Opinion of the Advocate General — ECLI:EU:C:2023:719
Date: 2023-09-28
Language of the case: Italian
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary C-341/22 – 1 
Case C-341/22 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
25 May 2022 
Referring Court: 
Corte suprema di cassazione (Italy) 
Date of the decision to refer: 
19 May 2022 
Appellant: 
Feudi di San Gregorio Aziende Agricole SpA 
Respondent: 
Agenzia delle Entrate 
  
Subject matter of the main proceedings 
Appeal against a tax assessment notice by which the Agenzia delle Entrate (the 
Revenue Authority) classified the appellant as a società di comodo (shell company 
or brass plate company) for the 2008 tax year and initiated the recovery of unpaid 
higher direct taxes. The contested tax assessment notice also ruled that the 
appellant could not use its VAT credit, amounting to EUR 42 108, in the 
following financial year because it had not carried out, over the course of three 
successive tax periods, relevant transactions for VAT purposes of such an amount 
as would enable it to pass the so-called operational test provided for by the Italian 
legislation governing such companies. 
Subject matter and legal basis of the request for a preliminary ruling 
Having regard to Article 267 TFEU, the referring court seeks clarification 
regarding the compatibility with EU law of national rules relating to the 
operational test, in particular, regarding the consequences for the classification of 
taxable persons flowing from failure to pass that test and regarding the right to 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING ‒ CASE C-341/22 
 
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deduct VAT, including with reference to the principles of legal certainty and the 
protection of legitimate expectations. 
Questions referred for a preliminary ruling 
‘1. Is Article 9(1) of Directive 2006/112 to be interpreted as meaning that the 
status of taxable person, and consequently the right to deduct input VAT paid or 
to be reimbursed input VAT paid, may be refused where, in three consecutive 
years, the relevant transactions for VAT purposes carried out are of a value which 
is not deemed commensurate ‒ in that it is too low ‒ with what may, according to 
criteria pre-determined by law, reasonably be expected from the available assets 
and the person or entity concerned is unable to demonstrate, as justification for 
that fact, the existence of objective circumstances which have caused that result? 
2. In the event that the first question is answered in the negative, do Article 167 
of Directive 2006/112, the general principle of VAT neutrality and the general 
principle that any restriction of the right to deduct VAT must be proportional 
preclude a provision of national law such as Article 30(4) of Law No 724 of 1994, 
under which the right to deduct input VAT paid on purchases or to be reimbursed 
such VAT or to use such VAT in a subsequent tax period may be refused where, 
in three consecutive tax periods, the relevant transactions for VAT purposes 
carried out are of a value which is not deemed commensurate ‒ in that it is too low 
‒ with what may, according to criteria pre-determined by law, reasonably be 
expected from the available assets for three consecutive years and the taxable 
person concerned is unable to demonstrate, as justification for that fact, the 
existence of objective circumstances which have caused that result? 
3. In the event that the second question is answered in the negative, do the EU-
law principles of legal certainty and of the protection of legitimate expectations 
preclude a provision of national law such as Article 30(4) of Law No 724 of 1994, 
under which the right the deduct input VAT paid on purchases or to be reimbursed 
such VAT or to use such VAT in a subsequent tax period may be refused where, 
in three consecutive tax periods, the relevant transactions for VAT purposes 
carried out are of a value which is not deemed commensurate ‒ in that it is too low 
‒ with what may, according to criteria pre-determined by law, reasonably be 
expected from the available assets for three consecutive years and the taxable 
person concerned is unable to demonstrate, as justification for that fact, the 
existence of objective circumstances which have caused that result?’ 
Provisions of EU law relied on 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax; in particular, Article 2(1)(a), Article 9(1), and Articles 167, 168 
and 178 
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Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the 
laws of the Member States relating to turnover taxes ‒ Common system of value 
added tax: uniform basis of assessment; in particular: Article 18(4) and 
Article 27(1), (2), (3) and (4) 
Case-law of the Court of Justice relied on 
Judgments of 20 January 2021, Administraţia Judeţeană a Finanţelor Publice 
Sibiu and Direcţia Generală Regională a Finanţelor Publice Braşov, C-655/19, 
EU:C:2021:40, paragraphs 25 to 30; of 6 October 2009, SPÖ Landesorganisation 
Kärnten, C-267/08, EU:C:2009:619, paragraph 20; of 2 June 2016, Lajvér, 
C-263/15, EU:C:2016:392; of 15 September 2011, Słaby and Others, C-180/10 
and C-181/10, EU:C:2011:589, paragraphs 36, 37 and 45; of 20 June 1991, 
Polysar Investments Netherlands, C-60/90, EU:C:1991:268, paragraph 13; of 
9 July 2015, Trgovina Prizma, C-331/14, EU:C:2015:456, paragraph 23; of 
13 June 2019, IO (VAT – Activity as a member of a Supervisory Board), 
C-420/18, EU:C:2019:490, paragraph 29; of 17 October 2019, Paulo Nascimento 
Consulting, C-692/17, EU:C:2019:867, paragraph 25; of 18 March 2021, A. 
(Exercise of the right to deduct), C-895/19, EU:C:2021:216, paragraphs 32 and 
33; of 14 October 2021, Finanzamt N (Communication of the allocation decision), 
C-45/20, EU:C:2021:852, paragraphs 31, 32 and 34; of 21 March 2018, 
Volkswagen, C-533/16, EU:C:2018:204, paragraph 39; of 15 September 2016, 
Barlis 06 ‒Investimentos Imobiliários e Turísticos, C-516/14, EU:C:2016:690, 
paragraph 40; of 25 July 2018, Gmina Ryjewo, C-140/17, EU:C:2018:595, 
paragraph 34; of 14 September 2017, Iberdrola Inmobiliaria Real Estate 
Investments, C-132/16, EU:C:2017:683, paragraph 29; of 16 September 2020, 
Mitteldeutsche Hartstein-Industrie, C-528/19, EU:C:2020:712, paragraph 27; of 
12 July 2012, EMS-Bulgaria Transport, C-284/11, EU:C:2012:458, paragraph 62; 
of 11 December 2014, Idexx Laboratories Italia, C-590/13, EU:C:2014:2429, 
paragraphs 38 and 40; of 17 October 2018, Ryanair, C-249/17, EU:C:2018:834; of 
22 October 2015, Sveda, C-126/14, EU:C:2015:712; of 12 November 2020, ITH 
Comercial Timişoara, C-734/19, EU:C:2020:919, paragraphs 37, 38 and 39; of 
28 February 2018, Imofloresmira ‒ Investimentos Imobiliários, C-672/16, 
EU:C:2018:134, paragraphs 39 and 40; of 9 September 2021, GE Auto Service 
Leasing GmbH, C-294/20, EU:C:2021:723; of 28 July 2016, Astone, C-332/15, 
EU:C:2016:614, paragraph 50); of 21 October 2021, Wilo Salmson France SAS, 
C-80/20, EU:C:2021:870, paragraph 80; of 21 March 2018, Volkswagen, 
C-533/16, EU:C:2018:204, paragraph 48; of 18 November 2020, Commission v 
Germany (Refund of VAT ‒ Invoices), C-371/19, EU:C:2020:936, paragraph 83; 
of 10 July 2019, Kursu zeme, C-273/18, EU:C:2019:588, paragraph 35; of 
9 October 2014, Traum, C-492/13, EU:C:2014:2267, paragraph 28 and the case-
law cited and paragraph 29 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING ‒ CASE C-341/22 
 
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Provisions of national law relied on 
Legge 23 dicembre 1994, n. 724, ‘Misure di razionalizzazione della finanza 
pubblica (Law No 724 of 23 December 1994 on measures to rationalise public 
finances), in particular Article 30, entitled ‘Shell companies. Valuation of 
securities’: 
‘4. In the case of non-operating companies and entities, any credit resulting 
from a declaration submitted for the purposes of value added tax shall not eligible 
for reimbursement, nor may it be offset … or transferred … Where, for three 
consecutive tax periods, a non-operating company or entity does not carry out 
relevant transactions for value added tax purposes of a value not less than the 
amount resulting from the application of the relevant percentage referred to in 
paragraph 1, any such credit may not be carried forward for the purpose of 
offsetting the VAT payable in respect of subsequent tax periods. 
4a. Where objective circumstances have rendered it impossible to achieve the 
revenues, increases in inventory or income determined in accordance with this 
article, or have made it impossible to carry out the relevant transactions for value 
added tax purposes referred to in paragraph 4, the company concerned may 
request that the relevant anti-avoidance provisions be disapplied …’. 
Succinct presentation of the facts and procedure in the main proceedings 
1 The Revenue Authority served on the company Vigna Ottieri S.r.l., which was 
subsequently taken over by Feudi di San Gregorio Aziende Agricole S.p.A., a 
notice of assessment by which, for the 2008 tax year, it classified the company as 
a shell company, on the ground that the value of the transactions which the 
company had recorded in its accounts was less than the revenue threshold below 
which companies are deemed, under national legislation, to be non-operating 
companies. 
2 By the same notice of assessment, the Revenue Authority initiated the recovery of 
unpaid taxes and rejected the company’s claim for a VAT credit of EUR 42 108 
which the company had proposed to apply in the following financial year. As 
justification for its rejection of that claim, the Revenue Authority stated that the 
company had not carried out, over the course of three successive tax periods, 
relevant transactions for VAT purposes of such an amount as would satisfy the 
criteria of the so-called operational test. 
3 The Revenue Authority also stated that, for the purposes of the operational test, 
the company’s sale of fixed assets and of the right to use a trade mark could not be 
taken into consideration, since they amounted to the sale of part of the business 
and, as such, fell outside the scope of VAT. 
4 The company appealed against that notice of assessment. In particular, it argued 
that there had been no transfer of part of its business, in that there was no proof 
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that the transferee was carrying on an activity which had previously been carried 
on by the transferor. 
5 La Commissione tributaria provinciale di Avellino (Provincial Tax Court, 
Avellino) dismissed that appeal by judgment of 18 April 2012. 
6 The company appealed against that judgment to the Commissione tributaria 
regionale della Campania (Regional Tax Court for Campania), which rejected that 
appeal by judgment of 15 October 2013. That court ruled that, as the Revenue 
Authority had asserted, the sale of fixed assets and of the right to use the trade 
mark constituted the sale by the company of part of its business, and for that 
reason those transactions had to be regarded as falling outside the scope of VAT. 
7 The company brought an appeal on a point of law against that judgment before the 
referring court. 
The essential arguments of the parties in the main proceedings 
8 The appellant alleges infringement of Directive 77/388/EEC (in particular, 
Article 18(4) and Article 27(1), (2), (3) and (4)), in that the judgment under appeal 
prevented it from using in the following financial year the VAT credit which it 
had declared and thereby unduly restricted its right to deduct VAT and breached 
the principle of tax neutrality. 
9 According to the appellant, a provision of national law (such as that applied in this 
case, the purpose of which is to prevent fraud and improper practices in 
connection with shell companies) which results in a restriction of this kind, not 
contemplated by the VAT directive, must first be authorised by the Council of the 
European Union, failing which it will be contrary to that directive and must not be 
applied. 
10 The appellant therefore maintains that national courts must disapply that national 
legislation, on the ground that it is contrary to the VAT directive. It adds that the 
right to deduct the tax may be refused only where the tax authority demonstrates 
that the substantive requirements are not met or where the right to deduct is relied 
on for fraudulent or abusive ends. 
11 The Revenue Authority maintains that the appellate court applied the national 
rules on shell companies correctly, since the conditions were met for holding that 
the company was not in a period of not normal activity. Indeed, in its view, the 
company had produced goods and supplied services which, while being 
instrumental to a subsequent activity, had, in themselves, an intrinsic and 
independent value that had enabled income to be generated. 
12 It also points out that the objective of the national legislation governing shell 
companies is to avert the improper use of the corporate structure and the obtaining 
of tax advantages by persons or entities that only appear, from a formal 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING ‒ CASE C-341/22 
 
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perspective, to be carrying on a business activity but are, in reality, non-operating 
entities. The refusal of the right to deduct VAT was thus based on the fact that, in 
this particular case, there was no person or entity that could be classified as a 
taxable person within the meaning of Article 9 of Directive 112/2006. 
Succinct presentation of the grounds for the reference for a preliminary 
ruling 
13 The referring court observes that the rule laid down in Article 30 of Law No 724 
of 1994 is intended to discourage the establishment of shell companies, or in other 
words to discourage the use of the corporate structure to attain ends other than 
those permitted by law. In order to do so, it employs the legal presumption that the 
structure is not an operating company. Indeed, as a rule, there is no genuine 
business without some minimal continuity of revenue. 
14 Accordingly, the legislature set a minimum revenue and income threshold 
correlated to the value of certain specific assets and the failure to reach that 
threshold constitutes an indication that the company is non-operating. There is, 
therefore, a presumption of a minimum income, that income being established on 
the basis of average profitability ratios for the said assets. That presumption may 
however be rebutted by the taxable person’s demonstrating that objective 
circumstances existed which rendered it impossible to achieve a certain minimum 
level of revenue. 
15 As regards VAT, by virtue of Article 30(4) of Law No 724 of 1994, it follows 
from the presumption that the structure is not an operating company that the 
taxable person loses the right to request the reimbursement of any credit resulting 
from a tax declaration and to use any such credit for the purpose of offsetting it 
against another liability or transferring it to a third party. The taxable person 
merely retains the right to carry it forward and deduct it from the VAT payable in 
subsequent tax periods. 
16 By virtue of that same provision, however, the right to carry forward such a credit 
and deduct it from the VAT payable in respect of subsequent tax periods is also 
lost where, for three consecutive tax periods, the non-operating company does not 
carry out relevant transactions for VAT purposes of a value not less than the 
amount resulting from the application of the percentages stipulated for the 
operational test. 
17 In such a case, the taxable person is definitively deprived of the right to deduct 
input VAT paid on purchases it has made. According to the Revenue Authority 
the appellant is in precisely that situation and may not, therefore, carry forward 
the VAT credit for 2008 to the following tax period. 
18 The referring court identifies three aspects of the national legislation that are 
potentially incompatible with Directive 2006/112 and the case-law of the Court of 
Justice. 
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19 The first aspect concerns the concept of ‘taxable person’, within the meaning of 
Article 9(1) of Directive 2006/112, and whether that provision may be interpreted 
as meaning that the status of taxable person may be refused, and the right to 
deduct input VAT accordingly refused, where a company fails to pass the 
operational test laid down by the national legislation and is also unable to 
demonstrate, as justification therefor, the existence of objective circumstances 
which prevented it from doing so.  
20 In this connection, the referring court observes that what such an interpretation of 
Article 9(1) of Directive 2006/112 would mean for the Italian tax system is that an 
entity which fails to pass the operational test for three consecutive years would be 
treated as not carrying on an economic activity for VAT purposes, and therefore 
not regarded as a taxable person for VAT purposes, while still remaining liable, 
under the general rules, to the taxation of its income in accordance with the rules 
applicable to trading entities, on the basis of its formal legal nature. 
21 In a case such as that here at issue, because of the failure to pass the operational 
test, the status of taxable person would be refused on the presumption that no 
economic activity is being carried on, and thus on the basis of a given number, 
representing an insufficient volume of taxable transactions in relation to an 
entity’s assets. 
22 That would not appear to be consistent with the principles identified in the case-
law of the Court of Justice concerning the concept of ‘taxable person’, which is 
defined in relation to the concept of ‘economic activity’. The referring court notes, 
in particular, that, for the purposes of establishing whether an activity constitutes 
an ‘economic activity’, the number and volume of sales made cannot constitute a 
criterion for distinguishing between the activities of an operator acting in a private 
capacity, which do not fall within the scope of Directive 2006/112, and those of an 
operator whose transactions constitute an economic activity. 
23 The referring court also observes that the tax authority may refuse the status of 
taxable person where it is able to demonstrate that a declaration of intent to 
commence a planned economic activity has not been made in good faith, the 
declarant merely having feigned an intention to engage in a specific economic 
activity while, in reality, seeking to incorporate into his own private assets 
property which might be the subject of deduction. 
24 The referring court points out that, on the other hand, a failure to pass the 
operational test is relevant only as the basis for the legal presumption that no 
economic activity is being carried on. It does not, however, constitute proof of the 
lack of the status of taxable person. Indeed, the taxable person is free to 
demonstrate the existence of objective circumstances, beyond its control, which 
have prevented it from carrying out taxable transactions generating a turnover 
commensurate with the assets at its disposal. 
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25 The second potentially incompatible aspect concerns Article 167 of Directive 
2006/112, the general principle of VAT neutrality and the general principle that 
any restriction of the right to deduct VAT must be proportional. 
26 In so far as concerns the right of taxable persons to deduct VAT due or already 
paid on goods purchased and services received as inputs from the VAT which 
they are liable to pay, the referring court observes that that is a fundamental 
principle of the common system of VAT established by the relevant EU 
legislation, is an integral part of the VAT scheme and, in principle, may not be 
limited. The fundamental principle of the neutrality of VAT requires the deduction 
of input VAT to be allowed if certain substantive requirements are satisfied (that 
the person or entity concerned is a ‘taxable person’ within the meaning of 
Directive 2006/112, that the goods or services relied on to confer entitlement to 
that right be used by the taxable person for the purposes of its own taxed output 
transactions, and that those goods or services are supplied by another taxable 
person as inputs). A national tax authority may not, however, impose additional 
conditions which circumstances may have the effect of rendering that right 
ineffective for practical purposes. 
27 In addition, if the final acceptance of VAT deductions were to be made dependent 
on the results of a taxable person’s economic activity, that would create, as 
regards the tax treatment of identical investment activities, unjustified differences 
between undertakings with the same profile and carrying on the same activity. 
28 In light of the foregoing, the referring court wonders whether the fact that national 
legislation precludes the deduction of input VAT paid on purchases, the refund of 
such VAT or the use of such VAT in a subsequent tax period, where, for three 
consecutive tax periods, a taxable person fails to pass the operational test (as laid 
down by Article 30(4) of Law No 724 of 1994), is compatible with Article 167 of 
Directive 2006/112, the general principle of VAT neutrality and the general 
principle that any restriction of the right to deduct VAT must be proportional. 
29 The referring court also observes that the prevention of tax evasion, avoidance and 
abuse is an objective recognised and encouraged by the VAT directive, and for 
that reason EU law cannot be relied on for abusive or fraudulent ends. 
Consequently, the national authorities and courts must refuse the right of 
deduction where it is shown, in the light of objective factors, that that right is 
being relied on for fraudulent or abusive ends. 
30 In this regard, the referring court has doubts as to whether the risk of abusive use 
of the corporate structure, in relation to which the Italian legislature introduced the 
provision at issue, and the consequent need to prevent companies from unduly 
benefitting from tax advantages associated with the corporate form adopted, can 
justify that national provision, in view of the violation of the right to deduct VAT. 
31 The third aspect of potential incompatibility concerns the consistency of 
Article 30(4) of Law No 724 of 1994 with the EU-law principles of legal certainty 
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and the protection of legitimate expectations. The referring court notes that those 
principles are to be observed all the more strictly in the case of rules which are 
liable to entail financial consequences, in order that those concerned may know 
precisely the obligations which such rules impose on them. It follows that taxable 
persons must be able aware what their tax liabilities will be before concluding a 
transaction. 
32 With regard to this aspect also the referring court expresses doubts as to the 
compatibility of the national rule with EU law. Indeed, the taxable person will 
meet with uncertainty when carrying out a taxable transaction as to whether that 
transaction is liable to give rise to a right to deduct VAT or to the refund of VAT, 
since those rights will be conditional on reaching a pre-determined level of 
income, calculated over a period of three years.