ITALY Law and Practice Contributed by: Marco Valdonio and Gabriella Cappelleri, Maisto e Associati
• Based on the administrative proceeding, the IRA Office is entitled, at its discretion, to totally or partially postpone the collection, upon written request of the taxpayer (possibly by requesting guarantees); this remedy will remain in force until the judgment 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 postponement is granted at the discretion of the Court if the judges con - clude that: (a) there is fumus boni iuris (ie, the argu - ments 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 conse - quence of the provisional collection). The hearing on the postponement will be scheduled by the court within 30 days from the request. The decision 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 taxpayers in the position to prevent domestic transfer pricing disputes, through unilateral or bilateral/multilateral APAs, and to resolve them out of court through competent authority pro - cedures (MAPs and arbitration procedures) that can ensure elimination of double taxation, or set - tlement procedures that allow taxpayers to sig -
nificantly 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 proce - dures instead of court proceedings, particularly where there are no penalties. This is the reason why the number of court rulings on transfer pric - ing 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 concerned the procedural ramifica - tions of Article 110(7) of the ITC and, in particu - lar, whether the initial burden of proof lies with the taxpayer, which will have to demonstrate that its transfer prices 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 and the low level of taxa - tion in the state of residence of the related party involved in the controlled transaction. In this context, it should be noted that Italian laws do not indicate the party that bears the bur - den of proof regarding the existence – or not – of arm’s length conditions. According to certain decisions, the Supreme Court has stated that the taxpayer is not required to prove the accu - racy of transfer prices applied, unless the tax authorities have themselves first provided proof of (i) effective non-compliance with the arm’s length principle 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).
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