The Italian Revenue Agency issued Letter No. 88/2026 on March 30, confirming that VAT groups cannot use excess credits to offset tax debts of individual group members, restricting such credits to refund claims or third-party transfers only.
The guidance addresses a query from a VAT group expecting over €3 million in excess credits for 2025, generated by significant capital investments and zero-rated export transactions. The group sought to transfer these credits within its tax consolidation structure to cover other tax obligations of participating members.
VAT Group as Autonomous Entity
The Revenue Agency confirmed that a VAT group operates as a single autonomous taxable person, separate from its individual members. This structure means VAT positions are assessed at the group level rather than individually, with all obligations and rights held by the group itself through its representative.
Compensation Restrictions
Article 4 of Ministerial Decree 6 April 2018 explicitly prohibits VAT groups from using credits to offset debts of individual participants. The agency explained this reflects the fundamental principle that compensation requires debts and credits to belong to the same legal entity. Since the VAT group and its individual members are distinct subjects for tax purposes, cross-compensation is not permitted.
The Revenue Agency referenced its 2017 Resolution No. 140/E, which established that compensation applies only between identical subjects, with limited exceptions requiring specific legislative provisions.
Permitted Uses
Excess VAT credits generated by groups may only be utilized through refund requests under Article 30 of the VAT Decree, subject to applicable conditions, or transferred to third parties including individual group participants under Article 6(5) of the 2018 decree. Such transfers must comply with civil code provisions on assignment of credits and require delegation from group participants to the group representative.
The clarification reinforces the structural separation between VAT grouping and other tax consolidation mechanisms, requiring businesses to manage excess VAT positions strictly within the VAT framework regardless of broader corporate tax arrangements.
