The Tax Section of the Italian Supreme Court in its judgment n. 1465 of January 21, 2009 held that the tax administration bears the burden to prove that a transaction is carried out solely to obtain a tax advantage, in order to disregard the transaction and deny the tax benefits obtained by the taxpayer under the general anti avoidance rule.
The Supreme Court in joined chambers had established the general anti avoidance principle in its judgments n. 33055 and 33057 of December 23, 2008.
According to the Court, a transaction can be disregarded when the intention to obtain tax advantages is the essential and predominant element of the transaction, taking into account the purposes of the parties and all the facts and circumstances and the specific structure and design of the transaction used by the taxpayer.
The taxpayer can prove that the transaction pursues alternative or concurrent economic objectives of real significance, which justify the transaction and its structure.
The case decided by the Court concerns a corporate joint venture in which a company purchased industrial machinery and equipment that it leased to related companies for non consideration, and then acquired vehicles from the lessees at a reduced market price. The structure of the transaction generated a tax saving.
However, the transaction was aimed at enabling the group to gain market shares by selling goods at discounted price and was considered sufficient to reject the challenge brought under the general tax avoidance principle.