LED Taxand summarizes hereinafter the main tax news regarding Italian real estate for the fourth quarter of the year 2020.
Case law – Supreme Court, decision 6 October 2020 no. 21395. Heavier burden of proof to deduct VAT related to the purchase of residential buildings.
According to article 19-bis1, letter i), D.P.R. 633/1972, VAT related to the purchase, rental, refurbishment or management of residential buildings is not deductible, unless for enterprises whose main purpose is the construction of these buildings. The Supreme Court ruled that the enterprise which does not carry out construction activity must satisfy a heavier burden of proof in order to deduct VAT related to the purchase of residential buildings. In particular, the enterprise must prove on the basis on objective reasons (i) that the purchase is related to its business activity and it is aimed to generate profits and in addition (ii) that the building purchased is effectively related to its business activity. In the case at hand, it was ascertained that the residential building purchased did not have the features of a “holyday apartment” and it was never utilised for that purpose.
Case law- Second Degree Tax Court Lombardia, decision 1° October 2020 no. 2134. Rental fee reduced for refurbishment works carried out by the tenant: the landlord benefitting from the works must declare the entire rental fee.
The decision analyses the case where the landlord and the tenant agree a reduced rental fee in light of refurbishment works on the asset carried out by the tenant, at his own expenses. The Second Degree Tax Court ruled that it must be verified if the refurbishment works are in the exclusive interest of the tenant or if also the landlord benefits from them. If the landlord derives a benefit, he will have to declare the entire rental fee (the decision is in line with Supreme Court no. 15808/2006).
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