Importance of the Best Transfer Pricing Method Selection
In Italy, the correct selection of the Transfer Pricing method is crucial for multinational companies that intend to comply with local regulations and reduce tax risks. Transfer Pricing methods, established by the OECD, determine that related party transactions are at market values, which is essential to avoid penalties and tax audits in Italy.
Transfer Pricing Methods in Italy
In the Italian context, Transfer Pricing methods include traditional ones, such as Comparable Uncontrolled Price (CUP), Resale Price (RP), and Cost Plus (CP), as well as those based on profit, such as the Profit Split (PS) and the Transactional Net Margin (TNM) methods. The selection will depend on the characteristics of the transaction, the availability of comparable data, and the company’s industry, as each sector may have specific requirements. This position replaced the one applied until 2018 when a hierarchy approach prevailed regarding the method selection.
Factors Affecting the Method Selection
Selecting the appropriate method in Italy depends on the availability of information, 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. Either way, the Italian authority recommends choosing the best method to suit the circumstances of the case under assessment.
Ensuring Compliance and Avoiding Tax Risks
Non-compliance with Transfer Pricing can significantly penalize companies in Italy. Therefore, a clear policy based on a thorough analysis of comparable market data is essential. In this regard, the support of a specialized team is indispensable to ensure that the analysis and supporting documentation comply with tax requirements and to optimize the company’s tax burden.
TPC Group as Best Option in Italy
TPC Group has an experienced Transfer Pricing team to guide you in choosing the most appropriate method for your operations in Italy. Our regulatory compliance expertise will reduce your tax risks and optimize your Transfer Pricing policies to maximize tax efficiency and reduce 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
