Judgement No. 2403/17/2024 of the Tax Court of Second Instance of Lazio – immediate implementation of the judgment of the European Court of Justice in Case C-341/22

The Tax Court of Second Instance of Lazio in Judgment No. 2403/17/2024, immediately applying the findings of the European Court of Justice in Case C-341/22 of March 7, recognized the right to a VAT refund of a company with a systematic loss, disapplying art. 30 of Law No. 724/1994.

The ruling on shell companies, which was brought before the EU courts, was rejected by them:

  1. for incompatibility with the notions of “VAT liability” and “economic activity” in art. 9, paragraph 1 of Directive 2006/112/CE;
  2. due to incompatibility with the right to deduction under art. 167 of the aforementioned Directive and the principle of neutrality that oversees said tax.

With regard to the first point, the incompatibility depended on the fact that the national rule on shell companies bases its anti-avoidance scope by providing a mere presumption according to which, if the amount of transactions carried out by a company during a tax period does not reach a certain threshold (calculated according to criteria of a patrimonial nature), that company shall not be considered in operation; consequently, the right to deduct VAT is limited or, in certain cases, excluded. Of an entirely different opinion is art. 9, paragraph 1 of Directive 2006/112/CE, according to which passive subjectivity is linked to the exercise of an economic activity in itself, regardless of its purposes and results achieved. In this regard, already in the past, the EU judges sanctioned the legitimacy of the deduction of VAT (see, among others, the Court of Justice’s judgment of October 28, 2018, Case C-249/17 (Ryanair)) paid on the costs incurred for the purchase of goods and services which are preparatory and instrumental to the start (or continuation) of the business activity, when revenues are completely absent and when the activity should cease without these having been achieved.

Regarding the second point, the judges point out how art. 168 of Directive 2006/112/CE establishes a principle of deduction of VAT paid downstream based on the relevance, i.e., the destination, of the goods purchased to be used for taxable transactions upstream, without providing any limitation with respect to taxable persons who, during a given tax period, carry out VAT-related transactions below a preestablished threshold. Conversely, the right to deduct VAT may be denied to the taxable person if it is proven, in light of objective elements, that it is fraudulently or abusively invoked. In this regard, the measures that the Member States may adopt, pursuant to art. 273 of Directive 2006/112/CE, must not, however, be such as to systematically undermine the right to deduct VAT and, therefore, the principle of neutrality of said tax, as is in fact the case in application of art. 30 of Law No. 724/94, which, by ruling on the non-deductibility of VAT on the basis of a mere presumption, is certainly not based on the same objective criteria provided for by the Community norm.

Based on the foregoing, it can be concluded that the ruling of the Tax Court of Second Instance of Lazio, perfectly interpreting the general character of the pronouncements of the EU Court of Justice and the cogent value that they have ex tunc as well, as a guarantor of the authentic interpretation of EU law, promptly disapplied an internal rule, more specifically that of art. 30 of Law No. 724/1994, which has long been criticized in doctrine for its inability to intercept companies that actually carry out an activity of sheer effect of company assets and not an actual economic activity.

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