Greater Clarity Sought in Italy’s Draft Transfer Pricing Rules

Italy’s draft transfer pricing provisions need to clarify the tax consequences of a local asset manager failing to demonstrate that its compensation conforms to the arm’s-length principle, according to practitioners.

The provisions implement the recently introduced investment management exemption, or IME, a type of safe harbor that allows eligible foreign investment vehicles to use local asset managers without the risk of the vehicles being considered to have a permanent establishment in Italy.

But the draft provisions aren’t clear on whether a potential adjustment of the compensation by Italy’s Revenue Agency would “only produce its effects on the taxation of the ...