Italian tax publisher Eutekne reported on Supreme Court Order No. 13809, addressing the VAT treatment of reimbursed expenses following a partial corporate demerger (scissione parziale).
The case concerned expenses initially paid by the demerged company for services that, following the demerger, became associated with contractual relationships transferred to the beneficiary company. The dispute centered on whether reimbursement of those costs should be treated as consideration subject to VAT or remain outside the scope of the tax.
Distinction Between Mandates With and Without Representation
Under Italian VAT law, different rules apply depending on whether a party acts under a mandate with representation or without representation.
Where a party acts under a mandate without representation, Article 3(3) of Presidential Decree No. 633/1972 generally treats the transaction as subject to VAT in the same manner as transactions between principal and third party. Conversely, reimbursements made under a mandate with representation may be excluded from the VAT taxable base pursuant to Article 15(1)(3) of the same decree.
The question before the Court was whether the reimbursement of expenses following the demerger should be treated as falling within the former category, thereby attracting VAT.
Demerger Does Not Change the VAT Outcome
The Supreme Court concluded that the demerger itself does not alter the VAT treatment of the reimbursement.
According to the Court, the demerged company could not be regarded as acting as an agent without representation on behalf of the beneficiary company merely because contractual relationships had been transferred through the demerger. The reimbursement therefore did not fall within the VAT rules applicable to mandates without representation.
The Court further emphasized that the joint liability of the demerged company following the demerger arises directly by operation of law. This statutory liability does not depend on any contractual allocation between the parties and therefore does not transform the reimbursement into taxable consideration.
Reimbursement Excluded From VAT Base
As a result, the Court held that reimbursements of the advanced expenses remain excluded from VAT under Article 15(1)(3) of Presidential Decree No. 633/1972.
The fact that the supporting documentation for the expenses remained issued in the name of the demerged company was considered irrelevant to the VAT analysis. What mattered was that the reimbursement represented recovery of expenses advanced in connection with relationships transferred through the demerger rather than remuneration for a taxable supply.
