Value Added Tax Chaos – The Agenzia delle Entrate Must Intervene

The privileges that the Italian Monopoly enjoyed could be passed on to BAT when it acquired it; However, this had to be planned and regulated by rules, not by underhand agreements that damage Yesmoke.

Circular 16D, of April 28th 2006, of the Customs Agency (Agenzia delle Dogane), though it is not a law, is an important opinion that should be followed. As a circular, it clarifies existing legislation and therefore regulates the VAT deposits instituted both before the publication of the circular as well as those instituted after its issue.

Specifically, the circular prescribes that whoever wants to have a VAT deposit, must give a guaranty to the Customs Agency or receive from the Agency an exemption from having it. Yesmoke is not interested in being one and consequently, has not given any guaranty and has not received any exemption. Therefore, its products are not exempt from VAT; on the contrary, Logista Italia S.p.A. that distributes them, claims that they are.

An Italian manufacturer who does not respect the circular and has not subjected to VAT the sales to Logista of its processed tobacco produced in Italy, has evaded VAT hand in hand with Logista, and they are both to be sanctioned.

It is hoped that BAT will make some contribution to clear up this matter. Does BAT have a VAT deposit? Has it paid the bond to exercise the VAT deposit? Or has it been exempted? Does it add VAT when it invoices sales to Logista of its processed tobacco produced in Italy?

If they want to claim that the company that purchased the Italian Monopoly benefits from mono phase VAT, without this being specified by a law regularly published in the Gazzetta Ufficiale, then they also have to ensure that other companies, part of the production chain are not damaged, granting them VAT exemption, too, on purchases as well as an atypical reimbursement** of past VAT credits.

If there is no corrective intervention by the National Tax Agency – Direzione Nazionale dell’Agenzia delle Entrate, there could be a start-up of  civil lawsuits by Italian producers of processed tobaccos against Logista, with injunctive decrees, which Logista  itself could not oppose,  because the suits are supported by the opinion, obtained by Yesmoke, of the Agenzia delle Entrate.

Answers need to be found urgently to solve this anomaly, which, besides significantly damaging Yesmoke, could destabilize the entire sector.

* The so-called Mono phase VAT regime provides for the payment of VAT upstream of the distribution chain. Article 4 of the Law 7 March 1985, No. 76 stated that “ the added value tax is due only one time,” but Article 1 specified that “the law is valid for processed tobaccos destined for sale to the public in the territory subject to monopoly,” but the monopoly no longer exists.

* The atypical reimbursement is applied in cases motivated by discrepancies, by evident injustice due to the application of a partial law that has caused significant damage to the contributor.

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