Following a judgment by Regional Administrative Tribunal an appeal was filed by Coim S.p.A
Among various other issues Coim S.p.A. complains of breach and misapplication of Article 9 of Presidential Decree No 917 of 22 December 1986, pursuant to Article 360(1)(3) of the Code of Civil Procedure, on the ground that the Regional Administrative Tribunal held that the recovery of the higher price calculated on the basis of the presumed normal value of the transfers made by the taxpayer to certain subsidiaries was lawful. The taxpayer claims that the appeal judges erred in finding that the Office had correctly applied the so-called CUP (comparable uncontrolled price method) price comparison method to determine normal value, in particular as regards the identification of the relevant market, the different stage of marketing of the goods tested compared to the comparative goods and the different commercial functions performed by the subsidiaries compared to the comparators.
Judgment of the Supreme Court
Indeed, the grounds of the judgment under appeal do not indicate the application of different parameters for the purpose of calculating the normal value of the goods or services transferred from those laid down by the OECD Guidelines referred to in the application. The criticism is therefore intended, rather, to challenge the result of the assessment made in this regard on the basis of the alleged use of reference data different from those prescribed or in any event inadequate, thus placing the criticism not on the rule of judgment applied but rather on the recognition of the fact, which can be criticised, if necessary, only in terms of motivation, pursuant to and within the limits of Article 360, paragraph 1, no. 5, of the Code of Civil Procedure.
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16. By the third ground of appeal, the appellant alleges infringement and misapplication of Article 9 of the consolidated law on income tax, Article 11 of the Sixth Council Directive 77/388/EEC of 17 May 1977 and Article 13 of Presidential Decree No 633 of 26 October 1972, in relation to Article 360(1)(3) of the Code of Civil Procedure, in so far as the C.T.R. failed to find that the act imposing penalties was unlawful because it erroneously assumed that the normal value of the prices of goods sold between intra-group companies was also relevant for the purpose of determining the taxable amount for VAT, and in any event because it determined that value on the basis of criteria which did not comply with the OECD directives.
The appellant also complains, at the same time, of a defect in the statement of reasons, on the ground that the C.T.R. made irrelevant and wholly inadequate findings.
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18. The third ground of appeal is well-founded in so far as it alleges, in a manner which is sufficient to answer all other complaints, breach of the law in relation to the deemed applicability of the rules on transfer pricing also for the purposes of determining the VAT taxable amount.
Transfer pricing is based on the concept of normal market value as set forth in Articles 9 and 76, paragraph 5 (now 110, paragraph 7) of Presidential Decree No. 917 of 22 December 1986 (see also Article 9 of the OECD Model Convention) and meets the need for a fair division of profits in the various countries where multinational groups operate.
For VAT, on the other hand, the consideration actually received is a key element of the tax application mechanism, based on the principle of neutrality of the tax (which would be violated if the taxable base were calculated as an amount hypothetically higher than the consideration received): a principle which has always been derived from the EU Directives (most recently set forth in Article 73 of Directive 112/2006/EC) and implemented in Italy by Article 13 of Presidential Decree No. 633 of 26 October 1972.
In particular, Article 17 of the Sixth Council Directive 77/388/EEC of 17 May 1977 links the right to deduct to the chargeability and inherent nature of the acquisition of the goods or services, without making any reference, and in any event not directly, to the value of the goods or services.
The European Court has also held that the fact that an economic transaction is carried out at a price above or below the normal market price is irrelevant (ECJ, 20 January 2005, Case C-412/03, Hotel Scandic Gasabach, p. 22). Nor is there tax avoidance or evasion if the goods or services are supplied at artificially low or high prices between the parties, both of whom have a right to deduct VAT, as it is only at the level of the final consumer that tax losses may occur (CJEC 26 April 2012, Joined Cases C-621/10 and C-129/11, Balkan, p.47). The taxable amount for the supply of goods or services for consideration thus consists of the consideration actually received by the taxable person and represents the subjective value actually received and not an estimated value according to objective criteria (CJEU, 19 December 2012, case C-549/11, p. 48-49; CJEU, 26 April 2012, cited above, p. 43; CJEU, 5 April 2012, cited above, p. 43), p.43; Court of Justice, 5 February 1981, Cooperatieve Aardappelenbewaarplaats, 154/80, p.13; guideline reiterated also for group transactions: Court of Justice, 9 June 2011, case C-285/10, Campsa Estaciones de Servicio SA, p.27).
Explicit confirmations in this regard are also to be found in the recent intervention of the European Commission, summarised in Working Paper 923 of 28 February 2017. It should therefore be reiterated that “under normal conditions, the Administration is not allowed to recalculate the value of the services purchased by the entrepreneur, excluding the right to deduct if the value is deemed uneconomic and therefore different from the one to be considered normal or in any case such as to produce an economic result” (Court of Cassation 04/06/2014, no. 12502, to which we refer also for other case law references).
The calculation of VAT on the consideration may be disregarded if the tax authorities demonstrate the manifest and macroscopic uneconomic nature of the transaction, such as to be indicative of the untruthfulness of the invoice and, therefore, of the untruthfulness of the transaction itself or of the fact that the goods or services are not intended to be used for transactions subject to VAT; in such a case, it will be for the entrepreneur to demonstrate that the supply of the goods or services is real and inherent to the activity carried out (Court of Cassation 27/09/2013, nos. 22130 and 22132).
However, this is a different case from the one at issue here, since no reference to such assumptions is made in the judgment or in the tax assessment, insofar as it is referred to in the record.”
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