Cidiverte S.p.A. is an Italian distributor of video-games. Following an audit, the tax authorities issued Cidiverte S.p.A an assessment of additional income resulting from a reduction of the pricing of costs it had paid to its Italian sister company. Appeals were filed by Cidiverte with the local and regional courts, but the objections were dismissed by reference to a previous judgement of the Supreme Court in href=”https://tpcases.com/italy-vs-take-two-interactive-italia-s-r-l-2012-supreme-court-no-119492012/”>Case no. 11949/2012 concerning disallowed costs in the same group. An appeal was then filed by Cidiverte with the Supreme Court. Judgement of the Court The Supreme Court set aside the decision of the regional court and refered the case back to the court, in a different composition, for further examinations. Excerpts “Therefore, without prejudice to the principles of law on the burden of proof set out in the Supreme Court’s judgment, the referring court should have examined the allegations of the parties in order to ascertain whether they had properly discharged their burden and, therefore, first of all, whether the tax authorities had attached and proved the validity of the transfer price adjustment, with reference to the discrepancy between the agreed consideration and the normal value of the goods or services exchanged, taking into account the taxpayer company’s specific objections.” “In the case at hand, the administration has recovered for taxation the costs carried by the invoice issued at the end of the financial year, considering the transaction to be elusive, and has recalculated the costs previously accounted for according to the ‘normal value’, determined in the average sale price, purged of the contested mark-up, applied by the English supplier, controlled by the same parent company, to its Italian sister company, during the tax year examined. There is therefore no question of proof of the existence and relevance of the costs, but only of their non-correspondence to market value.” “Therefore, in the present case, the referring court completely failed to examine the study produced by the taxpayer company and, therefore, did not ascertain whether, in relation to the concrete characteristics of the case before it, as emerged without dispute from the documents before it, the criterion for determining the normal value adopted by the tax authorities was correct, in the light of the taxpayer company’s circumstantial allegations, and whether or not those allegations required further proof.” Click here for English translation Click here for other translation ...