New Transfer Pricing Provision Starting from the 2020 Fiscal Year

June 9, 2021


By Giacomo Carnago

Associate Partner, Kreston TDL Italy Tax & Global Services

With Measure No. 360494 dated 23rd November 2020, the Italian Inland Revenue has amended the rules on transfer pricing documentation. This Measure replaces the implementing provisions introduced under Measure No. 137654/2010 and will come into operation starting from the 2020 tax period.

The importance of TP documentation for tax purposes

For companies belonging to Multinational Groups, including permanent establishments of companies that are not resident in the State territory, and resident companies with permanent establishments abroad, it is important to have the appropriate documentation to enable prices charged to intercompany transactions to be compliant with those charged under open competition. In the event of a tax audit by the Inland Revenue, the new measure allows companies to benefit from the non-application of administrative sanctions for unfaithful declarations (so-called “penalty protection”) in the event of an adjustment of income deriving from intercompany transactions.

What’s New

Companies will have to fulfil obligations on documentation always through the preparation of a Masterfile (also in English) and National Documentation (Country file). The content of both documents has, however, undergone a profound restyling to bring Italian legislation in line with the provisions of Action 13 of the OECD BEPS project.

Moreover, the distinction between a holding, sub-holding, and subsidiary company has been abolished, so all companies will have to prepare and hold a Masterfile from 2020.

Derogations to the New Regulations and Special Cases

Small and medium-sized enterprises (“SMEs”), identified exclusively based on the turnover of less than Euro 50 million, are no longer obliged to update, in the two tax periods following the one to which the National Documentation refers, the chapters relative to intra-group transactions should the comparability analysis be based on information from publicly available sources and not undergone significant changes.

Practical information

The Masterfile and National Documentation must be signed by the taxpayer’s legal representative (or a proxy) electronically and with a timestamp, to be affixed within the date of submission of the tax return (11th month after the end of the tax period).

In the event of a Tax Audit by the Inland Revenue, the delivery of the documentation to the Tax Authorities must be made within 20 days from the relevant request.