On March 30, the Italian Revenue Agency issued Letter No. 88/2026, clarifying the treatment of excess VAT credits generated within a VAT group.
The guidance addresses how such credits may be used, particularly in cases involving significant investments and zero-rated transactions.
VAT group treated as a single taxable entity
The Tax Agency confirmed that a VAT group is considered a single autonomous taxable person, separate from its individual members.
As a result, VAT positions are assessed at the group level, rather than individually.
Restrictions on the use of VAT credits
The clarification establishes clear limitations on how excess VAT credits may be applied:
- VAT credits generated by the group cannot be offset against tax liabilities of individual group members
- Credits also cannot be transferred within a tax consolidation framework to cover other tax obligations
This reinforces the separation between the VAT group and other tax structures.
Permitted use of excess VAT credits
The guidance confirms that excess VAT credits may only be used through:
- Refund claims, subject to applicable conditions
- Assignment to third parties, in accordance with relevant VAT provisions
The clarification limits flexibility in the use of VAT group credits, requiring businesses to manage excess positions strictly within the VAT group framework.
Companies operating VAT groups should review their structures and processes to ensure compliance with these restrictions.
Source: gov.it