Italy Tax Agency Clarifies VAT Treatment of Transfer Pricing Adjustments

The Italian Revenue Agency Aug. 20 issued Letter No. 214/2025, clarifying the VAT treatment of transfer pricing adjustments. The taxpayer, an Italy-based distributor within a multinational group, made periodic transfer pricing adjustments to ensure arm’s-length margins, documented by a breakdown of affected invoices. The taxpayer requested clarification as to whether the adjustments should be considered part of the taxable base for VAT purposes. Upon review, the Tax Agency clarified that: 1) transfer pricing adjustments were subject to VAT, if they directly modified the consideration for specific supplies of goods or services and were contractually linked to the original transactions; 2) ...