Comments on ECJ C-341/22: VAT Denial for Vigna Ottieri: The Consequences of Being Classified as a Non-Operational Company

Vigna Ottieri, an Italian wine producer, was classified as a non-operational company by the Italian tax authority due to its taxable turnover falling below the designated threshold.
The tax authority denied Vigna Ottieri the right to deduct VAT, as non-operational companies are not entitled to VAT credits or refunds.
The Italian legislation aimed to discourage the establishment of non-operational companies and prevent them from enjoying tax benefits without genuine operational activities.
The European Court of Justice (ECJ) ruled that the Italian legislation was not compliant with EU VAT laws, as Article 9(1) of the VAT Directive does not allow the denial of VAT taxpayer status based on income thresholds.
The ECJ also stated that Article 167 of the VAT Directive, along with the principles of VAT neutrality and proportionality, prevent the denial of VAT deductions based on the insufficiency of later VAT taxable activities.