TRANSFER PRICING: NEW ITALIAN GUIDELINES FOR ARM’S LENGTH PRINCIPLE PRACTICAL APPLICATION

With Decision no. 360494 of 23 November 2020, whose provisions will be effective starting from 2020 and which will replace the previous Decision no. 2010/137654 del 29/09/2010, the Director of the Italian Income Revenue Agency has updated the requirements and contents of Masterfile and Local File documentation in compliance with the arm’s length principle of transfer prices practiced by multinational companies which allow to access to the rewarding-regime of art. 1, co. 6, e 2, co. 4-ter of Decree n. 471/1997 (for incorrect annual tax return).

The Decision provides a detailed structure and precise content of the information to be included and, eventually, to be shown to the Tax Authority.

In particular, the previous distinction between group holding companies, sub-holdings of groups, and subsidiaries (used to determine the different levels of documentation required) has been replaced, and the same set of documents is now required for all taxpayers, regardless of the position of the Italian entity within the group.

Subject to certain conditions, partially relaxed documentation requirements are provided for SMEs, which are defined as companies with turnover or revenue not exceeding EUR 50 million in the tax period concerned. However, this does not apply if the company directly or indirectly holds or is held by a company that cannot be described as an SME.

Our staff is available for any clarification.