Italy: The selection of the ‘best’ transfer pricing method

Federico Vincenti and Carola Valente analyzes a recent ruling by the Italian Supreme Court, published on October 10, 2024, which clarifies the role of the OECD guidelines in transfer pricing and the “best method” principle. The case involves a dispute between the Italian tax authority and a taxpayer regarding the application of the Comparable Uncontrolled Price (CUP) method versus the Transactional Net Margin Method (TNMM). The Court ruled that the OECD guidelines do not have normative authority but serve as technical tools for implementing legislative provisions, such as the arm’s-length principle. This decision highlights the importance of selecting the method best suited to the specific case, with significant implications for tax and business practices.