Italian Tax Agency Clarifies Transfer Pricing Adjustments and VAT

The case in the tax ruling referred to transfer pricing adjustments made to permit the applicant enterprise to reach the minimum profit level provided in the group TP policy.

Specifically, the applicant company provided goods and services to a related company. According to an agreement between them, the former received remuneration from the latter for the difference between the amount of profit actually realised and the amount of profit at arm’s length. The question raised was whether or not such remuneration was relevant for VAT purposes.

Published in: TP Week - 7 November 2018

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Mandatory Electronic Invoicing: Are You Ready?

The Italian Revenue Agency has provided clarifications and practical guidance on the issuance, receipt and preservation of electronic invoices through various rulings.

The Italian Budget Law 2018 provided that both companies and individuals liable to VAT must issue and receive electronic invoices when they supply goods or services to Italian tax residents. The obligation enters into force on January 1 2019. However, it already applies to the supply of gas and petrol as motor fuel as of July 1 2018.

Published in: TP Week - 2 August 2018

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Transfer Pricing and Double Taxation: Italy’s Downward Adjustment Procedure

Published in: TP Week - 6 June 2018

The new rules (regulation - Provvedimento 108954/2018) were issued on 30 May 2018, following a public consultation launched in February 2018. The new regulation follows the amendments introduced in 2017 for Italian transfer pricing rules. Such amendments provided for an extended taxpayer’s right to request downward adjustment in connection with the correct application of the arm’s-length principle.

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Italy Refines Transfer Pricing Methodology

Published on: TP Week - 24 May 2018

On May 14 2018, the Italian Ministry of Economy and Finance issued a decree providing guidelines for the application of the Italian transfer pricing provisions, following relevant public consultation (the decree).

The Italian transfer pricing provisions, art. 110 para. 7 of the Italian Income Tax Code, had been amended in 2017 in line with the OECD Guidelines, as updated in July 2017 following the BEPS project.
The decree is composed of nine articles and in line with the OECD Guidelines on transfer pricing – these have been explicitly taken into account, according to the preamble. Further implementing provisions are expected to be issued by the Italian Revenue Agency, in particular with regards to updates of the OECD Guidelines.

In more detail, concerning the concept of control, the decree confirms the approach of the tax administration requiring verification of legal as well as economic control for the application of transfer pricing regulations.
The decree also adopts the notion of comparability as provided in the OECD Guidelines. For the assessment of comparability, it affirms the need to proceed with the analysis of the economically significant characteristics of the transactions (contractual terms, functional analysis, characteristics of goods and services, economic circumstances, company strategies).

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Italy Holds Public Consultation on New Transfer Pricing Rules

Published in: TP Week

On April 24 2017, the Italian provision on transfer pricing, article 110 paragraph 7 of the Italian Income Tax Code, was amended to clearly and definitively define and establish the principle of open-market conditions.
According to the amended provision, profit from transactions between Italian enterprises and related foreign enterprises shall be estimated “by reference to the conditions and prices that would have been agreed between subjects operating in open market conditions under comparable circumstances”.

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CbCR Obligations for Italian Entity Members of US Groups

Published in: TPWeek

An agreement for the automatic exchange of country-by-country reports (CbCR) between Italy and the US (Agreement) came into effect on September 27 2017, as announced by the Italian minister for economy and finance.
The above agreement derives its legal basis from Art. 26 of the Convention for the Avoidance of Double Taxation in effect between the US and Italy.

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Cooperative Compliance: The Italian Framework

Published in: TPWeek

On May 26 2017 the Italian regime on cooperative compliance was further clarified by the Italian Revenue Agency (IRA or tax administration) by virtue of a new regulation (provvedimento). Antonella Della Rovere and Federico Vincenti of Valente Associati GEB Partners explain.

The Italian framework of cooperative compliance has been built since 2014, when it was envisaged by law as part of a set of measures to establish a fairer, more transparent and growth-oriented national tax system.

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Italy: Changes to the TP Framework

On April 24 2017, a new law decree (N. 50/2017) introduced changes to the Italian transfer pricing framework. Antonella Della Rovere and Federico Vincenti from Valente Associati GEB Partners look at the changes.

In a nutshell, the Italian provision on transfer pricing (art. 110 para. 7 of the Italian Income Tax Code) was amended to clearly and definitively encompass the principle of open market conditions.

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Country-by-Country Reporting Finally Arrives in Italy

Published in: TPWeek

In February 2017, the Italian Ministry for Finance issued the long-awaited ministerial decree for the implementation of country-by-country reporting (CbCR) in Italy – Ministerial Decree No. 23 of February 23 2017. Antonella Della Rovere and Filipa Correia of Valente Associati GEB Partners discuss the implications.

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Automatic Information Exchange Comes to Italy

Published in: TP Week

In December 2016, the Italian Council of Ministers presented to Parliament the Draft Legislative Decree for the implementation of Directive 2015/2376/EU.
The decree sets out automatic exchange of information in the field of taxation, in particular with respect to advance cross-border rulings and advance pricing agreements (APAs).

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Suitable TP Documents Could Prevent Penalties in Italy: But What Is “Suitable”?

Published in: TP Week

Multinationals with activities in Italy can get rid of penalties for tax avoidance if they opt to supply the Italian revenue authorities with comprehensive transfer pricing TP documents supporting their group’s TP policies.
Antonella Della Rovere and Federico Vincenti of Valente Associati GEB Partners explain how this works in practice.

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Transfer Pricing: 'Broad-Based' Control Concept Pursuant to Italian Courts

Published in: TP Week, May 25, 2016

Article 110, paragraph 7 of the TUIR (i.e., Italian Income Tax Code, hereinafter, “TUIR”), related to the Italian Transfer Pricing regime, establishes that in order for the above rule to be applicable, one of the companies involved in the intercompany transaction must exercise control over another company, or that both be under common control.

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