VAT Disputes: EU Advocate General pushes back on Italy’s tax settlement regime

Edited by Davide Accorsi and Martina Toscano

On 11 June 2026, Advocate General Dean Spielmann delivered his Opinion in Case C‑308/25, concerning a dispute between the Italian Revenue Agency and Isolanti Group Srl regarding the recovery of VAT allegedly unduly deducted, together with interest and penalties.

At the heart of the request for a preliminary ruling is the compatibility with EU law of the tax dispute settlement regime introduced by Law No. 197/2022, insofar as it allows VAT disputes to be closed by paying a reduced portion of the tax in dispute, while excluding import VAT.

According to the Advocate General, EU law does not prohibit, in the abstract, every form of settlement or partial waiver of VAT collection. However, it requires such measures to remain exceptional, specific and limited, without undermining the effective collection of the European Union’s own resources or fiscal neutrality.

The Italian rules, by contrast, would have an excessively broad scope: they apply to VAT disputes pending as at 1 January 2023 regardless of the duration of the proceedings, the court level, the amount in dispute, the nature of the infringement and even the possible presence of fraud. Moreover, once the application has been submitted and the amounts due have been paid, neither the tax administration nor the court would have any effective power to object on substantive grounds.

As a result, the measure is characterised as a de facto generalised waiver of the full collection of VAT, capable of creating disparities between taxpayers. According to the Advocate General, the regime could also favour domestic and intra-EU transactions to a greater extent, since import VAT remains excluded from the relief.

The Advocate General therefore considers that, on the basis of the principle of neutrality, EU law precludes national legislation that allows VAT disputes, other than those concerning import VAT, to be settled by paying only part of the tax, with no penalties or interest and without any genuine power of objection on the part of the administration.

If the Court were to confirm this approach, the scope for settlement regimes in VAT matters could narrow significantly, especially where the measure operates on a generalised basis and entails the automatic cancellation of penalties and interest. For positions already settled, the most sensitive issue concerns the possible reopening of the effects of completed settlements, with an impact that the Italian Government has linked to approximately 40,000 disputes.