Italy: Transfer pricing legislation not applicable to domestic intercompany transactions

Federico Vincenti and Carola Valente of Valente Associati GEB Partners/Crowe Valente analyze a recent ruling by the Italian Supreme Court that clarifies the transfer pricing treatment for transactions between affiliated Italian companies. The Court reaffirmed that even purely domestic transactions must comply with the arm’s length principle, in line with OECD standards.

This means that the prices applied between related companies must reflect the true economic value of the transactions, preventing distortions in income distribution and potential tax abuses. The ruling provides clear guidance for businesses, strengthening tax compliance and reducing the risk of disputes with tax authorities.

Companies must adopt a rigorous approach, with proper documentation and specialist support, to ensure correct application of the rules and align with the new legal guidelines.