"NEWS July 21, 2016-normal value costs blacklist"

Posted by on Jul 21, 2016

Only for the tax year 2015 (considering the only subjects with solar year) black list costs arising from transactions with entities established or located in States or territories which have privileged tax structures identified by D.M. 23.01.2002 (in the absence of an information exchange), to effect the changes to article 110, paragraphs 10 and 11, of the tax code by article 5 of Legislative Decree 147/2015, are allowed as deductions in the following way:

  1. automatically within the limit of normal value determined under article 9 of the tax code. Were not given guidance on what are the methodologies to identify this normal value (indicate this amount in line 2 column 29 and RF RF 52);
  2. for the part exceeding the normal value, subject to actual economic interest in monitoring the demonstration to establish an operation with a blacklist provider (indicate this amount in line 1 column 52 29 and RF RF);
  3. as long as the operation with provider blacklist had concrete implementation in the sense that it is not fictitious. The purpose is to assist the customs import documentation, the supply contract/purchase order, bank accounting certifying the payment.

It is not therefore covered the extenuating circumstance represented by the actual performance of a business by the foreign supplier by virtue of the fact, as requested by many, it was hard for the taxpayer obtain documentation usually required for the demonstration of this extenuating circumstance, repealed in order to give greater certainty (so says the technical report to the schema of the Decree internationalization).

In relation to point sub), introduces a legal presumption of deductibility of the costs actually incurred in the black list limits of normal. The reference to article 9 causes that value is correctly identified in relation to specific assumptions referred to in paragraph 4 (a)) (quoted shares), b) (other actions) and c) (bonds and atypical titles). For other types of costs, normal value remains to locate considering "the consideration on average charged for the goods and services of the same or similar, in conditions of free competition and the same marketing stage, in time and in the place where the goods or services were acquired or provided – (buyer's market?) –, and, failing that, in time and place. In order to establish normal value reference is made, in as much as possible, your price lists or to the rates of the individual who provided the goods or services and, failing that, to Mahmud and price lists of Chambers of Commerce and professional fees, taking into account the normal discounts. For goods and services subject to price discipline refers to the measures in force "(paragraph 3).

In practice, in order to determine the normal value, it's fair to conclude that it is necessary to refer to the canonical rules relating to transfer pricing, even if the provider is not part of the group, using the OECD. In this regard, it should be noted that the policy of the CUP is to be preferred even if it is only applicable in case of perfect comparability (including through easy adjustments) transactions. Trying to exemplify (no claim to exhaust the matter):

  • If the property is fairly standardized, we should look for the prices of these goods in similar transactions. But what market? Can the following two streets which you prefer the first.
    • The wording of the first part of paragraph 3 of article 9 of the tax code seems preferable to seek the normal value in the buyer's market Italian (in fact, the sale of assets at different prices can be justified by the different target market). This solution is also supported by m. n. 32/9/2267/1980 (the line with the OECD guidelines para 3.24) that for the purposes of the CUP we must look the recipient's market. This means that you need to check for sales of that supplier black list to other companies (internal comparable) sales (obviously similar) of other suppliers located in the same State blacklist with other Italian companies (external comparable) and, of course, other purchases made by the Italian society of those goods. For C.M. 32 seller's market may be considered only where it is similar to that of the recipient. In this respect, the second part of paragraph 3 (which gives prominence to the seller's market) would be applicable only in the residual. For funding would detect the lender market.
    • For the judgment of the Supreme Court 10/23/2013 # 24005, the first and second part of paragraph 3 damage instead, emphasis on the market of the transferor rather than the buyer's destination. In hindsight that judgment concerned a particular case of an establishment that sold at its headquarters which in turn in his State had no comparable independent transactions, therefore, this principle should not be understood as applicable per se;
  • unless applicable on the CUP, such as in the productions of goods only on order you could locate the normal value using the cost plus method. In that case it would be appropriate to capture the cost pool that the supplier claims to honor the provision and apply a mark up to normal value. From the perspective of cost plus the cost basis would always deductible while only mark up would be strictly non-negotiable. Alternatively you could always show the normal value estimates of preserving other vendors that highlight the reasons for choosing that particular supplier;
  • where the provider works only for Italian companies, for example the TNMM can be used with various profit level indicator for it provided.

In hindsight the above methods require knowledge of information obtainable from the third party only in the event of a group membership. It would seem that the only defense to the taxpayer is to maintain vendor lists, black lists toward the "right" market.

It is therefore very clear how the reference to the normal value which operates solely on 2015 ports back to uncertainty.

Fortunately, by 2016 the uncertainty was eliminated as applicable the ordinary rules of deductibility for the cost the blacklist (black list remains normal value for intercompany costs). It is to be hoped that these ordinary rules are enforced by inspectors already for the 2015 because of the difficulty of identifying normal value.

In relation to the actual economic interest, as it should be considered that where the operation is primarily related to business activities, having, then, regarding strategic and economic choices that push to rely on a blacklist provider, such as: the intrinsic characteristics of the product (not elsewhere available, Supreme Court No. 10749/2013), the market demands, the punctuality (Cassation 5/8/2013 # 10749; CTR Brands 6/22/2010 # 5), reliability, delivery mode, the infungibilità of the provision (Appeal No. 10176/2016). See also point circular No. 51/E/2010 that overall conditions must be given significance "of the operation, such as the price of the transaction; the presence of utilities, such as those of storage, warehouse; the implementation modalities of the operation (for example, delivery); the opportunity to acquire the same product from other suppliers; the existence of commercial/productive/organisational constraints that cause them to make the transaction with the provider blacklist or otherwise, that would make it prohibitively expensive to the same transaction with another supplier. A seemingly abnormal price can be justified by the assessment of the other conditions governing the transaction and, therefore, does not affect the existence of the actual economic interest to operation ".

Please remember that failure indication Only costs the blacklist is sanctioned in an amount equal to 10% of the amount not shown with a minimum of 500 euros and a maximum of 50,000 euro.

by Peter Vitale