ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
10. Relevance of the United Nations Practical Manual on Transfer Pricing 10.1 Impact of UN Practical Manual on Transfer Pricing As discussed in 1. Rules Governing Transfer Pricing , Italian transfer pricing regulations have been aligned with international best practices (ie, the OECD Guidelines as amended following the BEPS project). There is no reference in Italian legislation or administrative guidance to the UN Practical Manual on Transfer Pricing. 11. Safe Harbours or Other Unique Rules 11.1 Transfer Pricing Safe Harbours Special rules for low value-adding intercompany services are provided by Article 7 of the Ministe - rial Decree. This provision, mirroring the OECD Guidelines, provides for a simplified approach to assessing the consistency with the arm’s length principle of certain qualified services. These are services which: • are of a supportive nature; • are not part of the core business activity of the group; • do not require the use of unique and valuable intangibles and do not lead to the creation of the same; and • do not involve the assumption or control of substantial or significant risk by, or give rise to the creation of significant risk for, the ser - vice provider. In accordance with the OECD Guidelines, the remuneration of the above-mentioned services is deemed to be arm’s length if a mark-up of 5% is applied on the direct and indirect costs
Generally, it is expected that these initiatives could have an impact on domestic legislation, which could be subject to amendments when the work on the two-pillar solution is complete and the Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union is implemented. This Council Directive has been incorporated into Italian legislation through the Legislative Decree of 27 December 2023, No 209. The Legislative Decree empow - ers the Minister of Finance to issue secondary regulation. The Minster of Finance has issued five decrees dealing with: • safe harbour (mainly CbCR transitional safe harbour (TSH)); • Italian qualified domestic minimum top-up tax (QDMTT) (expected to be qualified and eligible for the safe harbour status); • substance-based income exclusion (SBIE); • Administrative Guidelines approved within the Inclusive Framework; and • treatment of deferred taxation generated in the period prior to the implementation of the global anti-base erosion (GloBE) rules. 9.5 Entities Bearing the Risk of Another Entity’s Operations As a general rule, Italy applies the OECD Guide - lines on risks, recognising a return to the entity actually assuming them, taking also into account through a functional analysis how related par - ties involved in a controlled transaction operate in relation to the assumption and management of the specific, economically significant risks, identifying in particular who performs control functions and risks mitigation functions, who bears the consequences arising from the risk outcomes and who has the financial capacity to assume the risk.
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