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OBLIGATION TO COMMUNICATE TO THE
TAX AUTHORITIES THE DOCUMENTATION RELATED TO THE TRANSFER PRICING
The article 26 of the Law Decree No. 78, dated May 31, 2010,
containing the rules regarding the transfer pricing, introduces the
obligation, in order to avoid the penalties about the incorrect tax return,
to communicate by electronic means to the Italian tax Authorities the
production of the documentation about the transfer pricing.
Starting from 2010, the communication will have to be submitted with the same recurrence of the submission of the annual income
tax return, 30th September of each year, instead, for the previous years it
will have to be submitted within the 28th December 2010 (the communication
can be submitted also after December, 28 2010 as long as a tax assessment has
not begun yet).
According to the above rule, the controlling or controlled companies
of a multinational group and the permanent establishment of non-resident
company have to submit, within 10 days from the request of the Italian Tax
Authorities, the documentation defined by the tax Authorities provision dated
September 29, 2010.
The adequate documentations, in order to proof the correctness of the
transfer price, is the follow:
Master file which contains the information related to the group, divided into the
following chapters:
1.
general description of the group
(history, business sector and business market);
2.
the structure of the
organization (organization chart and the related distribution of shares,
description of the function of each associated companies);
3.
business strategies;
4.
business transactions (how the
product or service that is the subject of the controlled transaction in
question flows among the associated companies, invoicing terms and the
related amount);
5.
transactions between the
associated companies (description of the transactions, information about the
agreement regarding the distribution of the cost on the associated entities);
6.
function of the companies,
tangible assets involved in the transactions and risk assumed;
7.
intangible property (the
intangible assets detained by the associated companies involved in the
controlled transactions);
8.
information on pricing
(information on which the transfer pricing is based and showing that this
determination are consistent with the arm’s length principle);
9.
advance price arrangements
(description of the APA and the ruling signed with the foreign tax
Authorities).
Country file which contains the information about the associated entities, divided
into the following chapters:
1.
general description of the
company (history, business sector and business market);
2.
business sector of the company
(general commercial and industry conditions);
3.
operating structure of the
company (description of the function performed by the company in the business);
4.
business strategies;
5.
transactions between the
associated companies (description of the transactions, indication of the
entities involved in the controlled transactions, features of goods and
service, analyses of the function and the business risk assumed by the
company, nature and terms of the transactions, economic conditions, tangible
assets involved, description of the method selected for the determination of
the price);
6.
transactions between the
associated companies (agreement regarding the distribution of the cost on the
associated entities).
Annex 1 – transactions flow chart;
Annex 2 – the copy of the transaction agreement.
Moreover, the documentations have to be filled in in Italian, but the
master file related to the entire group can be presented in English.
Furthermore, the controlled companies and the permanent establishment,
qualified as a controlled company, can provide to the Italian Tax Authorities
only the country file contained the information indicated above.
Finally, the company can submit only the master file if it contains
all the information required for the country file.
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