The Italian Revenue Agency has clarified the VAT treatment of transfer pricing (TP) adjustments via a tax ruling on November 2 2018.
The ruling clarified that the adjustment cannot be qualified as “remuneration for a specific supply transaction” because it is essentially a remuneration for a financial risk assumed, to ensure that the applicant was remunerated for the goods supplied at arm’s length. Hence, what needs to be determined is whether the adjustments were practically modifying the prices paid for the supply of goods/services and, therefore, the VAT taxable base of the transactions between the two companies. To this purpose, the tax authority examined if there was a direct link between such amounts and the supplies of goods/services, in line with the European Commission’s Working Paper No. 923/28.02.2017.
Source
- TPWeek
- Agenzia Entrate – Ruling no. 60
- Remember … VAT Committee WP#923 on VAT implications of Transfer Pricing (Feb 28, 2017)
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