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Italy Issues Procedures for Corresponding Downward Adjustments

The Italian Revenue Agency has issued Measure No. 108954/2018 on the conditions and procedures for a taxpayer to request a corresponding downward adjustment following a definitive upward transfer pricing adjustment made in another jurisdiction with which Italy has a double taxation agreement (DTA) in force that allows for adequate exchange of information. The procedure is available for Italian residents and permanent establishments in Italy of non-residents.

Taxpayers that wish to apply the procedure must submit an application to the Office for Preventive Agreements and Disputes of the Revenue Agency (the Office) that includes:

  • A clear request for the elimination of double taxation resulting from the upward adjustment (if adjustment not yet final, this must be indicated, including the circumstances for the adjustment to become final);
  • A translation in Italian or English of the tax assessment from the foreign tax authority from which the upward adjustment resulted; and
  • Details of the factual and legal circumstances necessary to evaluate the upward adjustment.

Once submitted, the Office must reply with 30 days as to whether or not the application is accepted. If additional information is needed, the taxpayer will be informed and will have 30 days to submit such information. If the required information is not provided within 30 days, the application is rejected.

Once an application is accepted, the Office is to provide a decision on the acceptance or rejection of a corresponding downward adjustment within 180 days. If an adjustment is accepted, the competent authority of the foreign state will be informed, and the adjustment will be finalized following receipt of the foreign tax certificate or equivalent document on the definitive upward adjustment. If the adjustment is rejected, the taxpayer may still engage the Mutual Agreement Procedures of the applicable DTA or the EU Arbitration Convention.

The new procedures apply from 30 May 2018.

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