Transfer Pricing: Local and Global News

published on 22 January 2024 | reading time approx. 4 minutes

Transfer pricing is and remains a high-risk topic that is constantly in the focus of the tax authorities, not only in Italy but also abroad. This is also reflected in the growing number of transfer pricing-related proceedings (including tax audits, tax dispute proceedings, international mutual agreement procedures and advance pricing arrangements) and in the constantly changing regulations.

In order to keep our clients up to date, hereinafter we briefly present a selection of recent news at national and international level.

Italy

The Italian tax authorities have set a new deadline for filing tax returns for FY 2023: 9 months after the end of the year. For example, a taxpayer who closes 2023 on December 31 must submit the tax return for the corresponding period by September 30, 2024. As the deadline for filing the tax return is generally also the deadline for completing the transfer pricing documentation, this means that taxpayers generally need to complete the transfer pricing documentation (i.e.: Master File, Local File and all required analyses, including benchmark analyses) for 2023 by the end of September 2024. It is therefore strongly recommended to start preparing the Italian transfer pricing documentation immediately.

Brazil

Brazil has adapted its transfer pricing regulations to the OECD requirements as part of its efforts to join the Organisation for Economic Co-operation and Development (OECD). A corresponding law was signed by the Brazilian President on 14 June 2023. The new law provides, among other things, for the following:

Legal anchoring of the arm's length principle;
The previous transfer pricing methods applicable in Brazil will be replaced by the transfer pricing methods commonly used in OECD practice (i.e. comparable uncontrolled price method, cost-plus method, resale price method, profit split method, net margin method) and a transaction-based transfer pricing analysis will be introduced;
Possibility of advance pricing arrangements (APAs) and mutual agreement procedures (MAPs) enshrined in law;
Introduction of extensive transfer pricing documentation obligations.
The new regulations are generally mandatory from 1 January 2024, while there is an option to apply the new regulations already for the 2023 fiscal year.

France

The following measures to tighten transfer pricing audits in France have been finalized:

Reduction of the threshold of turnover or gross assets above which a company must submit a complete transfer pricing documentation (consisting of a Master File and a Local File) to EUR 150 million (compared to the current EUR 400 million);
Presumption of profit shifting if the application of the transfer pricing method differs from that set out in the transfer pricing documentation;
Increase of the minimum penalty for failure to submit transfer pricing documentation to EUR 50,000 per tax year (from the current EUR 10,000);
Various measures to strengthen the tax authorities' control over the disposal of so called hard-to-value intangibles.

Pillar 1 Amount B

As part of its initiative to tackle tax challenges arising from the digitalization of the economy (the so-called Two Pillars Initiative) the OECD in late 2023 has published a new discussion draft containing guidance on Pillar 1 Amount B. Pillar 1 Amount B intends to simplify the existing transfer pricing rules for all taxpayers by introducing standardized rules for so called baseline marketing and distribution activities, which is likely the most frequent fact pattern encountered by multinationals in the jurisdictions where they operate. Amount B is intended to increase tax certainty, reduce compliance and administrative costs and in particular assist low-capacity jurisdictions that often suffer from the absence of local market comparables. In terms of next steps the OECD is currently aggregating the public comments received from stakeholders on the discussion draft and should publish the revised guidance within short.

Germany

In June 2023, the administrative principles on transfer pricing from 2021 were revised. This was necessary due to the revision of the functional relocation regulation and the publication of the updated OECD Transfer Pricing Guidelines in 2022. The main changes concern the transfer of functions, price adjustments and group financing.