On December 18, 2024 the Italian Revenue Agency addressed transfer pricing adjustments for intercompany VAT transactions. The clarification followed the case of a company conducting intra-community purchases and importing goods in Italy, which are processed and exported to the U.S. for another group company. The company sought clarification on whether transfer pricing adjustments affect the taxable base for VAT on the underlying export transactions. The Agency confirmed that these adjustments are relevant for VAT purposes if contractual clauses clearly reflect the parties’ agreement to modify the original consideration, aligning with the arm’s length principle. It further clarified that the taxpayer’s second invoice represents the balance of the export transactions, making it VAT-relevant. Both invoices are subject to the non-taxable regime under Article 8 of the VAT Decree.
On October 15, 2024 the Italian Ministry of Economy and Finance issued a decree on the substance-based income exclusion (SBIE) for global minimum tax compliance under Pillar Two. Key provisions include: (1) guidance on income exclusions based on substantial economic activity, aligned with OECD recommendations; (2) rules to reduce taxable income for companies and jointly controlled or stateless entities, within both multinational and national groups; (3) a 5% reduction on the average net book value of tangible assets at year start and end; and (4) provisions for calculating SBIE in leasing contracts involving qualified tangible assets.
To read more on the Decree, click here.