Italian Supreme Court 1 April 2021 no. 9075: input VAT non-deductible if the remuneration is uncertain

DESCRIPTION OF FACTS

An Italian company (ItaCo) provides services to its foreign controlled company (Foreign SubCo) in order to improve its administrative organization, charging a fee only if Foreign SubCo achieves predetermined results within a certain period of time.
Since the predetermined goals were not achieved by Foreign SubCo, ItaCo did not charge any fee for the services provided. However, ItaCo deducted the input VAT on the related costs.
Italian tax authorities issued a tax assessment qualifying the input VAT as non-deductible.

Input VAT is deductible to the extent there is a direct and immediate link between purchases and sales subject to VAT. Such link is met even if purchase costs are part of the general expenses of the VAT person.
In the case under analysis, the Supreme Court ruled that services provided by ItaCo to Foreign SubCo do not qualify as subject to VAT since their remuneration is uncertain. Therefore, ItaCo cannot deduct input VAT on the related costs.