The Italian Supreme Court issued on July 23, 2026, an Order No.23915, by which it has decided(as the last instance court) on the case concerning the taxable persons right to claim input tax right deduction for the credit accumulated in the previous tax year, for its active deduction from the tax payable in the tax year of asking, when the taxable person failed to submit an annual VAT return.
Failing to Submit VAT Return and Tax Credit
The case in question started when the Revenue Agency issued a payment notice to a domestic taxable person to repay VAT credit used for the deduction in the following year, after automated VAT checks and tax authority notices that the same taxable person failed to submit an annual VAT return, by which these tax credits would be formally acknowledged.
Case Flow
The first instance judges rejected the taxable person’s appeal, deciding in favour of the Revenue Agency, confirming that adherence to the automated review of the tax-related data can be performed without the need to issue a formal tax assessment document.
However, the Sicilian Court of Appeal, accepted the complaint from the taxable person, taking the stand that the automated assessment procedures(accordining the Article 54bis.1 of the VAT Act) could be used to correct material errors, and not to block the taxable person’s right to exercise the right to the deduction, since for this purpose, to block the claim for input tax credit, its found necessary to issue a formal tax assessment document.
Revenue Agency filed an appeal, claiming that under the amended VAT Act, adherence to the automated procedures for recovery of the tax credit is legitimate.
The Supreme Court emphasized that the VAT deduction system is intended to ensure tax neutrality, and explained chronologically all substantive and procedural requirements that must be met for the recognition and ability to use this mechanism.
Substantive requirements concern facts such as that the purchases were made by a taxable person, that the taxable person is liable for the tax for these transactions, and that the acquired goods are used for taxable purposes.
Formal requirements concern accounting, invoicing, and VAT filing procedures.
The Supreme Court cited a few rulings to highlight that the formal check that the Revenue Agency performed under Article 54bis of the Consolidated VAT Act, in essence, involves a mere comparison between the declared data(by the taxable person) and data resulting from the different tax databases available to tax authorities.
The Supreme Court emphasized that it has repealed the Sicilian Appeal Court’s decision on the grounds of the previous case law.
Revenue Agency’s appeal was accepted.