ITALY Trends and Developments Contributed by: Paolo Ludovici, Marlinda Gianfrate and Luca Tortorella, Gatti Pavesi Bianchi Ludovici
• capital raising administrative management activities, such as legal and accounting services for the management of the assets, the preparation and provision of information for clients, the appraisal and pricing of assets under administration, including for tax pur - poses, the monitoring of compliance with the applicable rules, the keeping of an investors’ register, the distribution of proceeds, the issu - ance or redemption of quotas and the defini - tion of contracts; and • marketing activity, such as any promotional message directly or indirectly addressed to investors aimed at promoting the subscription or purchase of quotas or shares. For such services, the Guidelines clarify that the most appropriate method to apply is the com - parable uncontrolled price (CUP). The Guidelines also prescribe that if the CUP cannot be applied in a reliable manner, the profit split method (PSM) should be considered, if both parties involved in the transaction bear the same economically sig - nificant risks and separately assume economi - cally significant and closely related risks. In case of application of the PSM, contribution analysis is preferred. To apportion the overall contribution, the IRA suggests following a multi - factor approach, as described in the 2010 OECD Report on the attribution of profits to permanent establishments. Only in cases where both methods cannot be reliably applied should other methodologies be considered, excluding those that use profit level indicators based on costs – eg, the (net) cost- plus method. Finally, when accurate analysis of the transaction shows that the provision of services does not imply the assumption of economically significant
risks by the asset or investment manager, it is possible to assess the arm’s length remunera - tion for the activities carried out by making ref - erence to the most appropriate transfer pricing methodology, thus also including methods that use profit level indicators based on costs. Support services that are related – and instru - mental – to the investment management activi - ties include: • the promotion and development of invest - ment management activities, including invest - ment advisory activities; and • investment management support or ancillary activities, such as economic and financial analysis, the drafting, sending and commu - nication of economic and financial data and information, the provision and management of IT services, the management of real estate properties for functional use and accounting and administrative services. These kinds of services appear most similar to those typically rendered by “routine” or limited risk providers/advisors. To assess the arm’s length remuneration, the Guidelines clarify that the most appropriate methodology among those described in the OECD Transfer Pricing Guide - lines must be selected, considering the facts and circumstances of the case. Hence, methods that use financial indicators based on costs – ie, the (net) cost-plus method, are allowed. However, if accurate analysis of the transac - tion demonstrates that the provision of services actually involves the assumption of economical - ly significant risks, the arm’s length remuneration of the transaction must be assessed in line with what is stated for the investment management services (CUP, PSM or other methods, exclud -
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