On the very last day of 2021 the Italian Revenue Agency issued a remarkable ruling (no. 79/E) on the VAT regime applicable to the assignment of non-performing loans (“NPLs”), focusing on the determination of the taxable base for VAT purposes of such a transaction.
As a preliminary remark, the Revenue Agency recalls that, pursuant to the combined interpretation of art. 3, paragraph 2, no. 3) and art. 10, paragraph 1, no. 1) of Presidential Decree no. 633/1972, an assignment of receivables falls within the scope of application of VAT, as a supply of financial services (exempt from VAT) performed by the assignee in favour of the assignor, when carried out versus consideration. Indeed, confirming the position expressed in Ruling no. 71/E of 2000, the Agency reminds that in similar transactions the assignment of the receivables is merely instrumental to the supply of the financial service (i.e. the supply of liquidity) by the assignee to the assignor.
Focusing on the identification of the taxable basis for VAT purposes, the Revenue Agency:
- on the one hand confirmed the ongoing validity of the position expressed with Ruling 32/E of 2011 in relation to factoring transactions concerning performing loans and according to which it was cleared that the taxable base for VAT purposes amounts to the difference between (i) the nominal value of the receivables assigned and (ii) their sale price (i.e. it coincides with the discount against the nominal value of the receivables);
- on the other hand admitted that the identification of the taxable basis in case of assignment of NPLs (versus a consideration lower than their nominal value) is necessarily influenced by the actual economic value of the assigned receivables. Indeed, in the Ruling at hand, the Revenue Agency concluded that in such a case the taxable basis must rather be determined having regard to the difference between (i) the actual market value of the NPLs (which is normally rather lower than their nominal value) and (ii) their sale price (i.e. the taxable basis for VAT purposes coincides with the discount against the market value of the receivables).
More specifically, in NPLs transactions reference shall be made to the actual economic value of the defaulting receivables as determined by the assignee at the time of the sale according to its valuations and recovery expectations (net of estimated recovery costs and other elements relating to the management of the acquired NPLs portfolio), irrespective of whether such value is documented in the assignment agreement or other contractual arrangements in place between assignor and assignee, since it is normally an element internally documented by the assignee and that the Revenue Agency can thus audit at a later stage.
The Revenue Agency concludes its analysis confirming that the supply of the financial service by the assignee (subject to VAT, albeit exempt) occurs for VAT purposes at the time of the payment of the purchase price by the assignee of the NLPs which, de facto, coincides with the collection of the “discount component” linked to the financial service rendered by the assignee.
Authored by Serena Pietrosanti and Maria Cristina Conte.