ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
3.4 Ranges and Statistical Measures Article 6 of the Ministerial Decree deals with the arm’s length range – ie, the range of figures related to a number of uncontrolled transac - tions each of which is equally comparable to the controlled transaction. In accordance with the OECD Guidelines, it is expressly provided that a controlled transaction is deemed to be at arm’s length if the related financial indicator falls within the above-mentioned arm’s length range. Furthermore, it is worth mentioning that accord - ing to Article 6(3), if the financial indicator of a controlled transaction does not fall within the arm’s length range, the IRA and the Guardia di Finanza (hereafter, jointly referred to as “Tax Auditors” ) are allowed to make an adjustment in order to bring it within the range. The IRA, with Circular Letter No 16/E (the “Circular Let- ter” ), 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, Article 6(3) states that, in the case of a trans - fer 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 arguments, provid - ing 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 adjust - ments can be made if it is possible to reduce such differences in a reliable manner. As to year-end adjustments, Italian laws do not provide for notable rules, but in practice multi - national enterprises (MNEs) used to apply such
adjustment to respect the arm’s length principle under Article 110(7) of ITC.
4. Intangibles 4.1 Notable Rules
Italian laws do not provide for notable rules spe - cifically relating to the transfer pricing of intangi - bles. The arm’s length principle applies. 4.2 Hard-to-Value Intangibles Italian laws do not provide for any special trans - fer pricing rules regarding hard-to-value intangi - bles. 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 special transfer pricing rules apply to such arrangements. The arm’s length principle applies. 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 amend - ed tax return and paying the higher taxes result - ing from the upward adjustment, related interest and reduced penalties through the ravvedimento operoso (active repentance) programme. In the event that a taxpayer adopts the penalty protection regime (for further details see 8.1 Transfer Pricing Penalties and Defences ), that
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