New rules for Transfer Pricing Documentation

With the Measure of the Director of the Revenue Agency no. 360494 of 23 November 2020, significant and substantial amendments have been introduced to the provisions relating to transfer pricing documentation and new requirements for access to the penalty protection regime to safeguard from sanctions for unfaithful tax returns have been established.

First, the new provisions extend the obligation to prepare both the Masterfile and the Local File to all entities falling within the scope of the legislation under review.

The Measure also foresees a substantial modification of the structure and a considerable expansion of the data and information of the Masterfile and the Local File, to meet the eligibility requirements.

The new Measure also confirms the simplification foreseen for small and medium-sized enterprises, which have the option not to update the chapters relating to intra-group transactions in the two fiscal years following the one in which the documentation is prepared, provided that, in the absence of significant changes between fiscal years, the comparability analysis is based on data from publicly available sources. However, the Measure, updating the previous rules, excludes from the definition of small and medium-sized enterprises those entities that directly or indirectly control or are controlled by an entity that does not qualify as a small or medium-sized enterprise, essentially excluding from the simplification most of the companies and permanent establishments resident or established in Italy and belonging to foreign multinational groups.

The Measure confirms that transfer pricing documentation must be prepared on an annual basis and in the Italian language. However, the Masterfile may be submitted in English.

One of the main novelties is the introduction of the obligation for the legal representative to sign both the Masterfile and the National Documentation by means of a digital signature with a time stamp to be affixed by the date of submission of the tax return. The affixing of the time stamp is an essential condition for the eligibility of the transfer pricing documentation.

The provisions of the Measure apply from the current fiscal year of the date of its publication (23 November 2020) and, therefore, for entities with a fiscal year coinciding with the calendar year, the new provisions apply from the fiscal year 2020.