On October 16, the European Commission published a proposal for a Council Implementing Decision enabling Italy to continue restricting the right to deduct input VAT on vehicles-related expenses.

On April 12, 2019, Italy had requested an authorization to continue to derogate from the EU VAT Directive by limiting to 40 percent the right to deduct input VAT charged on expenditure related to motorized road vehicles not wholly used for business purposes. The Commission said that the rate of 40 percent appears to reflect adequately the actual business use of such vehicles.

In addition, Italy requested an authorization to continue to derogate from the VAT Directive by exempting from VAT the use for private purposes of vehicles included in the assets of a taxable person’s business, where such vehicles are subject to a restriction of the right to deduct.

Italy was first authorized to use these measures for a temporary period ending on December 31, 2010. The authorization was subsequently extended three times, with the latest extension due to expire on December 31, 2019.

The Commission said that given that the circumstances leading to the granting of these authorizations remains unchanged, it is proposing that the derogations be extended until December 31, 2022.

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