TPcases

The Office had identified two anomalies in the aforesaid transactions, namely the application of prices lower than average prices and the excessive deferment of payments, which occurred not only with significant delays, but without the payment of interest. This led the Agency to consider that the transfer price deviated from the normal value, thus fulfilling the hypothesis provided for by TUIR, Article 110, paragraph 7, for the existence of which the appellant would have fulfilled its burden of proof, while it was up to the taxpayer to provide suitable reasons to justify the commercial anomalies found.

On this issue, the judgment under appeal stated that “the documentation produced shows that there was no transfer pricing but rather that the company was pursuing a tax planning programme. Moreover, the Office does not provide any evidence of the assumptions of the alleged avoidance, such as the more favourable taxation in Germany, Belgium, England and the United States, countries in which the non-Italian resident companies operated, compared to the Italian taxation system, and the undue tax advantage obtained by applying prices lower than market prices in transactions with foreign subsidiaries, in the absence of valid economic reasons’.

Well, apart from the absence of specific arguments on which to base the conviction that the transactions for the sale of the assets were part of a tax planning programme rather than transfer pricing, the regional court did not take into account that the case law of the Court has long held that on the subject of the determination of business income, the legislation, already provided for by Presidential Decree No. 917 of 1986, Article 76, paragraph 5, and now by Article. 110(7), does not constitute an anti-avoidance regulation in the strict sense, but is aimed at repressing the economic phenomenon of transfer pricing (understood as the shifting of taxable income following transactions between companies belonging to the same group and subject to different national laws) in itself considered, so that the proof incumbent on the tax authorities does not concern the higher national taxation or the actual tax advantage obtained by the taxpayer, but only the existence of transactions, between related companies, at a price apparently lower than the normal price, it being instead incumbent on the taxpayer, in accordance with the ordinary rules of proximity of proof pursuant to Article 2697 of the Civil Code and on the subject of tax deductions, the taxpayer has the burden of proving that such transactions took place for market values to be considered normal in accordance with the specific provisions of TUIR, art. 9, paragraph 3 (Cass, judgment no. 10742/2013; judgment no. 18392/2015; ord. no. 9673/2018).

The judgment under appeal ruled without taking into account these principles, and moreover without providing answers to the points raised punctually in the Office’s notice of appeal, as reported in the appeal for cassation.