Tag: Arm’s length adjustment not premised on avoidance

Italy vs Prinoth S.p.A., December 2022, Supreme Administrative Court, Case No 36275/2022

Italy vs Prinoth S.p.A., December 2022, Supreme Administrative Court, Case No 36275/2022

Prinoth S.p.A. is an Italian manufacturer of snow groomers and tracked vehicles. For a number of years the parent company had been suffering losses while the distribution subsidiaries in the group had substantial profits. Following an audit the tax authorities concluded that the transfer prices applied between the parent company and the distributors in the group had been incorrect. An assessment was issued where the transfer pricing method applied by the group (cost +) was rejected and replaced with a CUP/RPM approach based on the pricing applied when selling to independent distributors. An appeal was filed by Prinoth S.p.A. which was rejected by the Court of first instance. The Court considered “the assessment based on the price comparison method to be well-founded, from which it emerged that in the three-year period from 2006 to 2008 the company had sold to its subsidiaries with a constant mark-up of 11.11 per cent, while in direct sales to end customers it had applied ... Read more
Italy vs Ferrari SpA, September 2022, Supreme Court, Case No 26695/2022

Italy vs Ferrari SpA, September 2022, Supreme Court, Case No 26695/2022

In February 2016 the Regional Tax Commission rejected an appeal filed by the Revenue Agency against the first instance judgment, which had upheld an appeal brought by Italian car manufacturer, Ferrari S.p.A. against a notice of assessment issued by the Revenue Agency in which the company was accused of having applied prices lower than the ‘normal value’ in transactions with its foreign subsidiaries, in particular with the US company Ferrari NA (North America). In determining the arm’s length price of the relevant controlled transactions Ferrari had applied the CUP method. The Revenue Agency considered the TNMM to be the most appropriate method. The Regional Tax Commission observed that “for verifying the “normal value”, the Revenue Agency itself, in Circular No. 32 of 22/09/1980, had suggested the use of the CUP method instead of the less reliable TNMM method “which is not advisable due to its considerable approximation and arbitrariness’ for which reason the Office’s objection must be considered inadmissible”. On ... Read more
Italy vs Enoplastic SpA, June 2021, Supreme Administrative Court, Case No 15906/2021

Italy vs Enoplastic SpA, June 2021, Supreme Administrative Court, Case No 15906/2021

Enoplastic SpA is engaged in production of closures for vine, spirits, oil and vinegars. Following an audit an assessment was issued by the tax authorities regarding transfer pricing. An appeal was filed by Enoplastic and the Regional Court later set aside the assessment stating that the tax authorities had not proved the existence of a tax advantage nor that the pricing determined by Enoplastic had not been at arm’s length. An appeal was then filed by the tax authorities claiming that the burden of proof was on Enoplastic due to the principle of proximity of evidence and that transfer pricing adjustments was not premised on proof of an intention to obtain tax savings. Judgement of the Supreme Court The Supreme Court upheld the decision to set aside the tax assessment. However, the basis on which the decision of Regional Court had been issued was incorrect. According to the Supreme Court transfer pricing adjustments should not be confused with tax fraud ... Read more
Italy vs P.V. s.r.l., December 2018, Supreme Administrative Court, Case No 33594/2018

Italy vs P.V. s.r.l., December 2018, Supreme Administrative Court, Case No 33594/2018

The regional court had set aside an assessment issued by the tax authorities concerning controlled transaction between P.V. s.r.l. and related parties. An appeal was filed by the tax authorities with the Supreme Administrative Court. Judgement of the Court The Supreme Administrative Court set aside the decision of regional court and referred the case back to the regional court in a different composition. Excerpts “Equally well-founded are the fourth and fifth pleas, which can be dealt with together because, under the different headings of infringement of the law and defective reasoning, they focus on the same issue, namely on the fact that the judgment of the regional court wrongly ruled out that the transactions involving the sale of goods by the taxpayer to foreign companies controlled by it could be classified as transfer pricing, instead framing them as part of a tax planning programme. The Office had identified two anomalies in the aforesaid transactions, namely the application of prices lower ... Read more