More certainty in relations with the Tax Authorities through new channels of consultation: Interpello and "International Ruling"

For some years now, Italian taxpayers have been able to submit questions in writing to the Tax Authorities in order to ascertain the correct taxation treatment, as well as the right procedures to be followed, and to reach agreements to achieve simplicity and clarity in their relations with the Tax Administration. In practical terms, if faced with uncertainty concerning the applicable tax rules, the taxpayer may question the Tax Authorities, which are obliged to reply within 120 days. If no reply is received within this time limit, it is understood that the authorities implicitly agree with the interpretation put forward by the taxpayer (the so-called silenzio-assenso - silence is consent). Once the interpello advance ruling procedure has been handed down (whether through reply or "silenzio-assenso"), the Tax Authorities cannot change matters and any action to the contrary would be invalid.

Recently, an additional form of co-operation between the Tax Authorites and taxpayers has been introduced, aimed especially at those taxpayers operating on the international markets. Known as the "International Ruling", it is a new tool which seeks to prevent disputes from arising and to counter double taxation. Already present in similar forms in other countries, the "International Ruling" concerns the correct identification of the criteria to determine transfer prices between companies located in various countries, in order to prevent possible disputes deriving from a disclaimer in the assessment stage of the transfer prices with other countries.

The "International Ruling" of the Italian tax code resembles various forms of consultation in force in other countries, such as the Advance Pricing Agreements. However, in the Italian model, the ruling is not limited to transfer prices, but it can be extended to interests, royalties and dividends. In more general terms, the system can be used for any situation involving companies operating abroad, following the model of the Spanish "acuerdos previos de valoración" set out in the "Ley de derechos y garantías de los contribuyentes" of 1998.

Any agreement reached through the "International Ruling" procedure is binding upon the parties concerned for the taxable year in which it has been reached and the next two years, as long as the de facto and de jure facts and circumstances do not change. A copy of the agreement must be filed with the Tax authorities of the country of residence or of establishment of the companies with which the taxpayers who have reached the agreement carry out the relevant operations.