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Italian Tax Authorities Give Interpretation of Transfer Pricing Documentation


With a letter dated 21 June 2011, Italian tax authorities have provided guidelines on the documentation prepared for the purposes of non application of penalties in case of a Transfer Pricing assessment. Taxand Italy reviews these clarifications and makes recommendations for those companies wishing to apply the documentation.

The Letter contains clarifications on the limitation of use, by Tax Authorities, of the information set forth in the TP documentation, terms for delivery of the documentation and the application of penalties for non-inherent, although duly documented, costs.

In particular, tax authorities consider that the non application of penalties - for taxpayers holding appropriate documentation on the consistency of charges with the arms' length principle - should be applied only in case of upward adjustment based on transfer pricing rules.

Consequently, according to tax authorities, the above rule should not be applied in case of I/C costs challenged on the ground of the non-inherence to the business activity of the Italian company.

Taxand's Take

An in-depth scrutiny and review of costs as to their type, nature and supporting documentation should be carried out in the preparation of the documentation for Transfer Pricing purposes.

Companies wishing to apply the mentioned regime on TP documentation should, therefore, perform a detailed analysis of the form and content of the documentation supporting the description of the services content to clearly reflect also the inherence in the country file prepared for TP purposes.

Your Taxand contacts for further queries are:
Guido Arie Petraroli
T. +39 02 7260591

Alberto Alfredo Ferrario
T. +39 02 7260591

Taxand's Take Author