Oracle – VAT applicability between a parent company and a permanent establishment in Italy

Really this can apply to any EU country and comes under the tax engine rules for Same VAT Group and can apply to any VAT or GST based tax regime.

In reference to the original article by the TMF group on VAT in Italy between a parent company and its child, I thought that i would try and explain this in terms of setting up the tax in Oracle R12 eBTax or Oracle Cloud Tax.

a “Taxable Person”, according to Art. 9, par. 1 of Directive 2006/112/EC on the common system of value added tax, is any person who, independently, carries out any economic activity in any place, whatever the purpose or results of that activity and art. 7 par. 1 lit. d) of Italian Presidential Decree no. 633/1972 expressly defines Permanent Establishments of foreign entities as “Taxable Persons established on Italian territory” exclusively in relation to transactions to which they are party.

 

So what does this mean when you set the tax up in your Oracle Tax Engine? We class this under our ‘Same VAT Group’ logic and the rules cover the relationship between companies that share the same vat group or have a head office/branch relationship (and therefore technically share the same VAT group by default).

The logic is simple and the examples below assume that each party has the same VAT Registration Number validated under VIES and set up in Oracle as being part of the VAT Group.

Any Domestic transaction – Out of Scope

Any non-domestic transaction (so where the two countries are not the same but share same VAT group) and are services – out of scope

Any non-domestic transaction (so where the two countries are not the same but sahre same VAT group) and are goods – treat as normal taxable transaction.

So its quite straight forward to set up and is actually part of our eBTax Rapid Install solution and comes as standard when we implement.

 

Contact us if you want to find out more about setting up logic to automate the tax for Same VAT Group requirements