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Advanced Pricing Agreements: Expanded Framework
Taxpayers can seek unilateral, bilateral, or multilateral APAs under Articles 31-ter and 31-quater of Presidential Decree 600/1973, with the aim of reducing disputes and providing certainty over multi-year transfer pricing positions. Procedures are coordinated with the latest OECD BEPS recommendations.
BEPS Pillar 2 & Hybrids: New Compliance Standards
Italy is introducing new requirements aligned with OECD BEPS Pillar 2---a minimum 15% tax and anti-hybrid mismatch provisions. Enhanced documentation obligations for these areas apply for the first time in June 2025.
"Best Method" Principle Clarified
Italy's Supreme Court (2024, Case No. 26432) reaffirmed that the most reliable method should be applied, consistent with OECD standards. While all OECD methods are accepted (CUP, Resale Price, Cost Plus, TNMM, Profit Split), traditional methods generally receive priority if they provide comparable reliability.
Direct Implementation of OECD Guidance
Italy's approach to transfer pricing in 2025 is firmly based on Art. 110(7) of the Italian Income Tax Code and incorporates the full arm's length principle, taking direct reference from the 2022 OECD Guidelines. All transfer pricing arrangements between associated enterprises must reflect market terms as independent parties would agree.
Documentation Structure per the 2020 Decree
Penalty protection for transfer pricing adjustments requires that documentation exactly follows the structure outlined in the 2020 Ministerial Decree, mirroring the OECD/BEPS framework. The Master File may be in English, but the Local File is required in Italian. Both must be digitally signed and provided upon request.
Guidance on Statistical Methods & Range
Recent guidance by the Italian Revenue Agency---through Circulars 15/2021 and 16/2022---details the use of statistical ranges (including the application of interquartile range), the treatment of loss-making comparables, and how to set points within an arm's length range, closely tracking OECD positions.
Integration with Customs Valuation
Regulations and joint guidelines between Customs and Revenue authorities reinforce the requirement to reconcile year-end transfer pricing adjustments with customs valuation, affecting both direct and indirect tax positions if intercompany product prices change after year-end.
Mandatory Public Country-by-Country Reporting
Multinationals headquartered in Italy with consolidated revenues above €750 million must file a CbC Report. EU legislation effective 2024/25 now also requires portions of these reports be made public, increasing transparency.
Shorter Filing Window & Electronic Documentation
From 2025, Italian companies must file their tax returns within nine months of the fiscal year-end rather than the previous eleven. For December year-end companies, the new deadline is September 30. To obtain penalty protection for transfer pricing documentation, firms must prepare and digitally sign their Local and Master Files ahead of the tax return deadline. In specific circumstances, authorities permit a ninety-day extension if files are not ready.
Tougher Penalties without Documentation
Effective September 1, 2024, failing to prepare compliant transfer pricing documentation exposes taxpayers to a 70% penalty on any additional taxes assessed. By contrast, full documentation---meeting strict format and timing standards---secures protection from such penalties.
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