Iprona SpA is an Italian company that sells fruit extract powder. It had sold products to an Austrian subsidiary at a price that was nearly tripled when the goods were quickly resold through related companies before reaching a final buyer in Liechtenstein.
The tax authorities argued that the final price received by the Liechtenstein company should have been treated as the “normal value” of the initial sale from Iprona SpA, indicating an artificial profit shift. A tax assessment was issued on this basis.
The case ended up in the Supreme Court.
Judgment
The Supreme Court decided that Iprona SpA had not applied the arm’s length principle correctly. The Court emphasized that, to establish normal value for transfer pricing purposes, one can rely on various complementary methods under both domestic law and OECD guidelines, such as the resale price method. The tax authority had shown that no further processing of the goods had occurred and that the rapid resale at a substantially higher price signaled an abnormally low initial sale price.
The Court therefore overturned the regional judgment and remitted the case to a different composition of the Bolzano Court of Tax Justice. It instructed the lower court to verify whether the entire chain of sales took place among entities in the same group and whether the purchase price at issue was abnormally low relative to prices charged in comparable transactions with independent parties. The Court also rejected Iprona’s incidental challenges about alleged procedural flaws, noting that an adequate intra-procedural exchange had occurred and that a tax assessment need not address every point raised by the taxpayer so long as it contains sufficient reasoning.
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