Clarifications on subjects that can set up a VAT Group

In Circular Letter no. 19/E dated 31 October 2018, the Italian Revenue Office comments on the regulation concerning the VAT Group and one of the most important issues examined is that concerning the subjects who can set up and take part in a VAT Group (comment to art. 70-bisof Presidential Decree no. 633/72). In fact, a correct identification of the taxable persons that can join the VAT Group is crucial for the whole VAT Group system, since the legislator provides for the application of the so-called "all in all out" model.

Essentially, all taxable persons established in Italy can set up a VAT Group, through a specific option, as long as they carry out a business activity, craft or profession and between whom there is a financial, economic and organizational relationship. It is pointed out that all the above subjects, with no exceptions (this is the "all in all out" principle), must join the Group.

Failing such a unanimous participation, the VAT Group cannot be set up, thus having an impact on the calculation of VAT of those subjects that took part in the Group and, subsequently, managed VAT incorrectly. Therefore, it is crucial to understand who must join the Group and who must be excluded. In this sense, clarifications included in circular letter no. 19/E/2018 are extremely useful, though there are still some quite uncertain issues.


Art. 70-bis of Presidential Decree 633/72 provides that taxable persons established within the territory of the Italian state carrying out a business activity, craft or profession between whom there are, jointly, financial, economic and organizational relationships under art. 70-ter can become a single taxable person, i.e. set up a VAT Group.

A first interpretation of the above statement would suggest that one of the requirements to join/set up a VAT Group is that all subjects be economic operators and established in Italy.

To this regard, art. 70-ter provides that the financial relationship between two or more taxable persons established in Italy occurs when those persons are either directly or indirectly controlled by the same entity, which can be established in Italy or in another country, which entered into an information exchange agreement with Italy.

The Revenue Office specifies that the above refers to the countries included in the so-called white list under Ministerial decree of 4 September 1996, as well as those that entered into a convention against double taxation or a specific international agreement.

In any case, regardless of their place of establishment, it is important to specify that a VAT group can be set up by subjects that do not have necessarily to be economic operators nor to be established in Italy.


For further information, read the article (Italian only) and contact Mario Spera.