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Italy: Update of the regulations for transfer pricing documentation 2020

​published on 3 December 2020 | reading time approx. 2 minutes


On 23 November 2020, Italian Fiscal Authorities have issued new regulations on transfer pricing docu­mentation for tax purposes. The provisions mainly apply to the fiscal year 2020 (more precisely: to current fiscal years at the time of publication of the regulations, i.e. as of 23 November 2020) and must therefore be observed in principle when preparing transfer pricing documentation in 2021 for the year 2020.



From an Italian perspective, the changes have significant effects in terms of content, form and organizational matters. The main reasons for the modification was the objective to bring the Italian transfer pricing documentation rules in line with the rules at OECD level. Some of the most important changes are listed below: 


  • The documents to be submitted are no longer dependent on the taxpayer's position within the Group, i.e. each company must now submit a Masterfile and a Local File. This implies a particular need for change for Italian subsidiaries, which previously only had to submit a Local File
  • Due to the general adaptation to the content of the OECD regulations, the existing Masterfile and the Local File must be fundamentally revised and, among other things, new elements must be included and/or existing elements must be deepened, e.g.:
    • Description of the supply chain for the most important products and services
    • Detailed presentation of intangible assets within the Group
    • Detailed presentation of the Group's financing structure
    • Presentation of the reporting structure from the subsidiary's perspective
    • Reconciliations between the income statement and the arm's length approach used
    • Separate documentation for so-called "low value-adding intra-group services" (i.e. essentially "Management Fees")
  • The Local File must still be submitted in Italian, while the Masterfile can be created in English language

  • If companies of the Group which have a turnover in excess of 50 million euros have a direct or indirect interest in the taxpayer (or if the taxpayer has a direct or indirect interest in companies of the Group which have a turnover in excess of 50 million euros), the taxpayer is no longer considered a "small and medium-sized enterprise". This has the disadvantage (especially for smaller subsidiaries) that database studies have to be renewed every year (and no longer only every 3 years), even if the taxpayer himself does not generate more than 50 million Euro turnover.  


Since in Italy formal aspects have always been and still are as important as content aspects, one very important formal aspect should be emphasized at the end: the final version of the transfer pricing docu­mentation (i.e. Masterfile and Local File including attachments) must be signed electronically by the taxpayer's legal representative before submitting the tax return for the relevant fiscal year, including the date of signature. If this is not done, even a comprehensive transfer pricing documentation does not protect against penalties (amounting to at least 90% of the additional taxes assessed due to transfer pricing adjustments). Since the tax return must generally be submitted 10 months after the end of the respective fiscal year, this means that there is a considerable time pressure for the preparation of the transfer pricing documentation.


The above presentation is merely an exemplary list of the changes in content and form which essentially have to be taken into account next year when preparing the transfer pricing documentation for this year. In view of the time pressure and the comprehensive changes in content and form that are necessary, we strongly recommend that the preparation of the transfer pricing documentation for 2021 should begin without delay. 


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