ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
5. Adjustments 5.1 Upward Transfer Pricing Adjustments Italian laws provide that a taxpayer is allowed to make an upward transfer pricing adjustment after the filing of a tax return, and before a tax assessment is served, by submitting an amended tax return and paying the higher taxes resulting from the upward adjustment, related interest and reduced penalties through the rav- vedimento operoso (active repentance) programme. In the event that a taxpayer has opted for the penalty protection regime (see 8.1 Transfer Pricing Penalties and Defences ), such upward adjustment may also be accompanied by a corresponding update of the trans - fer pricing documentation. 5.2 Secondary Transfer Pricing Adjustments Italian laws do not contain any provision on secondary transfer pricing adjustments. 6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information Italy carries out cross-border tax information shar - ing on the basis of a comprehensive and multi-lay - ered legal framework, which combines international, EU and domestic sources. These instruments are designed to promote administrative co-operation among tax authorities, while at the same time ensur - ing the protection of taxpayers’ rights. In summary, with specific reference to transfer pricing matters, the exchange of information may be carried out on the basis of DTTs, tax information exchange agreements (TIEAs), and EU directives as implement - ed in Italy. DTTs Italy has a wide treaty network, largely based on the OECD Model Tax Convention on Income and on Capi - tal of 1969, generally compliant with Article 26 of the OECD Model Convention. As a general rule, under DTTs, contracting states are obliged to exchange not only necessary information, but also pieces of infor - mation that could be “foreseeably relevant”, with the only limitations being those applicable to general -
Letter”), issued on 24 May 2022 provided instruc - tions regarding the correct definition and use of “arm’s length range”. Lastly, in accordance with the OECD Guidelines, Arti - cle 6 (3) states that, in the case of a transfer pricing adjustment by the Tax Auditors, the taxpayer has the right to demonstrate that the controlled transaction complies with the arm’s length principle. In this case, the Tax Auditors can disregard the taxpayer’s argu - ments, providing adequate explanation. 3.5 Comparability Adjustments According to Article 3 of the Ministerial Decree, in the case of differences in comparability that affect a financial indicator, comparability adjustments can be made if it is possible to reduce such differences in a reliable manner. As to year-end adjustments, Italian laws do not pro - vide for notable rules, but in practice multinational enterprises (MNEs) used to apply such adjustment to respect the arm’s length principle under Article 110 (7) of the ITC. Italian laws do not provide for notable rules specifi - cally relating to the transfer pricing of intangibles. The arm’s length principle applies. 4.2 Hard-to-Value Intangibles Italian laws do not provide for any special transfer pricing rules regarding hard-to-value intangibles. The arm’s length principle and the OECD Guidelines on hard-to-value intangibles apply. 4.3 Cost Sharing/Cost Contribution Arrangements Cost sharing/cost contribution arrangements are generally recognised in Italy (reference to them is expressly made in the 1980 Circular), even if no spe - cial transfer pricing rules apply to such arrangements. The arm’s length principle applies. 4. Intangibles 4.1 Notable Rules
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