Italien legislation on transfer pricing is contained in Article 110, paragraph 7 of the Consolidated Income Tax Act, where the first sentence states that
“the components of income deriving from transactions with companies not resident in the territory of the State, which directly or indirectly control the company, are controlled by it or are controlled by the same company that controls the company, are determined by reference to the terms and prices that would have been agreed between independent parties operating in conditions of free competition and in comparable circumstances, if an increase in income is the result”.
The rule was last amended by Article 59 of Decree-Law No. 50/2017 which, as far as it is of interest, replaced the reference to “normal value” with the “arm’s length principle”, referred to in the aforementioned Article 9 of the OECD Model Convention, in determining the value of transactions between associated enterprises operating in different States.
At the level of secondary legislation, the Ministerial Decree of 14 May 2018, published in the Official Gazette no. 118/2018, contains the guidelines for the application of the provisions contained in paragraph 7 of Article 110 on transfer pricing.
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