The Italian Revenue Agency has published Ruling No. 503 of 23 July 2021 on whether a supply of advisory services in connection with a VAT exempt transfer of shares may qualify as a VAT exempt ancillary supply. The ruling concerns an Italian holding company that decided to sell a minority stake in one of its subsidiaries and, for this purpose, engaged an investment bank as a financial advisor to identify a suitable investor to acquire the minority stake, develop a suitable structure for the transaction, and provide other related services. In the request for the ruling, it was proposed that the advisory services should be considered an exempt ancillary supply considering various factors, including that the services were provided exclusively for the transfer of shares (sale) and the transfer could not have been carried out without the services of the financial advisor. A 2019 court decision regarding the VAT exemption for share transactions was also referenced in support of this position.

The ruling provides that for a supply to be considered an exempt ancillary supply, two main conditions must be met, including an objective condition and a subjective condition. The objective condition is met if the ancillary supply integrates, completes, and makes possible the main supply, while the subjective condition is met if the ancillary supply is carried out by the same taxable person carrying out the main supply or on their behalf in necessary connection with the main transaction. In the case of the advisory services for the transfer of shares, the ruling provides that even if the services were important in relation to the transfer of shares, they may not be considered ancillary for two main reasons. First, the services were carried out exclusively for the holding company and were not in any way carried out between the parties to the transaction, i.e., the holding company and acquiring investor. Second, it cannot be shown that the services were carried out on behalf of the transferor, in close connection with the transfer of shares for the benefit of the transferee, given that the services were not recharged to the transferee. Lastly, the ruling addresses the 2019 court decision that the applicant referenced in support of allowing the advisory services to be treated as an exempt ancillary supply. In regard to this decision, the ruling notes that the court recognized the applicability of the VAT exemption for share transactions only for the costs and fees relating to the sale of shares that were charged to the transferee by the same company that sold the shares.