Investment in Italy

Investment in ItalyThe reverse charge procedure applies to the transfer of industrial real estate if the supplierhas opted for VAT or the customer is a partially exempt business person.8.11Head-office and branch transactionsIn light of the judgment in the FCE case (C-210/04), the Italian tax authorities have clarifiedthat services rendered between a head office and its branch are disregarded for VATpurposes (on condition - as pointed out by the ECJ judges - that the branch has no decisionalautonomy).8.12Bad debtsVAT relief can be claimed for bad debts only if they are due to a customer’s bankruptcy orinsolvency.8.13Anti-avoidanceThere is no general anti-avoidance rule for VAT purposes; there are, however, certain specificanti-avoidance provisions.According to the Italian Supreme Court, should a taxpayer make obviously uneconomictransactions in such a way that VAT is not due, the tax authorities are allowed to reclassifythe transactions and claim VAT. Therefore, a taxpayer should always be in a position to provethe economic value of his transactions; otherwise they might appear to be made with thesole purpose of obtaining an undue tax advantage.In this respect the Italian tax authorities have clarified that the principles set forth in theHalifax ECJ decision should also apply for Italian VAT purposes.A rule to combat missing trader intra-Community fraud, also known as carousel fraud, isin force in Italy, establishing that the purchaser has joint liability for VAT not paid by theseller. This anti-fraud rule only applies to a limited series of goods (cars, motorcycles, mobilephones, computers, live stock, and fresh meat) and is only triggered when the price is lowerthan the market value.Specific anti-avoidance provisions exist whereby the fair market value becomes the taxablebasis in certain transactions between related parties which are partially exempt.8.14 Penalty regimeThe VAT penalty regime can be categorised according to the type of violation committed bythe taxpayer, as described below.82© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato Consulenza legale e tributaria, anItalian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.