ITALY Law and Practice Contributed by: Giuliano Foglia, Foglia & Partners
8.3 Mandatory Binding Arbitration Generally, Italian DTCs do not contain an arbitration clause. Only specific conventions include an arbi - tration provision (ie, those with Armenia, Canada, Chile, Colombia, Croatia, Georgia, Ghana, Hong Kong, Jamaica, Jordan, Kazakhstan, Lebanon, Mol - dova, Slovenia, Uganda, United States, Uruguay and Uzbekistan), which however could not be considered as mandatory, generally requiring the consent of both States and of the taxpayers for the start of the arbi - tration. Mandatory binding arbitration is provided for EU MAPs under both the Arbitration Convention and Directive (EU) 2017/1852.
Treaty MAPs are specifically regulated by the relevant provision of the applicable DTC (generally Article 25). EU MAPs are governed by two main legal instruments. The first is the Convention on the Elimination of Dou - ble Taxation in Connection with the Adjustment of Profits of Associated Enterprises (90/436/EEC, known as the “Arbitration Convention”), which applies exclu - sively to double taxation arising from transfer pricing adjustments. The second is Directive (EU) 1852/2017 on Tax Dispute Resolution Mechanisms in the Europe - an Union, implemented in Italy by Legislative Decree No 49/2020. This Directive covers both transfer pric - ing adjustments and other issues connected with the interpretation and application of the relevant DTCs. 8.2 Application Deadlines The deadline for submitting a MAP request is specifi - cally set out in the legal instrument on the basis of which the procedure is activated. For Treaty MAPs, the term usually included in the Ital - ian DTCs is two years, which is shorter than the three- year term set out in the OECD Model. For EU MAPs, the term is also three years. The term generally runs from the first notification of the measure that results in (or is capable of resulting in) double taxation. Such a moment corresponds to: • the date of the explicit or implicit denial of the refund request by the Italian Revenue Agency, in case double taxation originates from the applica - tion of a domestic tax or withholding tax; and • the notification of the tax assessment notice, in case of adjustments made by the Italian Revenue Agency following a tax assessment. In the latter case, according to the clarifications released by the Italian Revenue Agency (Circular Let - ter No 21/2012), taxpayers may also activate MAP even before the formal notification of a tax assess - ment notice; for example, following the notification of a final tax audit report (“processo verbale di con - statazione” or “PVC”).
9. Dispute Prevention 9.1 Advance Pricing Agreements 9.1 Advance Pricing Agreements
In accordance with the OECD TP Guidelines, Ita - ly introduced an APA programme in 2003 for the advance determination of transfer pricing over a specified period. The APA programme allows the conclusion of both unilateral and bilateral (or multilateral) APA. The proce - dure for concluding APAs is governed by Article 31-ter of the Presidential Decree No 600/1973, as imple - mented by the provisions of the Regulations of the Director of the Italian Revenue Agency No 42295/2016 and No 297428/2021. In addition to the advance determination of transfer prices, enterprises with an international activity may also conclude agreements with the Italian Revenue Agency on the basis of Article 31-ter of the Presi - dential Decree No 600/1973, in order to obtain the advance: • definition of the entry or exit value of assets in case of transfer of residence; • assessment of the conditions for the existence of a PE in Italy of a non-resident company;
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