VAT Credit refund

Guarantees
Payments and Refunds of Taxes

VAT Credit Refund
General Information
Taxpayers who, under Article 38-bis of the D.P.R. of October 26, 1972, No. 633 and subsequent modifications and integrations, find themselves creditors of the Financial Administration at the time of presenting the annual VAT declaration, can request and obtain an advance refund of this credit by providing a surety bond. Similarly, certain categories of taxpayers can request this refund quarterly by submitting a special request with the required information in lieu of the annual declaration. According to recent provisions from the Ministry of Finance, “virtuous” companies—i.e., those with structural VAT credits, established for at least five years, and without significant open issues with the tax administration—are not required to present the bond.

Another specific form of VAT credit refund concerns group compensation (D.M. December 13, 1979). This applies to capital companies owned by a single parent company for more than 50% of the shares or quotas.

Obligations and Benefits of Compensation:

The credits of individual companies are immediately offset against the debts of other companies.
Companies benefiting from the compensation of their transferred credits with the transferred debts of other companies at the end of the year must guarantee the compensated credit.
In particular, relevant to our operations, taxpayers have the right to request a refund of VAT credit if the amount exceeds €15,000 (increased to €30,000) and upon the establishment of a surety bond in the following cases provided for by Article 30 of the DPR 633/72 and its amendments:

Transactions subject to tax with average rates lower than those of tax applied on purchases and imports (including services subject to the reverse charge mechanism, as per Article 17, paragraph 6, DPR No. 633/1972).
Transactions not subject to tax due to lack of the territoriality condition according to Article 7 of DPR 633/72.
Purchases of depreciable goods and goods and services for research and studies.
Exempt transactions (Articles 8, 8-bis, and 9 DPR 633/72) exceeding 25% of the total amount of operations carried out.
Exports and intra-community sales of goods subject to excise or agricultural and fish products.
Transactions by the tax representative of non-resident entities operating in our country without a permanent establishment, as per Article 17 – second paragraph of DPR 633/72.
Cessation of business activities and lesser deductible excess in the last three years (in these cases, the limit of €2,582.28 does not apply).
It is essential to highlight that Legislative Decree No. 175 of November 21, 2014 (tax simplification and pre-filled income tax return—G.U. No. 277 of November 28, 2014), which came into effect on December 13, 2014, replaced Article 38-bis (Execution of refunds) of the Presidential Decree of October 26, 1972, No. 633.

Specifically, regarding our operations, attention is drawn to the following paragraphs of Article 38-bis:
Legislative Decree No. 175 of November 21, 2014 – Article 13 – Execution of Refunds.

Paragraph 3
Except as provided in paragraph 4, refunds exceeding €15,000 (later raised to €30,000) are executed upon presentation of the relevant declaration or application showing the requested credit for refund, bearing the compliance verification or alternative signature as per Article 10, paragraph 7 of D.L. No. 78 of July 1, 2009. A declaration substituting an act of notoriety must accompany the declaration or application, attesting to the existence of the following conditions concerning the characteristics of the taxpayer:

The net worth has not decreased by more than 40%; the value of real estate has not decreased by more than 40%; the activity itself has not ceased or reduced due to the transfer of business branches.
If the refund request is made by unlisted capital companies, the shares or quotas of the company have not been transferred in an amount exceeding 50% of the share capital.
Payments of social security and insurance contributions have been made.

Paragraph 4
Refunds exceeding €15,000 are executed upon presentation of the guarantee mentioned in paragraph 5 when requested:
a) By taxable persons who have been conducting a business for less than two years;
b) By taxable persons who, within the two years preceding the refund request, have received notices of assessment or correction;
c) By taxable persons who present a declaration or application revealing a refund credit lacking compliance verification;
d) By taxable persons requesting a refund of the deductible excess at the time of business cessation.

Paragraph 6
Regarding the declaration showing the requested credit for refund, it is not mandatory to affix compliance verification or the alternative signature required by paragraph 3 when the guarantee mentioned in paragraph 5 is provided.

Therefore, except for the cases provided in paragraph 5, the new rule, compared to the recent past, allows economic operators to obtain a VAT credit refund without providing any guarantee, using the compliance verification or alternative signature method.

Annual and Fiscal Account Refund
Starting from January 1, 1998, taxpayers with a VAT credit against the Financial Administration of up to €516,456.90 must request a refund through a specific application (model VR) to the collection agent. For refunds exceeding the aforementioned amount of €516,456.90 (maximum payable by the collector, including any offset credits), two separate guarantees must be presented:

One for the refund within the competence of the collector (up to €516,456.90).
The other in favor of the competent Revenue Agency for the portion exceeding the collector’s limit.
Interim Refund
Can only be requested in the aforementioned cases 1) - 2) - 3) (provided the purchase of depreciable goods exceeds two-thirds of the total value of purchases - Article 52 of Law 342/2000), upon submission of a specific request to the competent Revenue Agency by the last day of the month following the first three reference quarters (the last one merges into the annual declaration).

Contents and Limitation of the Guarantee
The policy guarantees the Financial Administration the total or partial payment of the following amounts related to VAT, including related interest, expenses, and connected penalties due from the contractor following an administrative act notified within the validity period of the guarantee:

Tax surpluses that result in undue refunds concerning the year to which the guarantee refers.
Credits with the same title (VAT, including related interest, expenses, and connected penalties) of the Administration towards the contractor, relating to the year for which the refund is requested, as well as to prior years, accrued during the validity period of the guarantee.
In case of multiple sureties related to different tax periods, those relating to the tax declaration to which the administrative act refers will be invoked first, followed by those related to other tax periods in proportion to their respective amounts. If the same guarantees have been issued concerning the same tax period, they will be invoked in proportion to their respective limits.

The guarantee is effective from the date of execution of the refund and for a duration of three years or, if shorter, equal to the remaining period until the expiration of the assessment period, subject to the suspension of this period following the delayed delivery by the taxpayer of the documents requested by the Financial Administration (Article 57 - first paragraph - DPR 633/72).

The Revenue Agency or the Collector shall inform the guarantor of the date of disbursement of the refund and any suspension period of the expiration of the assessment power and will execute it upon confirmation of the validity of the guarantee. If the communication of the refund occurs more than six months after the issuance of the contract, the guarantor has the option to declare the cessation of the commitment made. In any case, the policy automatically ceases twelve months after issuance if the refund has not taken place during this period.

Type
Legal Obligations Guarantees

Group
Payments and Tax Refunds

Legal References
Article 78 of Law No. 413 of December 30, 1991, D.L. No. 241 of July 9, 1997 Articles 20, 21, and 22 of Regulation No. 567 of December 28, 1993, Article 22 of Law No. 449 of December 27, 1997

Usual Contractor
Creditor I.V.A, Creditor I.R.P.E.G, Creditor I.R.P.E.F.

Usual Beneficiary
Revenue Agency - VAT Office

Usual Initial Duration
VAT Credits: Duration equal to three years from the execution of the refund or, if shorter, to the remaining period until the expiration of the assessment period.
IRPEG – IRPEF Credits: Until the expiration of the assessment period (December 31 of the fourth year following the declaration submission).

Extensions
No (However, the Beneficiary may request an extension of the policy equal to the suspension period of the expiration of the assessment power before making the payment).

Particular Clauses Normally Required
None

Specific Documentation to Acquire
Copy of the declaration related to the credit covered
Copy of the request model for refund disbursement via fiscal account (model VR)
Copy of the guarantee request by the Collector
Copies of declarations for years not yet prescribed