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Italian Transfer Pricing Procedures Clarified

by Ulrika Lomas,, Brussels

20 December 2010

In a circular issued on December 15, the Italian Revenue Agency has clarified the regulations for multinational companies which are able to inform the Agency that they are in possession of documents to verify the transfer pricing of their inter-company transactions.

In June this year, transfer pricing provisions were included within the government’s two-year deficit reduction package. The relevant decree provided that Italian taxpayers can avoid tax penalties following tax investigations relating to transfer pricing issues by confirming to the Agency the existence of transfer pricing documentation within a prescribed deadline; and by being able to support arm's length transfer pricing policies with adequate documentation when called upon to do so in a tax audit.

In terms of the timing required for the provision of transfer pricing documentation, the Agency is providing taxpayers, at the beginning of the procedure, with a certain amount of latitude. Although, on a regular basis, documentation should be confirmed by the date that a company makes its annual tax return, taxpayers can avoid penalties for prior years, up to and including 2009, by communicating to the Agency that they hold the necessary documents by December 28.

They will then have until June 30, 2011 to produce their full transfer pricing documentation, although the documents will need to be produced within 15 days if the Agency so requests. Normally, in the case that the Agency institutes an investigation, a taxpayer will have ten days to produce documents, and a further seven days if the Agency requests further information.

The Agency will look upon the ready acceptance by a company of the new transfer pricing procedure as a sign of its cooperative attitude and a wish to be transparent. In that respect, the Agency is also willing to accept that any omission or partial error by the company in its documentation will not, by itself, cause the application of sanctions, unless it compromises the Agency’s subsequent analysis.

Transfer pricing documentation provided to the Agency will be considered ideal if it contains all the information necessary for a complete and exhaustive examination of the pricing being applied. The Agency suggests that the range of documentation to be provided will vary according to the type of company under consideration – for example, holding, sub-holding, subsidiary, branch or representative office – while small and medium-sized enterprises may be exempt, under certain conditions.

This comprehensive report in our Intelligence Report series examines the global and national landscapes in which companies can use transfer pricing to improve their after-tax returns, including summaries of recent developments in design of the corporate supply train, the usefulness of 'offshore' in international corporate tax planning, and a section covering the spread of DTAAs and CFC laws. It is available in the Lowtax Library at and a description of the report can be seen at
TAGS: compliance | tax | business | law | group taxation | legislation | transfer pricing | Italy | regulation | penalties

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