The Italian Tax Police updated its practical instructions regarding performance of tax audits by releasing the Circular n. 1/2018 i.e. the operational manual for tackling tax evasion and fraud, which was later on updated on 1st December, 2017 and came into action since 1st January, 2018.
The Circular mainly discusses on transfer pricing, and its audit procedures. The Circular was updated on the issue regarding tax audits concerning multi-national groups bringing in some procedures that needs to be undergone –
- Auditors must focus on the transfer pricing policies from the beginning of preparations piling up for the audit and its primary planning.
- It must be clarified and proved whether the taxpayer has prepared the transfer pricing documentation and has informed the Italian Revenue Agency about the documentation through the means of tax return.
- A formal request for the master file i.e. the Transfer Pricing Documentation must be made, where the request must be granted within 10 days as instructed by the Italian Revenue Agency.
According to the Circular the tax Police uses the tool TP Catalyst to develop the comparative analysis allowing the tax police a handy and easy method to verify Transfer Pricing Documentation and comparability analysis.
