Transfer Pricing

Transfer pricing rules in line with OECD Guidelines are applicable in Italy.

In particular, the rules apply to:

a. foreign companies which control Italian enterprises they perform transactions with;

b. Italian enterprises which control foreign companies they perform transactions with;

c. Italian or foreign companies which control both entities (Italian enterprises and foreign companies) involved in the transaction.

“Foreign companies” is defined in practice as any kind of business entity, legally recognized in the foreign country, even if it has only one partner.

“Italian companies” is defined as companies with share capital, partnerships, sole traders and permanent establish- ments of foreign companies set up in Italy.

Inter-company transactions are to be performed at armset up in, which is the principle recommended by the OECD Guidelines, according to which the price is negoti- ated by independent entities.

There are no legal obligations in terms of documenting the price policy used within the business group, however, it is advisable to ensure documentation can prove the transfer pricing method adopted within the group. Avoiding transfer pricing issues is also possible by using one of the means provided by the tax authorities, such as:

An annual tax return must include the following information:

  • the kind of control (see the above point a) b) c)) applicable to the company;
  • the amount of the transaction relating to the operation subject to the Transfer pricing rules;
  • if the company has the documentation to prove the transfer pricing method adopted within the group.

In relation to the above documents, the Italian regulations make explicit reference to the OECD Guidelines (namely, to the recent edition approved by the OECD Council on July 22nd, 2010), and the documentation requirements broadly replicate the recommendations of the EU Code of Conduct on transfer pricing documentation for associat- ed enterprises in the EU – the “European Union Transfer Pricing Documentation” or “EU TPD”. This includes the Master File and Country File concepts, although with some points of difference, towards a more comprehensive informative package (please see the table at the end for a detailed list of the required documentation).


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