Recently, the Italian Supreme Court issued a very important decision with reference to VAT paid by a company (SPV) established with the sole aim of performing a LBO Transaction and the Supreme Court upheld the decision of the lower court (Milan Court).

Provided that SPVs do not usually carry VAT paid to suppliers as a VAT credit, Italian Supreme Court affirmed the following principle of law “…for the purposes of recognizing the right to VAT deduction, it must be pointed out that this Court has repeatedly specified on several occasions that, while, on the one hand, with regard to purchases of goods and in general to passive transactions, it is to ascertain, for the purposes of the deductibility of the tax, that there is an effective to the exercise of the enterprise, i.e. that they are carried out in close connection with the business purposes, on the other hand, it is not however, ‘the actual exercise of the undertaking is not required, since the deduction of the tax is possible even in the absence of active transactions, with regard to merely preparatory activities preparatory activities’ since ’it is inherent in the exercise of the undertaking also the purchase of goods and services intended to create the conditions necessary for the typical activity to begin, falling within the concept of instrumentality also includes merely preparatory activities preparatory activities’ (Cass. no. 7344 of 2011; Cass. no. 1578 of 2015; Cass. no. 18475 of 2016; Cass. no. 23994 of 2018) …”.

We stress that 1) decision is of utmost importance and 2) our firm agrees with the opinion expressed by some scholars about the possibility of submitting a refund request concerning VAT paid by SPVs in these transactions.