Italy requires transactions between related companies in different countries to comply with the arm’s length principle, meaning that prices must reflect market conditions between independent parties.
Companies may prepare a Master File and National Documentation to obtain penalty protection in the event of a transfer pricing adjustment. The documentation must be prepared according to the applicable rules and made available during tax audits. Properly documented intercompany agreements and pricing policies are essential to manage transfer pricing risks.
Companies belonging to multinational groups should review their intercompany agreements, pricing methods, functional analyses and supporting evidence on a timely basis. Consistent documentation remains essential to demonstrate that intra-group remuneration reflects market conditions and to manage the tax risks associated with transfer pricing adjustments.
