VAT and MLBO: SPV Costs Deductible under Resolution No. 7/E/2026

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With Resolution No. 7/E of 12 February 2026, the Italian Revenue Agency significantly revises the VAT treatment of acquisition costs incurred by special purpose vehicles (SPVs) in the context of merger leveraged buy-out (MLBO) transactions.

 

VAT deductible also during the preparatory phase

The Tax Authority acknowledges that transaction costs incurred by the SPV (legal, tax and financial advisory fees, structuring costs, etc.) qualify as general preparatory expenses in view of the economic activity to be carried out following the merger with the target.

From this perspective:

  • the SPV may qualify as a VAT taxable person already during the preliminary phase of the transaction;
  • VAT incurred on acquisition costs is deductible, as it relates to a future taxable economic activity.

The clarification is grounded on the EU principle of VAT neutrality as developed by the Court of Justice of the European Union (in particular, Case C-42/19, Sonaecom) and aligns with the approach adopted by the Italian Supreme Court (judgments No. 22608 and No. 22649 of 9 August 2024), which emphasized the economic unity of MLBO transactions.

 

The previous restrictive approach has been overturned

Resolution No. 7/E/2026 marks a clear departure from prior administrative guidance:

  • Circular No. 6/E of 2016: denial of VAT taxable status to “pure” holding companies and SPVs without management activity, resulting in non-deductibility of VAT on acquisition costs;
  • Legal Advice No. 17/E of 2019: confirmation that mere shareholding activity does not qualify as an economic activity for VAT purposes.

Under the new interpretative framework, the SPV is no longer regarded as a mere financial conduit, but rather as an integral part of a single transaction aimed at the direct exercise of the target’s business activity following the merger.

Operational implications for M&A and private equity transactions

The Resolution clarifies that the following costs fall within the scope of VAT deductibility:

  • financial advisory fees;
  • legal and tax advisory fees;
  • notarial and transaction structuring costs;
  • other expenses directly connected with the acquisition and functional to the subsequent merger.

From an operational standpoint, it remains essential to demonstrate the direct and immediate link between the costs incurred and the taxable economic activity to be carried out by the company resulting from the merger.

 

Tax implications for SPVs and leveraged buy-out transactions

The new position:

  • reduces tax uncertainty in MLBO transactions;
  • strengthens the principle of VAT neutrality;
  • aligns Italian administrative practice with EU case law and domestic Supreme Court precedent;
  • enhances the financial efficiency of investment structures (private equity and M&A).

This clarification was highly anticipated by market operators, as it directly affects the effective cost of acquisition transactions structured through SPVs.

Andersen professionals are available to assist clients in assessing the feasibility of the transaction and in determining the appropriate tax and legal treatment applicable to MLBO transactions.