Autocentro Pavese S.R.L., a company engaged in the purchase and sale of cars, had rented a showroom to another company with the same shareholding structure and director for a fee of only 5,000 euro per year. Following a tax audit an assessment of additional taxes was issued. The audit had resulted in several findings, one of which concerned the failure to issue invoices in accordance with market prices for renting of showrooms. The Court of Appeal upheld the assessment and an appeal was then lodged by Autocentro Pavese S.R.L. with the Supreme Court. Judgement of the Supreme Court The Supreme Court upheld the judgement and dismissed the appeal of Autocentro Pavese S.R.L. “On the subject of the determination of business income, the deviation from the “normal value” of the transaction price pursuant to Article 9 of Presidential Decree No. 917 of 1986 may in fact be relevant, even for internal intra-group transactions, as a circumstantial element for the purpose of assessing the uneconomicity of the transactions from the standpoint of the lack of inherent nature of the excessive costs, or the possible (partial) concealment of the price in the case of excessively low profits. (Cass. Sec. 5 – , Judgment No. 16948 of 25/06/2019, Rv. 654388 – 02).” Click here for English translation Click here for other translation ...

Fruit old s.a.s was active in wholesale of fruit and vegetables. In 2003 it purchased products at a price higher than the market price from another company owned by the same partners, Fruit new s.r.l., and resold them at a price lower than the purchase price. Both companies were domiciled in Italy. Following these transactions the entire business of Fruit old s.a.s (premises, employees and customers) was transferred to Fruit new s.r.l. The tax authorities issued an assessment where the price of the transactions had been adjusted, since it was in the taxpayer’s interest to transfer income from the Fruit old s.a.s to Fruit new s.r.l. The company argued that the transactions in question only took place over a short period of three months. It also stated that the pricing of the transactions were motivated by an “intra-group strategy”. Lower courts had ruled in favour of the company and set aside the assessment of the tax authorities. Judgement of the Court The Supreme Court upheld the judgement of the lower court and dismissed the appeal of the tax authorities. Since this was a case involving two Italien companies, the rules set forth in Article 110, on international transfer prices could not be applied. Transactions between resident intra-group companies at a price different from the normal value determined pursuant to Article 9 of the Income Tax Act are not in it self indicative of an avoidance conduct. Click here for English translation Click here for other translation ...