A recent ruling (no. 1567 of 28 January 2015) of the Italian Supreme Court clarified that in Italy VAT is due also on the sale of second hand containers.
The Court dealt with a case concerning containers originating from non-‐EU countries and purchased by an Italian company, which used to subsequently sell the containers to another Italian company without applying VAT to the transaction.
The selling company deemed that VAT was not applicable because of the absence of the territorial requirement.
Both the Provincial Tax Commission and the Regional Tax Commission upheld this approach.
Indeed the latter emphasized that the “containers, being still “foreign”, could not be subject to the temporary import regime and therefore their purchase had to be considered VAT exempt, because of the absence of the territorial requirement”. The Tax Judge also added that, because of “the circulation as “foreign” also the subsequent sale of the containers to Italian residents was to be considered VAT exempt”. The Italian Revenue Agency, not agreeing with such interpretation, challenged the Regional Tax Commission decision before the Supreme Court.
The Italian Supreme Court considered the appeal well founded, stating that pursuant to Article 214 of the Unified Customs Code “containers are subject, in principle, to the temporary import regime”. Indeed, customs duties provide for “an automatic temporary admission regime (with no need for a specific authorization when the conditions required by the relevant legislation exist). Such regime allows the use within the customs area, with relief from import duties, of non-‐EU goods that will be exported again within a specific time period”. In addition, pursuant to Article 7-‐bis of Presidential Decree n° 633/1972 “transfer of goods is considered as taking place within the territory of the State, and consequently subject to VAT, if the goods are subject to the temporary import regime and exist in said territory, hence including containers subject to temporary import regime pursuant to Article 214 of Customs Laws Consolidation Act”.
Therefore, it will be necessary to verify if the goods subject to the temporary import regime and existing within the territory of the State, were finally put on the market, thus loosing the requirements provided for by the special regime.
If that is the case, both the purchase and the subsequent re-‐sale to Italian residents shall have to be subject to VAT.
This court decision has highlighted the different interpretation given to territoriality, for customs purposes as opposed to VAT purposes. Indeed, for customs purposes, the container is considered to have the characteristic of extraterritoriality under the temporary admission regime, thus to be subject to no customs fee. On the other hand, for VAT purposes the container is considered to be within the State territory, hence its transfer is subject to VAT.