Italy vs. ILPEA SPA, July 2015, Supreme Court 15298

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This case is about an Italian company, ILPEA S.p.A, transactions with its US subsidiary.

The company stated that there were substantial difference between the products sold to its subsidiary in the United States and the benchmark transactions considered by the Tax Administration – quality of the products, volumes of sales, terms of sale. These differences affected the pricing, so that these transactions could not be compared with other transactions with independent parties.

The Court found that the transactions carried out with controlled companies must be evaluated according to the “normal value”, defined as the average price charged for similar goods or services with independent parties and at the same marketing stage. Therefore, “normal value” is considered to be the ordinary prices of goods and services charged at arm’s length conditions, referring in the extend possible to “pricelists” and “rates”.

The Court also stated that the tax administration does not have to prove existence of tax minimization, but only the existence of transactions between affiliated companies. The taxpayer must prove that the transactions have been priced at market value.

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Italy Supreme-Court-21st-July-2015-n.-15298

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