Italy transfer pricing guidelines

Transfer pricing documentation provisions have been included in Law number 122 published in the Official Gazette on July 30 2010.

Article 26 titled, Conformity with OECD directives in relation to transfer pricing documentation, provides that taxpayers that suffer a transfer pricing adjustment will no longer be subject to a tax-geared penalty if specific transfer pricing documentation is provided during the audit. Particularly, taxpayers should prepare documentation drawn up in accordance with a regulation to be issued by the Italian Revenue Office (Agenzia delle Entrate) within 60 days from the day after the date of publication of the law in the Official Gazette. Additionally, there are deadlines for the taxpayers to notify the revenue office that they have this documentation on file in a form and, in accordance with the regulation, with a timeframe which will also be stipulated.

The preparation of the Documentation will not be mandatory, but taxpayers presenting it to the Tax Authorities will enjoy of apenalty protection system. Accordingly, those taxpayers that have presented the Documentation to the Tax Authorities will not be charged of penalties in case of tax assessment leading to a transfer pricing adjustment. Penalties on transfer pricing adjustments range from 100% to 200% of the higher tax assessed.

The Documentation shall be contemporaneous and taxpayers shall timely inform the Tax Authorities of its availability.

An Implementing Regulation from the Tax Authorities, to be issued within sixty (60) days from the conversion into Law of the Law Decree (The Law Decree has to be converted into Law by  July 29, 2010), will rule about the following topics:

1.      Form and the structure of the Documentation (it is expected that the Documentation Requirement shall follow the EU Code of Conduct and the so-called Masterfile approach); 

 2.      Terms and procedures to be followed by the taxpayers in communicating to the Tax Authorities the availability of the Documentation.   

As the Documentation Requirements may also be applicable to prior years, those taxpayers that are willing to prepare the Documentation for fiscal years prior to 2010 shall comply with the content of the Implementing Regulation and give notice to the Tax Authorities within ninety (90) days after the publishing of said Implementing Regulation.