Cross-border Mergers and VAT: Tax Representation Survives Incorporation. Analysis of Supreme Court Order No. 15026/2025

Corporate transactions involving non-resident entities often present significant complexities, particularly in the tax arena. Supreme Court Order No. 15026, published on June 4, 2025, provides essential clarification on the fate of tax representation mandates in the event of a merger by incorporation of a foreign company. This decision is crucial for the continuity of VAT obligations and rights, including refunds, offering certainty to economic operators.

Context and Legal Issue

The dispute examined by the Supreme Court, originating from an appeal by the State Attorney General's Office against company M., concerned a request for refund of VAT excess submitted by a tax representative on behalf of an incorporated non-resident company. The central issue was whether the merger of the principal company resulted in the extinction of the tax representation mandate, thereby precluding the representative from acting for the refund. The Supreme Court was called upon to define the limits of legal continuity in such transactions.

The Supreme Court's Ruling: Continuity and Right to Refund

The Supreme Court, with Order No. 15026/2025, provided a decisive answer, based on cardinal principles of civil and tax law. The ruling's headnote clearly states:

In matters of VAT, the merger by incorporation of a non-resident company into the Italian territory is not a cause for the extinction of the tax representation mandate of the incorporated company, as, pursuant to Article 1722, No. 4, of the Civil Code, a mandate whose object is the performance of acts relating to the exercise of a business does not terminate upon the extinction of the principal, if the business is continued, without prejudice to the right of withdrawal of the parties or heirs. (In a dispute where the appellant, acting as tax representative, had submitted, in the name and on behalf of the incorporated company, a request for refund of VAT excess, the Supreme Court affirmed that the fact that the refund request was not made in the name and on behalf of the acquiring company was not sufficient to invalidate the right to refund of the VAT credit, given that, on the one hand, the acquiring company succeeds to all the rights and obligations of the incorporated company, and on the other hand, such an irregularity is, in any case, not such as to deprive the taxable person of the right to obtain the refund).

The decision is based on Article 1722, number 4, of the Civil Code, which protects the continuity of a mandate relating to the exercise of a business even in the event of the principal's extinction, provided that the activity continues. This principle is extended to mergers, recognizing that incorporation does not interrupt the continuity of economic activity. Furthermore, Article 2504-bis of the Civil Code establishes the universal succession of the acquiring company to all the rights and obligations of the incorporated company, automatically transferring VAT credits and the entitlement to a refund. Therefore, a formal irregularity in submitting the refund request cannot preclude the substantive right to a VAT credit refund, as the substance of the transaction prevails over the form.

Key Implications for Businesses

Order No. 15026/2025 offers important practical clarifications:

• The tax representation mandate does not terminate with the merger by incorporation of a non-resident company, if the business continues.
• The acquiring company fully succeeds to all rights and obligations, including VAT credits and the right to a refund.
• Formal irregularities in submitting the request do not invalidate the substantive right to a refund.
• This ruling reiterates the prevalence of substance over form in matters of extraordinary transactions and international taxation.

Conclusions

Order No. 15026 of 2025 is a fundamental piece in Italian tax law. The Supreme Court has reaffirmed the continuity of the business and universal succession, protecting the right to VAT refunds and limiting the impact of mere formal irregularities. For companies and professionals, this ruling serves as a reminder of the importance of careful and informed management of extraordinary transactions, ensuring the full protection of their tax rights in an increasingly globalized context.