International tax rulings allow “companies carrying out multinational activities” the opportunity to conclude a five-year validity agreement with the Italian Revenue Agency, concerning:
a) transfer pricing
b) assessment of asset values in case of inbound or outbound transfer of residence
c) assessment of the existence of a foreign company’s permanent establishment (PE) in Italy
d) determination of income*loss to be attributed to the foreign company’s PE in Italy
e) tax treatment of payments of dividends, interest and royalties to/from foreign entities.
The tax ruling request must be submitted to the Agency, either in Milan or Rome (Ufficio Accordi preventivi e controversie internazionali dell’Agenzia delle entrate), regardless of where the applicant is domiciled for tax purposes. Certain information and documents must be provided with each application. Within 30 days, the Agency will inform the applicant of whether the request is admissible or not.
In advance of submitting a tax ruling request it is now possible for the applicant to have a meeting with the Agency to determine whether the information provided is complete, request additional documents or define other steps that need to be taken in the procedure. More than one meeting is possible but the entire procedure must be completed (in principle) within 180 days from when the Agency receives the request. If the Agency requires information from foreign tax authorities then the 180-day period is suspended until the information has been obtained.
The procedure ends with the issuing of a ruling that is binding for both the parties from the fiscal year in which it is signed and for the following four fiscal years.
It is important to note that it is now possible to retroactively apply the effects of the agreement to the fiscal year in which the application was submitted. If the ruling is based on an agreement reached with foreign tax authorities under a double taxation treaty, or if the same factual and legal circumstances existed in previous fiscal years, the applicant can roll back the terms of the ruling and amend its related tax returns, without penalties.
For more information, contact:
Gian Luca Nieddu
Hager & Partners, Italy
T: +39 (02) 7780711
T: +39 (02) 7780711
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