The main benefits of an APA include: – the prevention of tax controls for APA-covered transactions (reducing costs and related efforts) and the removal of potential transfer adjustment prices: – removal of late interest and penalties for possible transfer pricing adjustments; Eliminating the costs of establishing the transfer pricing record for APA-covered transactions (during the period during which the APA is in effect); Avoid double taxation. With regard to recent media reports, the tax administration states that the “tax rulings” on which the articles appear to relate are agreements contrary to international standards codified at OECD and EU level, which have not been concluded in a stimulating or never concluded manner by the Italian tax administration. Over the past three years, the number of applications from companies with international activities to activate the regulatory procedure in question has increased sharply. Indeed, international companies that decide upstream of financial management to define their tax position in terms of transfer pricing, interest, dividends and royalties have increased considerably. Agreements in our country and other OECD countries fall into the category of ASA (early pricing agreements) or agreements with the sole purpose of creating preventive security with respect to transfer pricing criteria and methods. These agreements, as has already been said, are present in all advanced administrations and Italy is governed by art. 31-ter of Dpr 600/1973. A Pre-Pricing Agreement (APA) is a procedural agreement between one or more tax payers and one or more tax authorities, which aims to avoid transfer pricing disputes by pre-defining a set of criteria for certain cross-border controlled transactions within a specified time frame, to ensure that they respect the length-of-arm principle. On March 22, 2018, in a press release, the financial agency indicated that it wanted to specify the transfer prices and the correct price quantification criteria. The press release states that tax rulings are agreements that are contrary to international standards in OECD and EU codes; To better understand, “tax rulings” are tax advances through which states communicate to a company how corporate tax is calculated in that state. “First of all, early knowledge of the size of the tax over a long period of time – a fact that, as stated in Confcommercio`s response – allows companies for Italy to actually plan taxation over five years. This case is provided for in Decree Law 32 of 15/3/2017 on “prevention agreements for companies with international activities”, which are governed by art.
31-ter d.P.R. 600 of 29.9.1973. In fact, every entrepreneur wants to know how much tax they will have to pay in the years to come. Given the tax burden on Italian companies, this would be fundamental information for their company. Well, under these agreements, multinationals receive – or better agree – this information, the others do not! Unfortunately, transfer pricing is often used as a means of tax evasion: prices are manipulated to transfer income from the multinational`s detachment to the original company, which is in a tax haven and provides for a more favourable tax on profits.