Why is it key to choose the right method in Italy?
In Italy, the correct selection of the Transfer Pricing method is critical for multinational companies seeking to comply with local regulations and reduce tax risks. Transfer Pricing methods, established by the OECD, help determine that related party transactions are carried out at market values, which is key to avoiding penalties and tax audits in Italy.
Transfer Pricing Methods in Italy
In the Italian context, Transfer Pricing methods include traditional methods such as Comparable Uncontrolled Price (CUP), Resale Price (RP), Cost Plus (CP), as well as profit-based methods such as the Profit Sharing (PS) method and the Transactional Net Margin Method (TNM). The selection of the method will depend on the characteristics of the transaction, the availability of comparable data and the industry of the company, as each industry may have specific requirements. This position replaced the position that had been in place until 2018, in which a hierarchy approach to method selection prevailed.
Factors affecting the choice of method
Choosing the appropriate method in Italy depends not only on the availability of information, but also on the complexity of the transactions and the type of goods or services involved. For example, transactions with intangibles or intra-group services may require a more detailed analysis, while traditional methods, such as the CUP, are often recommended for more direct comparisons. In either case, the Italian authority recommends choosing the method that best suits the circumstances of the case under assessment.
Ensuring compliance and avoiding tax risks
Transfer Pricing non-compliance can result in significant penalties for companies in Italy. It is therefore essential to have a clear policy based on a thorough analysis of comparable market data. In this regard, the support of a specialized team is indispensable to ensure that the analysis and supporting documentation is in line with tax requirements and to optimize the company’s tax burden.
Why choose TPC Group as your partner in Italy?
TPC Group has a team of Transfer Pricing experts to guide you in choosing the most suitable method for your operations in Italy. With our regulatory compliance expertise, we reduce your tax risks and optimize your transfer pricing policies to maximize tax efficiency and minimize audit risks.
Call to Action
Ensure compliance with your Transfer Pricing policies in Italy. Contact us at TPC Group to receive expert advice and optimize your company’s tax strategy.
Source: International Tax Review
