ITALY Trends and Developments Contributed by: Paolo Ludovici, Marlinda Gianfrate and Luca Tortorella, Gatti Pavesi Bianchi Ludovici
ing those that use profit level indicators based on costs). The application of the transfer pricing method - ology, and the remuneration achieved by the investor or asset manager carrying out activities in Italy, must be documented in a proper trans - fer pricing documentation, structured in line with the one that multinational companies operating in Italy prepare in order to benefit from the Ital - ian penalty protection regime. The transfer pric - ing documentation must also satisfy formalistic requirements. The purpose of the transfer pricing documen - tation is to disclose how the Italian asset or investment manager is compensated, and to prove that the remuneration aligns with the arm’s length principle, taking into account the Guide - lines. Any adjustments to the compensation received by the Italian asset or investment manager raised by the tax authorities have no consequences for the application of the IME. In other words, they do not impact the application of the legal presumption of independence from the non- resident investment vehicle.
To complete the legislative and administrative framework, on 19 November 2024, the IRA issued Circular Letter No 23/E, providing “oper- ating instructions” to be followed by the IRA’s offices (and taxpayers) in their tax control and assessment activities. Conclusion If all the requirements for the application of the safe harbour provided for by the IME regime apply, a prudent approach is to carry out an ad hoc tax analysis – and to prepare the relevant transfer pricing documentation – in order to attest the arm’s length nature of the remunera - tion achieved by an asset or investment manag - er of a foreign investment vehicle in performing the managerial services.
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