The Burden of Proof in Intra-Group Financing: A Turning Point in Italy?

4 March 2026

A recent Italian Supreme Court case examined the burden of proof in transfer pricing disputes involving intra-group financing arrangements. The dispute concerned whether the Italian tax authorities had provided sufficient evidence to support a transfer pricing adjustment to the interest rate applied on a loan between related parties.

The tax authorities argued that the interest rate charged did not reflect arm’s length conditions and sought to adjust the financing arrangement. According to the authorities, the agreed pricing resulted in an undue tax advantage and therefore required correction under the arm’s length principle.

The Italian Supreme Court, however, emphasized that tax authorities cannot merely assert that an intercompany financing arrangement is not arm’s length. Instead, they must support their position with a robust comparability analysis and demonstrate why the terms of the financing differ from those that would have been agreed between independent parties.

The decision raises broader questions about the evidentiary standards that should apply in transfer pricing audits, particularly in relation to financial transactions. It also highlights the increasing scrutiny of intra-group loans, where disagreements often arise regarding interest rates, creditworthiness assessments, and the selection of comparable market data.

The case serves as a reminder that both taxpayers and tax authorities must support their positions with robust economic analyses. For multinational groups, maintaining clear documentation and well-supported financing policies remains critical in defending transfer pricing positions during audits.

Find the full English translation here: Cass. civ., sec. V trib., judgment 04/03/2026, no. 4887 | Doctrine