ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
not applicable with reference to precautionary meas - ures (eg, seizure of assets). After the First Instance Tax Court decision, to the extent unfavourable for the taxpayer, the collection agent can collect up to two thirds of the higher taxes and penalties as determined by the decision, plus interest. After the Second Instance Tax Court deci - sion, to the extent unfavourable for the taxpayer, the collection agent may request 100% of the taxes and penalties as determined by the decision, plus interest. The taxpayer can also ask for a suspension of the col - lection according to the following procedures. • Based on the administrative proceeding, the IRA Office is entitled, at its discretion, to totally or par - tially postpone the collection, upon written request of the taxpayer (possibly by requesting guaran - tees); this remedy will remain in force until the judg - ment of the First Instance Tax Court. • Under the judicial proceeding, the taxpayer can request the postponement directly from the First Instance Tax Court; this request can be filed together with the appeal as well as after it, but no later than the first hearing on the merit – the post - ponement is granted at the discretion of the court if the judges conclude that: (a) there is fumus boni iuris (ie, the arguments of the appeal are well-grounded prima facie); and (b) there is periculum in mora (ie, there is a well- founded risk that the taxpayer may suffer from financial detriment as a consequence of the provisional collection). The hearing on the postponement will be scheduled by the court within 30 days from the request. The deci - sion on the postponement can be appealed within 15 days from its issuance. 14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing Italy has a well-developed legal system that puts tax - payers in the position to prevent domestic transfer pricing disputes, through unilateral or bilateral/multi - lateral APAs, and to resolve them out of court through
competent authority procedures (MAPs and arbitra - tion procedures) that can ensure elimination of double taxation, or settlement procedures that allow taxpay - ers to significantly reduce penalties (where taxpayers did not have proper transfer pricing documentation). As a result, in many cases, transfer pricing claims are solved out of court. In recent years, there has been a trend to start competent authority procedures instead of court proceedings, particularly where there are no penalties. This is the reason why the number of court rulings on transfer pricing matters is quite limited in comparison with the overall number of transfer pricing challenges. 14.2 Significant Court Rulings In the last decade, one of the most notable transfer pricing topics discussed before Italian courts has con - cerned the procedural ramifications of Article 110 (7) of the ITC and, in particular, whether the initial burden of proof lies with the taxpayer, which will have to dem - onstrate that its transfer pricing policy is in line with the arm’s length principle, or on the IRA, which will have to demonstrate effective non-compliance with the arm’s length principle. In this context, it should be noted that Italian laws do not indicate the party that bears the burden of proof regarding the existence – or not – of arm’s length con - ditions. In certain decisions, the Supreme Court has stated that the taxpayer is not required to prove the accuracy of transfer prices applied, unless the tax authorities have themselves first provided proof of: (i) effective non-compliance with the arm’s length princi - ple; and (ii) the low level of taxation in the state of the related counterpart (see, for example, the decisions of the Supreme Court, No 22023 of 13 October 2006 and No 11226 of 16 May 2007). However, in other recent decisions, the Supreme Court seems to have overturned this position. Indeed, the Supreme Court has stated that the IRA bears only the burden of proof to demonstrate the correctness and legitimacy of TP adjustments. The determination of the transfer pricing adjustment, as a consequence, must be fully justified by the tax authorities (while the reference to the low level of taxation in the other state is no longer regarded as relevant).
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