Italian news: Transfer Pricing and Formal Obligations (STUDIO DE GIORGI e ASSOCIATI)

Member News

Transfer pricing rules are a common factor and fundamental consideration for all multinational companies looking to do business in Italy. This thought leadership article from Italian member firm STUDIO DE GIORGI e ASSOCIATI provides a concise summary of the recent Italian news on transfer pricing (TP).

Access our Business Opportunities Insights hub page to access similar articles about international business and global opportunities. Interested in sharing your own thought leadership with PrimeGlobal members? Submit an article.

The Italian TP rules are included in article 110 of the TUIR (i.e., Italian tax law), which identifies the method of determination of the “fair” price to be applied to transfers of goods or services between companies belonging to the same group, but resident in different states or jurisdictions.

Companies belonging to a “group” are defined as all entities (subsidiaries, branches, etc.) that are in fact or by law directly or indirectly controlled by the same economic entity.

The rationale behind TP policy controls is to verify that intra-group transactions respect the arm’s length principle, i.e., that the price charged in commercial transactions between companies belonging to the same group coincides with the price that would have been agreed in similar conditions between independent companies, and in free-market conditions. The ultimate aim of TP regulations is to counter and discourage the undue transfer of the tax base from high-tax countries, such as industrialized and advanced countries, to countries considered to be “tax havens” with a low tax burden.

The OECD practice (from which the Italian rules are inspired) invites multinational groups to draw up a set of documents explaining and supporting the price logic on which intra-group trade is based, in order to facilitate the verification activities of national tax agencies.

The Documental Set

This set consists of two documents: the “Master File”, which includes information on the group and the transactions carried out, and the “Country File”, which relates to the group companies located in a particular country.

The Italian law concerning the preparation of TP documentation has been amended several times in recent years, and only from the end of 2021 is the picture finally complete.

It is important to underline that compliance with all the new rules, including the formal ones, is the only bulwark that can guarantee the so-called “penalty protection” to a taxpayer subject to a TP audit.

This circumstance consists in the non-application of penalties (which at the present case range from 90% to 180% of the higher tax due as a result of a transfer pricing adjustment) during the inspection.

The mere presence of TP documentation drawn up in accordance with the OECD guidelines is no longer sufficient per se to guarantee the “penalty protection”; in fact, it is necessary to point out that:

  • The multinational group must have prepared both documents making up the TP file: the Master file (relating to the group) and the Country file (relating to the transactions of the Italian company with the other companies of the group),
  • The TP documentation must be drafted in the Italian language (although the Master file may be accepted in English) and according to the structure required by the Italian regulations,
  • The Italian company must have indicated possession of TP documentation by ticking the appropriate box in the annual tax return; this requirement is valid for one year and must be renewed periodically,
  • For each tax year, both TP documents (Master and Country files) must be electronically signed by the signatory of the Italian company’s tax return before sending it, i.e., by the legal representative of the Italian entity of the group,
  • In order to prove that the electronic signature was affixed before the filing of the tax return, a “time-stamp” must be affixed to the TP documents. The so-called “time stamping”, an Italian peculiarity, is a third-party certification process of the documentation, whereby an electronic document is given an unambiguous date,
  • In the event of a tax audit, TP documentation must be provided to tax inspectors, in electronic format, within 20 days of the request.

In most cases, the TP documentation must be reviewed and updated every year; however, the Italian legislation provides for a “simplified approach” whereby, under certain conditions, small groups may keep the economic and quantitative analysis underlying the documentation unchanged for three years. In any case, the annual obligation to update the TP documentation in the other parts and to communicate its possession remains.

Given the complexity of the matter, the interest of the Italian Revenue Agency in transactions between multinational group entities and the risks associated with a TP audit, STUDIO DE GIORGI e ASSOCIATI recommend that a periodic assessment of the TP documentation is carried out, also in view of the recently introduced peculiarities in the Italian rules to verify the compliance of the documentation held also with the new Italian formal requirements.

In the light of the importance of the matter and the risks associated with a TP audit,

STUDIO DE GIORGI e ASSOCIATI recommends verifying that the TP documentation of the Italian entities of the group also complies with the new Italian formal requirements.

Content by:


STUDIO DE GIORGI e ASSOCIATI is a professional firm of accountants and auditors focused on national and international tax and company law, on company administration matters, and on individuals’ tax planning. We normally do business in English, currently spoken by most of our staff, as well as in other foreign languages. We assist our clients with financial, administrative and fiscal support, dealing with yearly tax returns, financial reporting, accounting, payroll, bookkeeping, company management and cost controlling, in general.

Learn more