Italy Tax Agency Clarifies Input VAT Deduction for Imports of Raw Materials

The Italian Revenue Agency Aug. 19 issued Letter No. 213/2025, clarifying the VAT deduction on imports of raw materials. The taxpayer, an Italian pharmaceutical company, sought clarification regarding whether it could deduct VAT paid on imported raw materials for drug production that were provided by a client free of charge. Upon review, the Tax Agency found that: 1) the EU and Italian VAT laws allow deductions when importation costs impact product pricing and supported taxable activities; 2) legal ownership is irrelevant for VAT deduction purposes, provided that the importer uses the goods for taxable business activities; and 3) the taxpayer ...