Plastic Pipes s.p.a. produces and sells flexible plastic pipes, via foreign subsidiaries, to which it supplies the product to be resold to foreign customers and it operates abroad, selling the product directly to customers, also in foreign countries where it has a subsidiary.
The tax authorities had issued a notice of assessment for FY 2006 claiming that Plastic Pipes s.p.a. had incurred (and deducted) marketing costs in the interest of its subsidiaries, without recharging their share of the expenses.
The Court of first instance set aside the assessment of the tax authorities.
Judgement of the Supreme Court.
The supreme Court dismissed the appeal of the tax authorities.
“…the burden of proof on the tax authorities is limited to providing evidence of the existence of the intra-group transaction and of the agreement of a consideration lower than the normal market value; the taxpayer who intends to contest the tax claim must instead provide evidence that the agreed consideration, or the lack of a consideration for the intra-group transaction, corresponds to the economic values that the market attributes to such transactions. On the other hand, it is not necessary for the tax authorities to provide further evidence that the intra-group transaction lacks a valid economic justification and that it resulted in a concrete tax saving…”
“In the absence of proof – to be borne by the Office – of the deviation from normality, there is no basis for transfer pricing [adjustments].”ITA Jan 2021 cass_230_2021