All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Transfer pricing and related parties disclosures


To ensure the respect of the arm’s length principle, Italian Law mandates that companies’ financial statements include proper disclosures regarding transactions with related parties. Piergiorgio Valente, managing partner of Valente Associati GEB Partners explains the logistics of the Italian rules.

As of November 21 2008, Legislative Decree No. 173/2008 modified Art. 2427 of the Italian Civil Code by adding paragraph 22-bis on related party disclosures.

For every relevant transaction with related parties, the amounts involved, the relationship between the parties and any other information necessary to understand such transactions, must be disclosed.

The definition of “related party” is provided by the international accounting standards adopted by the EU (accounting principle “IAS 24”).

With reference to the arm’s-length conditions, the government report on Legislative Decree No. 173/2008 explains that the circumstances leading to transactions with related parties rather than with third parties need to be evaluated and all criteria supporting such a decision must be provided.

Regarding the relevance of related parties’ transactions, the 2010 “Regulation on Disclosures Regarding Related Parties Transactions” by the Italian Companies and Stock Exchange Commission (Consob) defines a transaction as “relevant” if its value exceeds 5% of the net assets or the total assets/liabilities, depending on the type of transaction.

Relations with related entities must also be described in the companies’ management report attached to the financial statements, as per Art. 2428 of the Italian Civil Code.

Additionally, Arts. 3 and 4 of Legislative Decree No. 74/2000 establish criminal consequences for the incorrect application of transaction evaluation criteria.

Nevertheless, Art. 7 of the above-mentioned Decree excludes a wilful tax-evasion attempt if the financial statements describe the criteria applied in transfer pricing evaluations, since their explicit disclosure does not have a misleading connotation and seems incompatible with the intent to evade taxes.

Pursuant to Art. 2427, par. 1 of the Italian Civil Code, those criteria must be included in the explicatory note to the financial statements.

The law, however, does not clarify whether it is sufficient to state the transfer pricing methods or if more information (comparability analysis, prices and margins data, etcetera) is needed.

If interpreted too strictly, the law could entail revealing industrial and commercial secrets. Further, the explanatory note’s role and function are those of an accounting document that does not lend itself to bear the weight of complex tax considerations.

Yet, a generic reference to the criteria followed is not sufficient to rule out a tax-evasion attempt.

It is preferable to choose an intermediate solution, namely a detailed description of the steps leading to the determination of transfer prices. The Criminal Court will then verify the degree of specificity of each explanation; the greater the degree of specificity, the lower the risk of the Criminal Court challenging the adopted criteria for being vague.

Valente Associati GEB Partners

Viale Bianca Maria, 45

20122 Milan, Italy

Managing Partner: Piergiorgio Valente

Tel: +39 02 7626131

Fax: +39 02 76001091



more across site & bottom lb ros

More from across our site

The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.
An OECD report reveals multinationals have continued to shift profits to low-tax jurisdictions, reinforcing the case for strong multilateral action in response.
The UK government announced plans to increase taxes on oil and gas profits, while the Irish government considers its next move on tax reform.
War and COVID have highlighted companies’ unpreparedness to deal with sudden geo-political changes, say TP specialists.
A source who has seen the draft law said it brings clarity on intangibles and other areas of TP including tax planning.