Italy issued final transfer pricing regulations on May 14 regarding the application of the arm’s length principle. The publication follows the release of a draft for public consultation in February and a consultation in May.
The guidance supports Italy’s transfer pricing rules with the outcome of Actions 8–10 of the OECD/G20 base erosion and profit shifting (BEPS) plan. New regulations provide definitions of associate enterprises, control, independent enterprises, controlled and non-controlled transactions, and financial indicators.
The regulations explain the concept of comparability analysis and describe five methods that can be used to determine arm’s-length prices for intra-group transactions, namely, the comparable uncontrolled price (CUP) method, resale price method, cost plus method, transactional net margin method (TNMM), and the transactional profit split method.
Director of the revenue agency should publish guidelines regarding transfer pricing documentation and, in the future, should update the Italian procedures in accordance with the OECD guidelines.
