"NEWS October 12, 2016-Deductible intercompany services without the need for a super test"

Posted by on Oct 12, 2016

The Commissione Tributaria Regionale dell'Emilia Romagna, judgment No. 693/13/16 of February 22, 2016, confirming the previous judgment of the provincial court, rejected the appeal and financial administration following a dispute which had been raised to a resident company – controlled by another Italian company – regarding the deduction of costs incurred for certain benefits received from a related party and related to business and commercial activities related to the purchase and sale of the goods in the business of the subsidiary. In particular, from a reading of the judgment that the objection raised by the Auditors relied essentially:

  • the fact that performance that they had sourced the costs were made by an individual who was a Managing Director of the parent company, which created an overlap of functions such that one who was advising at the origin of the cost would have been already paid for such services,
  • the alleged antieconomicità of the case
  • the fact that the liability for such costs would represent a mere accounting gimmick aimed at tax planning purposes,

Thus concluding that the cost could not be relevant for the alleged tax deficiency of inherently requirement.

Well, the judges of the CTR of Emilia Romagna, in calling the orientation of the Court of Cassation (judgment No. 6548/2012) have first shown that is inherent in "everything in terms of cost and expenditure belongs to the sphere of the enterprise, as advocated in order to give the latter a utility, even indirectly, remaining excluded just as it can lead to personal or family sphere of the entrepreneur".

The fact that the supply was made to a related party – in the present case, an Executive at the parent company – does not by itself the need for demonstration of inherent costs incurred for such services should be subject to the production of a sort of "super trial" by the subsidiary; the costs of preparatory activities to the production of taxable income for enterprise tax purposes are therefore inherently character, even if it is a future event revenues.

A different argument would be the daughter of a formalistic approach, obviously without prejudice to burden the taxpayer who supports spending to produce documentation from which you can draw the evidence of the amount claimed and the cause of economic performance. In the present case, the subsidiary had documented through the contract nature of the service provided, and it was evident his proportionality with the revenues.

The CTR of Emilia Romagna says, in the final part of the judgment, that the power of the Administration cannot legitimately go as far as to perform a Union on the actual usefulness of the cost for the production of revenues; of course, unless it is shown that it is non-existent or simulated performance.

The fact that it is services provided by related parties, or a mismatch between the social forces of the contracting parties cannot in itself become a proof or indication of operation fittizietà, since this is a mere presumption unless accompanied by certain elements, precise and consistent evidence.

Fabio Lad