By Davide Anghileri, University of Lausanne
Italy’s Ministry of Economy and Finance on May 14 issued final transfer pricing regulations on the application of the arm’s length principle. The publication follows the release of a draft for public consultation in February and a consultation in May.ut
The guidance aligns Italy’s transfer pricing rules with the outcome of Actions 8–10 of the OECD/G20 base erosion and profit shifting (BEPS) plan. In particular, new regulations provide definitions of associate enterprises, control, independent enterprises, controlled and non-controlled transactions, and financial indicators.
The regulations also explain the concept of comparability analysis and describe five methods that can be used to determine arm’s-length prices for intra-group transactions, namely, the comparable uncontrolled price (CUP) method, resale price method, cost plus method, transactional net margin method (TNMM), and the transactional profit split method.
The guidance further discusses when transactions should be priced jointly, explains when a transaction can be considered at arm’s length and provides the conditions when the Italian tax administration can make an adjustment to a transaction. The new regulations also provide a definition of low value-adding services.
The regulations state that the director of the revenue agency should publish guidelines regarding transfer pricing documentation and, in the future, should update the Italian procedures in accordance with the OECD guidelines.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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