"NEWS of November 2, 2016-the requirement of control for the purposes of the discipline of transfer price"

Posted by on Nov 2, 2016


The Court of appeal, by judgment No. 8130 filed on April 22, 2016, he faced between the various issues under discussion also related to the verification of the existence of the subjective assumption of application of the guidelines of the transfer price, Italian tax law contained in article 110 normatively, paragraph 7, of the tax code.

The taxpayer had been the subject of a dispute of non-deductibility of costs, for their alleged excess of the open market value of the benefit, which had been supported by counterpart a company who did not hold, either directly or indirectly, a corporate control on the same according to the rules contained in the civil law under article 2359 cod, discipline. CIV.. He argued then the taxpayer established that, regardless of whether the normal value, performance verification of the case it would not have been possible to apply article 110, paragraph 7, of the tax code, since there were subjective assumptions due to the absence of a report of "control".

Article 110, paragraph 7, of the tax code, as you know, we only refer to companies that "directly or indirectly control the enterprise, are controlled by or are controlled by the same company that controls the company," without providing any normative reference about the concept of control applicable in this case.

The tax authorities, with the "historical" ministerial circular 32/1980, as we know, attributed to the concept of control relevant to the application of the guidelines of the transfer price content expanded, to include any situation in which there is a "potential or actual economic influence shown by individual circumstances"; among the "individual circumstances" exemplified by the Administration include:

  • the exclusive sale of products of the other enterprise;
  • the inability of the functioning of the enterprise without the capital, products and technical cooperation of the other enterprise;
  • the right of appointment of members of the Board of directors or of the managing bodies of the other enterprise;
  • family relationships between the parties;
  • prevalent financial dependence on the other enterprise;
  • participation of Central enterprises to buy or sell;
  • corporate participation in cartels or consortia, especially if aimed at fixing prices;
  • control of supplies or markets;
  • existence of contracts that model in fact a monopoly;
  • and in General, any other situation where potentially or currently is exercised an influence on business decisions.

The Supreme Court, in its judgment in commentary, accesses the interpretation endorsed by the tax authorities in the assumption that circumscribe the notion of "control" is relevant for the purposes of the regulations contained in article 110, paragraph 7, of the tax code, would be overly simplistic compared to the elusive "anti" requirements of the legislation itself.

The Supreme Court considers therefore that we can glimpse in the text of the standard precise legislature's intention not to limit the concept of control relevant to this provision that strictly for civil; in the present case, where the participation of the other company was limited to only 24% of the company's capital established, was given importance to the absence of a commercial structure of the latter and the existence of a contractual provision that attributed to another company the exclusive distribution of the products of the first, glimpsing a controlling relationship determined by the impossibility of functioning of society without the other undertaking , as well as by the conditioning of his business decisions by the behaviors of the latter.

Fabio Lad