Italy Tax Agency Clarifies VAT Treatment of Sums Paid as Compensatory Measures

The Italian Revenue Agency Oct. 30 issued Letter No. 212/2024, on the VAT rules regarding payments made as compensatory measures. The taxpayer, an Italian municipality, entered into an agreement with a company to build, operate, and maintain a photovoltaic park. Under the agreement, the company was required to pay the taxpayer an annual fee. The taxpayer sought clarification on whether the company’s payments were subject to VAT. The Revenue Agency found that: 1) because no mutual benefits were exchanged, the payments represented compensatory measures for environmental improvements, not consideration for services; and 2) the payments therefore constituted “money or money ...