1. In your jurisdiction, are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

There is no specific provision of law which obliges Italian taxpayers to maintain proper transfer pricing documentation. However it is advisable for them to maintain such documentation in readiness for a possible assessment by the tax authorities. Moreover, there is a penalty protection regime that excludes the possibility to apply penalties in case of transfer pricing assessment if the taxpayer (i) has prepared proper transfer pricing documentation and (ii) has informed the Italian Revenue Agency about the existence of such documentation (to that end a specific box has to be marked in the relevant tax return). It is basically a matter of disclosure, i.e. if pricing policies are disclosed (through proper transfer pricing documentation) the assessment is however possible but penalties on assessed amounts may not be imposed.

2. What is the content of the documentation that must be prepared?

a) Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?

All transactions with associated enterprises, except those that may be considered “residual” (i.e. transactions that, even if not taken into account, are not able to affect the reliability of the entire analysis).

b) What is the definition of “associated enterprises” for the purposes of this requirement?

Under the Italian income tax code (Presidential Decree 22 December 1986, N. 917), transfer pricing rules apply in cases of “control”. This means that one company is considered to be associated to another if the former (i) is controlled by the latter, (ii) controls the latter or (iii) is controlled by the same entity that controls the latter. Both legal control (i.e., direct or indirect participation in the majority of the capital of the company) and de facto control should be taken into account.

c) For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?

Both taxpayers and tax authorities usually refer to EUTPD. However, in order to apply the above mentioned penalty protection regime there is a specific format required by the Italian Revenue Agency.

d) Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?

Taxpayers who are not established in Italy do not need to commit to provide any particular information upon request. However, the Italian tax authorities might start an exchange of information procedure with the country where the taxpayer is established. Moreover, taxpayers who are established in Italy should be ready to provide certain information on other entities of the group that are not established in Italy, in order to support the transfer prices that have been adopted.

e) If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?

Yes, but only if there are no Italian comparables and it is demonstrated that the market to be taken into account is the regional and not the Italian one.

f) What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?

It has to be in Italian.

3. What is the deadline or timescale for providing transfer pricing documentation to the tax authorities (is it to be provided for example upon filing of the tax returns, at the beginning of a tax audit, or on the specific request of the tax authorities)?

Upon specific request from the tax authorities.

4. In the event that the documentation is not provided within the applicable timescale, or is incomplete, do documentation-related penalties apply in your jurisdiction? If so, please detail the penalties and the circumstances in which they do and do not apply.


5. Does the absence or incompleteness of documentation reverse the burden of the proof as regards the arm’s length character of the transactions?

In theory, the absence or incompleteness of documentation does not reverse the burden of proof. However in practice, in order to face tax authority challenges to the adopted transfer prices, the taxpayer should not only oppose their calculations point by point, but also provide its own reconstruction of the said prices.

6. In the event that the tax authorities (i) impose documentation-related penalties and (ii) make a transfer pricing reassessment, does the imposition of documentation-related penalties prevent the taxpayer from initiating any mutual agreement procedure which may be contained in an applicable tax treaty (or, for EU countries, the procedure contained in the EU Arbitration Convention) with a view to eliminating any double taxation resulting from the transfer pricing reassessment?

Not applicable (documentation-related penalties are not provided for by Italian law).


Picture of Giovanni Battista Cali
Giovanni Cali