The tax authorities in Italy have issued a second International Standard Ruling Report. This provides statistics on the tax ruling system. Any enterprise that has international activities may apply for the process known as an international tax ruling, introduced into the law in 2003 and implemented in 2004. Taxpayers may agree in advance with the tax authorities their transfer pricing methodology in transactions with related parties; the tax treatment under domestic law or double tax agreements of dividends, interest, royalties or other income; or the application of domestic law or tax treaties to specific cases on the attribution to profits to permanent establishments.
As the international standard ruling only offers certainty to taxpayers at a similar level to that of a unilateral advance pricing agreement (APA), from 2010 the tax authorities have also introduced bilateral and multilateral advance pricing agreements. As foreign tax authorities are also involved in these agreements the taxpayer may gain more certainty as to relief from double taxation. The report indicates that 19 bilateral APAs were open at 31 December 2012.
The report reveals that since the system of international tax rulings was introduced there have been 135 applications for rulings, of which 123 have been accepted. Of these, 56 had led to an agreement by 31 December 2012, while 54 applications were in progress and 13 had been withdrawn by either the taxpayer or the tax authorities. The number of applications has been increasing in recent years, with 38 applications made in 2012. The average time required for a ruling to be made is 16 months. 83% of applications have been completed within 24 months and only 17 required more than 24 months.