In Italy, the VAT treatment of Transfer Pricing adjustments requires careful assessment. The Agenzia delle Entrate (Revenue Agency), in its response to consultation No. 214, August 20, 2025, clarified that these adjustments are only relevant for VAT purposes when they meet specific conditions.
When Are They Relevant for VAT?
Transfer Pricing adjustments are subject to VAT only if:
- They are onerous, i.e., they involve an outlay of money or in kind.
- They refer to specific transactions involving the sale of goods or the provision of services already taxed with VAT.
- There is a direct link between the adjustment and the original transaction, duly documented.
Required Documentation
For the adjustment to be relevant for tax purposes, it must be provided for in the contract and supported by:
- Variation notes (increase or decrease).
- A detailed analysis related to each invoice.
Thus, the connection with the initial transaction is clearly demonstrated.
Accounting and Operational Obligations
When the conditions are met, Transfer Pricing adjustments form part of the VAT tax base, which implies:
- Applying reverse charge if the transaction is with a foreign counterparty.
- Issuing a modified self-invoice for goods already present in Italy.
- Exercising the right to deduct VAT, according to current regulations.
Practical Implications for Companies
To conclude:
- If the adjustment is provided for in the contract, refers to specific transactions, and is accurately documented, it will be considered relevant for VAT purposes.
- If any of these requirements-contract, direct relation, or documentation-are missing, the adjustment is classified as an accounting correction not subject to VAT.
Call to Action
Does your company carry out intra-group distribution or service operations in Italy?
TPC Group‘s specialists in Transfer Pricing and indirect taxation can assist you in applying VAT to intra-group adjustments, ensuring compliance and minimizing tax risks.
Contact us to enhance your international tax strategy.
Source: Quotidianopiu