Regulations
During 2020 transfer pricing rules, which were already introduced in 2010, were updated, providing a great opportunity to the taxpayer in respect of transfer pricing.
In fact, preparing a specific supporting documentation, indicating the possession of such documentation within the terms and in the manner prescribed by the new rules and delivering the same not later than 20 days after the request, the taxpayer could benefit from the non application of administrative sanctions in case of dispute and transfer pricing adjustment.
This opportunity, which was introduced by Article 26 of Law Decree no. 78 of 31 May 2010 (converted with modifications by Law no. 122 of 30 July 2010), was amended by the Decree of the Minister of Economy and Finance of 14 May 2018 and subsequently regulated by the Measure of the Director of the Revenue of 23 November 2020 and Circular no. 15/ E of 26 November 2021 of the Revenue Agency.
The conditions to apply for the non-application of administrative sanctions are basically four:
- Preparation of a specific supporting documentation specified in the decision of 23 November 2020, sufficient to permit the finding of compliance with the arm’s length value of the transfer prices charged;
- electronic signature by the taxpayer’s legal representative or his delegate with a timestamp to be appended by the date of submission of the income tax return;
- communication to the tax authorities of the possession of the documentation that must be performed with the submission of the tax return;
- delivery of such documentation no later than 20 days after the request.
The required documentation consists of:
- a document called National Documentation (Countryfile); and of
- a document called Masterfile.
The National Documentation in summary contains information concerning the company and local information related to intercompany transactions that the company has put in place, together with the methodology for determining transfer prices applied and the related economic analysis.
The Masterfile, on the other hand, contains in brief an overview of the multinational group business, including the nature of its global business operations, its overall transfer pricing policies, and its global allocation of income and economic activity.
Indicating the reference context of the new regulation, the Measure and the Circular mentioned above, in addition to explicitly call the Italian legislation on transfer pricing (Article 110, paragraph 7 and Article 9 of Presidential Decree 22 December 1986, n. 917) and that sanctioning (Legislative Decree 18 December 1997, n. 471), also call the OECD Guidelines (Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations) approved by the Council of the Organization for Economic Cooperation and Development.
For more details, please view the section relating to the Italian legislation transfer pricing updates for FY2020 onward:
New Italian TP rules from 2020
You can also see the country profile on the law and practice of transfer pricing of all OECD member countries and Observers, clicking the image below.
