GE Medical Systems Italia S.p.A. is an Italian company engaged in the sale and installation of medical diagnostic equipment and the provision of technical assistance and maintenance services, primarily to hospitals and private clinics in Italy. The company, fiscally resident in France, is part of the multinational General Electric (GE) group and was wholly controlled by GE Medical Systems Information Technologies S.r.l., itself controlled by Nuovo Pignone Holding S.p.A. (formerly GE Italia Holding S.p.A.). GE Medical Systems Italia and Nuovo Pignone Holding participated in the Italian fiscal consolidation regime as consolidated entity and consolidating parent, respectively.
Following tax audits conducted in 2013 and 2018, the Italian Revenue Agency issued tax assessments for the years 2011 (Case No 7169/2026) and 2013–2015 (Case No 7163/2026). On the transfer pricing issue, the Revenue Agency challenged under Article 110(7) of the Italian Income Tax Code (TUIR) the prices paid by GE Medical Systems Italia for the purchase of medical equipment from related foreign entities — specifically the French affiliate GE Medical Systems CS and the American entity GE Company. The Revenue Agency applied the transactional net margin method (TNMM) based on a benchmark of nine comparable companies selected from an initial pool of two hundred. It concluded that the intra-group purchase prices exceeded the arm’s length value (“valore normale”) as defined under Article 9(3) TUIR.
GE Medical Systems Italia and Nuovo Pignone Holding challenged the assessments before the Provincial Tax Court of Milan, which annulled the assessments. The Regional Tax Court of Lombardy subsequently confirmed the first-instance decisions, finding that the Revenue Agency’s transfer pricing analysis was subject to “multiple critical observations” regarding the comparability period (use of a tax year different from the one under assessment), the selection of comparable companies (four of the nine comparables carried out activities beyond the commercialisation of medical equipment), the database used (AIDA versus Amadeus and Orbis), the reference period of the database, and the unjustified preference for the Italian market over the European — and in particular the French — market, given the origin of the goods resold. The Regional Tax Court also noted that the reduction in profitability observed in the relevant years was attributable to sector-wide economic factors, including contraction in healthcare spending documented in the Ministry of Health’s 2011 report.
Judgment
The Supreme Court dismissed the Revenue Agency’s appeals on the transfer pricing issue in both cases.
In Case No 7169/2026 (FY 2011), the Court rejected both the first ground of appeal (alleging nullity of the lower court’s reasoning) and the second ground (alleging failure to examine decisive facts). On the first ground, the Court held that the Regional Tax Court’s reasoning was fully intelligible and identified the basis for its conclusion — namely, that the Revenue Agency had failed to prove that the intra-group transfer prices did not correspond to the arm’s length value under Article 9(3) TUIR. The Court emphasised that a judgment is not void merely because it adopts a party’s arguments, provided the reasoning is clear, unambiguous, and exhaustive, citing the United Sections ruling (Cass. Sez. U. No 642/2015). On the second ground, the Court found that the lower court had not omitted examination of the relevant facts but had instead reached a different assessment of them, which fell outside the scope of review in the court of cassation.
In Case No 7163/2026 (FY 2013–2015), the Court reached the same conclusion on the transfer pricing ground, again holding that the lower court’s reasoning met the constitutional minimum standard and that the Revenue Agency had not demonstrated that the transfer prices deviated from arm’s length.
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