ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
The IRA issued comprehensive guidelines on transfer pricing for the first time in 1980 with Cir - cular No 32/9/2267 of 22 September 1980 (the “1980 Circular” ). The 1980 Circular was largely based on the OECD report, “Transfer Pricing and Multinationals” of 1979, and has been the sole source for interpreting the Italian transfer pricing rules for a very long time. At the end of 1980, the provisions contained in Articles 53 and 56 of Decree No 597/1973 were repealed and replaced by Article 75, last paragraph, of Presidential Decree, 30 December 1980, No 897. Further guidelines were issued by the IRA with Circular No 42 of 12 Decem - ber 1981 (the “1981 Circular” ), dealing with the concept of control. Subsequently, Article 75 was transposed into Article 110(7) of the ITC, which provided that the price for intercompany cross- border transactions had to be determined on the basis of the “normal” value of goods and services, as defined by Article 9(3) of the ITC, which reads as follows: “Normal value [...] means the price or considera- tion applied on average for goods or services of the same kind or similar, at arm’s length condi- tions and at the same market level, at the time and place where goods and services are pur- chased or rendered or, in the absence of this, at the nearest time and place. For the determina- tion of normal value, reference is made as far as possible to price lists or tariffs of the person ren - dering the goods or services or, in the absence of this, to official lists, considering usual discounts. [...]” . Alignment With OECD Transfer Pricing Guidelines In 2017, in order to better align the Italian transfer pricing regulations with international standards, Article 110(7) was amended by Law Decree, 24
April 2017, No 50 converted, with amendments, by Law No 96 of 21 June 2017: the reference to the “normal” value concept was replaced by the reference to the arm’s length principle. There - fore, the new Article 110(7) of the ITC explicitly incorporates the arm’s length principle set forth by both Article 9 of the OECD, Model Tax Con - vention on Income and on Capital, Condensed Version 2017, and the OECD, Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations of January 2022 (OECD Guide - lines). On 14 May 2018, a Ministerial Decree was pub - lished, setting out general guidance for the cor - rect application of the arm’s length principle in line with international best practices making explicit reference to the OECD Guidelines and to the OECD Final Report on Base Erosion and Profit Shifting (BEPS) Actions 8–10 as well. Furthermore, pursuant to Article 8 of the Minis - terial Decree, on 23 November 2020, the Direc - tor of the IRA issued Regulation 2020/0360494 (the “2020 TP DOC Regulation” ), in replacement of the previous 2010 regulations, updating the transfer pricing documentation eligibility require - ments to benefit from the penalty protection regime and aligning the same with the OECD Guidelines as amended following the OECD Final Report on BEPS Actions 13. It is also worth noting that the Ministerial Decree contains a final clause under Article 9 that explic - itly enables the IRA to issue further implementing measures, considering the OECD Guidelines as amended, from time to time.
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