Reverse charge on the sale of jewellery not intended for transformation or refining: VAT evasion

With judgment no. 42822/2024, the Supreme Court of Cassation established that an entrepreneur who applies the reverse charge mechanism instead of the tax regime on the sale of jewellery intended for immediate use, and not for refining or transformation, is evading VAT.

The Case

The Italian Tax Authority contested to a jewellery company the declaration of lower taxable elements for the purposes of income taxes and VAT. The CEO of the company, defendant in the criminal proceedings, was convicted by the Court of second instance for the crime pursuant to Article 4 of Italian Legislative Decree No. 74/2000.

The defendant filed an appeal to the Supreme Court, claiming the violation of law and lack of reasoning in relation to Articles 4 of Legislative Decree no. 74/2000, 17 of Presidential Decree no. 633/1972, and Article 3, para. 4 of Law no. 7/2000.

On the ground of the reason given in the tax notice of assessment, the judge ruled that the reverse charge was not applicable to the company.

The Decision

The Supreme Court declared the appeal inadmissible, due to the right and well-argued facts of the second instance judge on the non-applicability of the reverse charge.

The Court clarified that according to Article 17 para. 5 of Presidential Decree No. 633/1972, the supplies must concern investment gold, gold material or semi-finished products to enforce the reverse charge regime. 

Specifically, the jewellery:

  • must have specified qualities;
  • be intended not for immediate use, but for transformation into a different object.

The second instance decision emphasized the lack of these necessary characteristics. Indeed, the supplies concerned gold jewellery previously purchased from consumers, not intended for refining or transformation and, therefore, lacking the requirements for the application of the regime under Article 17, para. 5 of Presidential Decree No. 633/1972.