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Italy and the transfer pricing issue

Tuesday 3 January 2012 - by Piergiorgio Valente

Transfer pricing is the hot topic in the tax audit world right now in Italy says Piergiorgio Valente, managing partner of law firm Valente Associati GEB Partners.

If someone were to ask a CFO or a tax director of a multinational company operating in Italy: "What's the hottest issue right now within the tax audits area?", the answer would most undoubtedly be transfer pricing.

There are a number of excellent reasons for such an unequivocal and straightforward answer.

First of all the context, viewed from both an economic international scenario and a supranational legal framework perspective. The worldwide crisis is most certainly compelling most countries to adopt stringent rules in terms of public finances.

The OECD and the European Commission are in the process of developing new guidelines in the TP area with the technical expertise and political support of all countries involved.

This is an ongoing learning process for countries such as Italy, which, thus far have neither had an in-depth, nor a long-standing experience in such matters.

At the same time, this substantiates and enables the tax authorities to exert their auditing power towards companies with international interests.

Furthermore, TP is a highly debatable and controversial area that most often gives rise to disputes between states and taxpayers, it is a field that may easily produce "funds" for states' treasuries.

Within this scenario, are there any caveats, any points calling for special attention for multinational companies investing in Italy? The answer is yes and some technical aspects should be kept in mind from an Italian tax perspective.

TP audits generally follow the same formal procedure that Italian Tax Authorities apply to regular audits.

Nevertheless, the auditing procedure may turn out to be particularly complex and should, therefore, be adequately followed and supported by the taxpayer since a great number of elements must be considered such as: the peculiar aspects of international relations, the specificity of the subject-matter and the need to interact with various jurisdictions, by keeping in mind the tax legislation currently in force in Italy.

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2012-01-08 22:20:02 | David Stocks
Thank you for all that you do in this important matter.