Case facts

The Revenue Agency issued the original assessment notice to a company operating in the trade of motor vehicles registered in Italy, contesting the undue VAT deduction claimed on invoices issued by supplier companies deemed non-existent (so-called shell or straw companies). The tax authorities argued that the input invoices related to objectively non-existent transactions, defined in case law as supplies/services actually carried out but featuring a discrepancy between the effective supplier and the one appearing on the invoice, whereby the supplier companies acted as interposed parties (missing traders) purchasing in a tax suspension regime through the improper use of letters of intent, without meeting the requirements for habitual exporters. According to the investigation, these missing traders acquired vehicles from companies within an Italian car rental holding group (the initial suppliers), failing to remit the collected VAT and thereby selling the vehicles below cost to another company as the ultimate purchaser (the respondent in the proceedings). The Revenue Agency appealed to the Supreme Court, based on two grounds, seeking to overturn the decision of the Regional Tax Court (second instance) which had dismissed the Agency’s appeal against the company.

Invoices for non-existent transactions