The decision no. 23628 of 3 September 2024 issued by the Italian Supreme Court dealt with a case whereby the plaintiff requested a refund on the Italian withholding tax paid on dividends pursuant to Art. 27-bis of Presidential Decree 600\/73 which implements the Parent-Subsidiary Directive (Directive 2011\/96\/EU) in Italy.
\nThe Supreme Court held that in order to do so, it must be proven that the foreign receiving company is the beneficial owner, by way of three tests:
\n\u2022 the \u201csubstantive business activity test\u201d, which verifies whether an actual economic activity is carried out by the recipient entity, and thereby, excludes an artificial structure;
\n\u2022 the \u201cdominion test\u201d, which assesses whether the recipient entity can effectively dispose of the income without the obligation to remit the income to a third party;
\n\u2022 the \u201cbusiness purpose test\u201d, which examines the economic motives for the interposed recipient entity.
\nThe judges found that the \u201cdominion test\u201d was successfully demonstrated since the recipient company retained a significant part of the dividends for itself, without any obligation to transfer them to third parties.<\/p>\n
With its decision no. 25608 of 25 September 2024, the Italian Supreme Court upheld that remuneration received by an Italian citizen residing in France, for services provided as a frontier worker for employment in the Municipality of Ventimiglia, are taxable only in Italy on the basis of Art. 19(1)a) of the Italy-France tax treaty.
\nThat provision states that remuneration paid by a State or local authority to an individual in consideration for services rendered to that State or to that subdivision or entity is taxable only in that State.
\nThe rule therefore refers to all remuneration, other than pensions, paid by public bodies for services rendered to such bodies, without objective limitations.
\nArticle 15 of the Italy-France tax treaty, which concerns remuneration deriving from employment relationships in the private sector, does not apply to frontier workers.<\/p>\n
The European Court of Justice held in its decision C-387\/22 dated 26 September 2024 that exemptions granted by Member States on employment income to employees working in the national territory, and excluding such exemption whereby said employee is posted abroad, are legitimate on the condition that the exemptions are appropriate for attaining the objective pursued and that the restrictions on the fundamental freedoms comply with the principle of proportionality. The European Court of Justice ruled in its decision C-465\/20 dated 10 September 2024 on the well-known \u201cApple case\u201d. It held that the advantageous regime granted to two Irish incorporated companies of the Apple Group (Apple Operations International Ltd (AOI) and Apple Sales International Ltd (ASI)) by means of transfer pricing rulings provided by the Irish tax authorities represented selective State aid that is incompatible with EU law. With its decision on the case C-83\/23 issued on 5 September 2024, the European Court of Justice maintained that whereby the recipient of the service receives an invoice from the supplier which files for insolvency, the former cannot, as a first court of action, claim a refund of the VAT paid but not due directly from the tax authorities of its Member State. As an exception to the general procedure, in cases of excessive difficulty (for example due to the insolvency of client or the liquidation of the company) the recipient may file a request for the recovery of the undue VAT directly to the tax authority (however this principle is not applicable to the present case as the Member State tax authorities had already refunded the tax to the supplier).<\/p>\n","protected":false},"excerpt":{"rendered":"
\nIn the case under review, it was found that the exemption from tax provided for by Romanian legislation on employment income derived from the construction sector, which is however denied for workers seconded abroad, was considered legitimate due to \u201cthe specific issues of the Romanian construction sector linked to the shortage of labour on account of the migration of qualified workers in that field abroad for wage reasons<\/em>\u201d.<\/p>\n4. CJEU landmark State Aid judgement (\u201cApple case\u201d)<\/h2>\n
\nIn particular, the Court held that the transfer pricing rulings resulted in a profit allocation that was incompatible with the internal market because \u201cby not allocating the profits deriving from the Apple Group\u2019s IP to ASI\u2019s and AOE\u2019s branches, thereby acting in breach of the arm\u2019s length principle, the Irish tax authorities had conferred an advantage on ASI and AOE for the purposes of Article 107(1) TFEU in the form of a reduction in their respective annual chargeable profits<\/em>\u201d.
\nFinally, the Court of Justice of the European Union, in ordering the recovery of the State Aid that was illegally granted, held that such an obligation contravenes neither the principle of legal certainty nor the principle of the protection of legitimate expectations.<\/p>\n5. CJEU establishes VAT refund procedure on invoices in the event of a bankrupt supplier<\/h2>\n
\nThe Court of Justice laid out the procedure to be followed in the case of VAT that has been wrongly charged and paid by the supplier. If the parties have acted in good faith:
\n\u2022 the supplier can obtain a refund of the VAT unlaw-fully paid to the tax authorities;
\n\u2022 the recipient may bring a civil action for recovery of the undue amount against the same supplier.<\/p>\n