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Transfer Pricing: An Overview of the Italian Supreme Court’s Recent Rulings

Rulings on transfer pricing matters issued in the last few years by Italian Courts covered various themes. Among these, the Tax Authorities frequently challenged the selection and application of transfer pricing methods, comparability analyses developed by taxpayers supporting intercompany policies, the analysis of special transactions such as intercompany loans and services as well as transactions related to intangibles. In the last decade, a considerable increase of disputes in transfer pricing matters could be observed along with tax audits relating thereto issued by the Tax Authorities in application of Article 110, paragraph 7 of the TUIR (i.e., Italian Income Tax Code, hereinafter “TUIR”). Notwithstanding the rising trend of proceedings activated by the Tax Authorities within such context and, subsequently further scrutinized by Italian Judges, there is not—to date—a clear-cut jurisprudential orientation such to provide the interpreter with the necessary guidance in the reconstruction of intercompany transactions.

The paper highlights the Supreme Court’s position on the burden of proof and transfer pricing documents. In particular, the compilation of documents entails a number of critical factors, given that the differences—both legislative and economic—existing in the various States of residence of group companies, do not facilitate the collection of adequate data/information, particularly where identification of comparable transactions is rather complex (as is the case for certain kinds of intangibles).

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