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Italy's Transfer Pricing Changes In 2014

Through its Finance Act 2014 (Law No 147/2013), Italy has introduced a number of transfer pricing-related changes. This should affect both procedures and fundamental concepts.

Article 1, Paragraph 281 clarifies that transfer pricing adjustments have a bearing on regional corporation taxes (IRAP). This 'clarification' has been given retroactive effect for every financial year beginning on January 1, 2008 or later. However, Paragraphs 282 and 283 specify that penalties should not be due on the additional amount of IRAP due for tax years ending on December 31, 2012 or earlier. Special rules apply for taxpayers whose financial year does not match the calendar year. The transfer pricing penalty waiver does not apply to deficiencies notified prior to January 1, 2014.

This development should be of particular importance for Mutual Agreement Procedures (MAPs). Thanks to this clarification, Italian taxpayers may now claim IRAP tax relief under MAP if they have been subject to a transfer pricing adjustment in a foreign country. Until now, the tax authority would have included IRAP in Italian transfer pricing adjustments, but would have denied IRAP relief under MAP. This approach could have resulted in many instances of double taxation.

In addition to that, Italy has introduced other changes of particular relevance to the digital economy, which is currently being discussed by the OECD as part of the BEPS project. The Finance Act 2014 now expressly excludes the cost plus method for online advertising services (including any auxiliary services), unless an APA says otherwise (Article 1, Paragraph 177).

As far as APAs are concerned, a Decree Law No 145/2013 has extended their scope regarding PE risk. From now on, taxpayers will be able to obtain advance rulings as to whether they have a PE in Italy. In order to reduce the competent authority's backlog, their duration is also extended from three to five years.



For further information please contact Enrico Holzmiller, international contact partner for our member firm in Italy on


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