Transfer Pricing News Issue 35 - April 2021

Transfer pricing developments

With the Provision no. 360494 dated 23 November 2020 (the “Provision”), the Italian Tax Administration has amended the Italian rules relating to transfer pricing documentation, with the aim of aligning national requirements to OECD post-BEPS standards.

New rules contained herein will apply from FY 2020, while no variations are due for transfer pricing documentation related to previous fiscal years.

In this article, we briefly summarise the major changes, and the potential impact on global transfer pricing matters going forward.

Firstly, there are no variations to communications to the Tax Authority about the possession of TP documentation - the taxpayer has to flag the box in line RS106 in the CIT return. Upon request, in the event of a tax audit, the aforementioned TP documentation has to be submitted to the Tax Authority within 20 days (compared to the previous deadline of 10 days).

Focus on TP documentation structure

Basically, the required documentation for the taxpayer to be eligible for penalty protection will continue to consist of the Masterfile and the country-specific documentation (“Country File”). However:

  1. Both the Masterfile and the Country File will be subject to a substantial restyling of their formal structures and substantial requirements, in line with OECD Action 13 standards;
  2. Even subsidiaries will be required to have the Masterfile available,  with the facility to file the document in English remaining;
  3. Italian permanent establishments (PEs) of non-resident companies, and Italian resident companies with non-resident PEs, will have to comply with the new obligations (i.e. prepare both Masterfile and Country File);
  4. Enterprises with a turnover of less than EUR 50 Million will no longer be considered SMEs where they directly or indirectly control or are controlled by entities crossing that threshold;
  5. A separate and mandatory documentation package will be necessary to support intragroup low value-adding service transactions;
  6. The transfer pricing documentation has to be signed by the legal representative of the taxpayer by electronic signature. A time stamp has to be affixed before the filing of the annual corporate income tax return (i.e. 30 November 2021 for FY ending on 31 December 2020).

The new rules will have a significant impact on global transfer pricing matters, particularly in terms of information to be collected, activities to be performed and deadlines to be mandatorily met.


Concerning the Masterfile, the Italian Tax Administration has substantially increased the amount of data and information to be included (e.g. a higher focus on Group IP strategy and structuring, Group financing policies, consolidated financials, etc.), which – in most cases – are not easy-to-access for Italian subsidiaries of MNE Groups.

In this respect, it will be essential to strengthen collaboration and understanding between companies located in different jurisdictions.

Local File

With regard to the Local File, even though the Provision has aligned its formal structure with that provided by the OECD Guidelines, it will be essential to carry out  several activities from an Italian perspective, in terms of content review and integration, financial analysis of local entities (e.g. P&L segmentation, where needed), and a mandatory Italian translation. Moreover, it is recommend to update the economic analyses of intragroup transactions annually, particularly in cases where small/medium sized Italian entities cannot be considered as such based on new rules (i.e. due to belonging to an MNE Group with revenues exceeding EUR 50 million, as stated above).

Low value-adding services

The chapter 7 of the Provision regulates low value-adding services. It is worth noting that the Italian Tax Administration has significantly burdened taxpayers in terms of documentation to be prepared to support intragroup transactions. Indeed, a specific section of the transfer pricing documentation has to be drafted, including proper services identification, benefit testing, cost base determination and documentation. Penalty protection will not be granted to the extent that intragroup low value-adding service transactions are not duly analysed and supported. In this respect, it would be appropriate to consider that these new rules require effort in gathering such data and information.

Last but not least, considering the mandatory deadline for “time-marking” the transfer pricing documentation introduced by the Provision, it will be essential to carefully plan the several steps and activities of each transfer pricing project and to be able to meet the deadline.

In conclusion, the Provision represents an important - and necessary - stage in the process of adapting the Italian regulations on transfer pricing to OECD standards. The new discipline, in light of the many innovations introduced, is characterised by the increase in data and information that must be made available. However, the timing imposed by the timestamp entails an increase in the costs of compliance and the effort required of multinational groups operating in Italy, in order to be compliant with new documentation standards. This will require reflection on the current way of drafting TP documentation, as well as collecting all supporting documentation.

However, it should be noted that, considering the innovative scope of the Provision, as well as some steps that are not very explanatory and not easy to understand, new guidance is desirable in the near future from the Italian Tax Authority, in order to clarify the application of the Provision.

Eleonora Briolini

Ciro Pisacane

Andrea Trainotti