Transfer pricing in Italy (prezzi di trasferimento)

How Italy prices transactions between an Italian company and related companies abroad, what documentation protects the company from penalties, how the protection is claimed in the corporate tax return, country-by-country reporting, and advance pricing agreements. It is for Italian resident companies and Italian permanent establishments in multinational groups. Figures are for tax year 2026. The statute figures are read from the current consolidated text on Normattiva. The documentation rules come from the Agenzia delle Entrate provvedimento of 23 November 2020 and its Circolare 15/E of 26 November 2021, which are still the current texts. The return rules come from the Redditi SC 2026 instructions, which cover the 2025 tax year; the 2027 return form for tax year 2026 was not yet published when this Guide was checked.

Italy Transfer Pricing Guide v1.0

This heading is kept from the legacy version, with its wording updated to match reader-facing terms. The content below is the refreshed Guide.

Section 1: Quick Reference

Quick Reference

Field	Value
Country	Italy (Italian Republic)
Tax authority	Agenzia delle Entrate (Italian Revenue Agency)
Key TP legislation	Article 110, paragraph 7, TUIR (Testo Unico delle Imposte sui Redditi, D.P.R. 22 dicembre 1986 n. 917): https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1986-12-22;917~art110!vig=
Guidelines	Decree of the Minister of Economy and Finance of 14 May 2018 (linee guida for art. 110(7))
Documentation regulation	Provvedimento of the Agenzia director of 23 November 2020, prot. 2020/360494; Circolare 15/E of 26 November 2021
Penalty protection	Art. 1(6) D.Lgs. 18 dicembre 1997 n. 471
Advance pricing agreements	Art. 31-ter D.P.R. 29 settembre 1973 n. 600
Is documentation compulsory?	No. It is an option (onere) that buys penalty protection, not a legal obligation (Risposta 174/2024)
Currency	EUR
Documentation language	Masterfile: Italian, or English. Documentazione Nazionale (Local File): Italian (Provvedimento point 5.1.1; Risposta 174/2024)
New TUIR	A new income tax code (D.Lgs. 19 giugno 2026 n. 117) applies from 1 January 2027. This Guide uses the current article numbers, which apply to tax year 2026

Section 2: Documentation Requirements

The provvedimento of 23 November 2020 sets the content of the two documents. It says the Masterfile and the Documentazione Nazionale must be written in Italian, but the Masterfile may be presented in English (point 5.1.1). Both must be signed by the legal representative, or a delegate, with an electronic signature and time stamp applied by the date the income tax return is filed (point 5.1.2). The whole set is kept in electronic form. Source: https://www.agenziaentrate.gov.it/portale/documents/20143/2794495/Provv_prot_0360494_del_23112020.pdf/87a55907-b275-a3b5-1bc7-a6e316b70fef

2.1 Master File (Documentazione di Gruppo)

Master File (Documentazione di Gruppo)

Item	Detail
Required?	Optional, but needed for the penalty protection regime
Format	Per the provvedimento of 23 November 2020, in line with the OECD Guidelines (Annex I to Chapter V)
Language	Italian or English (point 5.1.1)
Deadline	Electronic signature with time stamp by the date the tax return is filed (point 5.1.2). For a return filed within ninety days of the deadline, see Section 2.3

2.2 Local File (Documentazione Nazionale)

Local File (Documentazione Nazionale)

Item	Detail
Required?	Optional, but needed for the penalty protection regime
Format	Per the provvedimento of 23 November 2020, in line with the OECD Guidelines (Annex II to Chapter V)
Language	Italian only. Risposta 174/2024 refused a request to present it in English. Circolare 15/E (point 8.1) allows its annexes in another language
Deadline	Electronic signature with time stamp by the date the tax return is filed
Submission on request	Within 20 days of the request; additional information within 7 days, or a longer period for complex transactions (points 5.2.1 and 5.2.2)
Small and medium companies	A company with turnover (volume d'affari or ricavi) not above fifty million euro ("cinquanta milioni di euro"), and not controlling or controlled by a larger company, may skip updating the comparability data (points 2.1.1 to 2.1.5 of the Documentazione Nazionale) for the two following tax years, if the comparability analysis uses public sources and the items in point 2.1.2 do not change significantly (points 1.1(a) and 4.1)

Sources for 2.1 and 2.2: the provvedimento linked above; Risposta 174/2024: https://www.agenziaentrate.gov.it/portale/documents/20143/6314639/Risposta+n.+174_2024.pdf/f2013dc1-acb4-2459-77e9-bac69cc74e74

2.3 Penalty Protection Regime

Art. 1(6) D.Lgs. 471/1997 says the penalty for an unfaithful return does not apply to a transfer pricing adjustment if, during the audit, the company hands over the documentation set out in the provvedimento. A company that holds the documentation must tell the Agenzia; without that notice the penalty applies. Source: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:1997-12-18;471~art1!vig=

To benefit from penalty protection, ALL conditions must be met:

1. Masterfile and Documentazione Nazionale prepared as the provvedimento of 23 November 2020 requires, complete and truthful (points 5.3.2 and 5.3.3).
2. Electronic signature with time stamp by the date the tax return is filed. The return is due by the last day of the tenth month after the end of the tax period (31 October for a calendar-year company), under art. 2(2) D.P.R. 322/1998. Circolare 15/E says that for a return filed within ninety days of the deadline (late, or supplementary or replacing), the signature and time stamp must be applied by the date that return is actually filed.
3. The box "Possesso documentazione" ticked in row RS106 of the Redditi SC return. That tick is the notice the law requires. After the ninety days, Circolare 15/E allows a late notice through remissione in bonis only if the documentation was already complete, signed and time stamped within ninety days of the ordinary filing deadline, no audit has started, the notice is given in a supplementary return filed by the deadline of the next year's return, and the minimum penalty set by art. 11(1) D.Lgs. 471/1997 is paid at the same time.
4. The documentation handed over during the audit, within 20 days of the request.

Failure on any formal requirement (including the box) may result in loss of penalty protection. Circolare 15/E: https://www.agenziaentrate.gov.it/portale/documents/20143/3930122/Circolare+oneri+documentali+TP+26+11+21+h.+13.20+-+REV.pdf/5f23fab7-0853-68c6-cb5d-868fdfed9490

2.4 Country-by-Country Report (CbCR)

Country-by-Country Report (CbCR)

Item	Detail	Note
Source	all figures below	https://www.agenziaentrate.gov.it/portale/web/guest/schede/comunicazioni/rendicontazione-dati-nazionali-paese-per-paese/scheda-informativa-rendicontazione-dati-nazionali
Threshold (consolidated group revenue in the previous tax period)	EUR 750 million	"non inferiori a 750 milioni di euro"
Filing deadline	Within twelve months after the last day of the group's reporting period	"entro i dodici mesi successivi all'ultimo giorno del periodo di imposta di rendicontazione"
Filing method	Electronic, to the Agenzia delle Entrate	Filed by the Italian parent, or by an Italian group company in the cases the page lists

Section 3: Arm's Length Standard

3.1 Definition

• Arm's length standard: income components from transactions with non-resident companies that control the Italian company, are controlled by it, or are controlled by the same company, are set by the conditions and prices that independent parties would have agreed in free competition and comparable circumstances, if this increases income. It applies to a decrease in income only under the conditions of art. 31-quater D.P.R. 600/1973. (Article 110(7) TUIR, link in Section 1)

3.2 Accepted Methods

Accepted Methods

Method	Accepted
Comparable Uncontrolled Price (CUP)	Yes
Resale Price Method (RPM)	Yes
Cost Plus Method (CPM)	Yes
Transactional Net Margin Method (TNMM)	Yes
Profit Split Method (PSM)	Yes

These are the OECD methods. The ministerial decree of 14 May 2018 sets how they apply in Italy; its text was read here only through Circolare 15/E.

3.3 Preferred Method

No strict hierarchy; the most appropriate method applies. The OECD Guidelines are the main interpretive source (the provvedimento defines them as the Guidelines of 10 July 2017 and later updates).

Section 4: Filing Obligations

Filing Obligations

Obligation	Detail
Master/Local File	Not filed with the return; kept and handed over within 20 days of an audit request
Tax return box	Row RS106 of Redditi SC: tick box A, B or C for the control relationship, tick "Possesso documentazione" if you hold the documentation, and enter in columns 5 and 6 the total positive and negative income components from art. 110(7) transactions
CbCR	Annual electronic filing (Section 2.4)
No separate TP return	TP information is given in row RS106 and in the documentation, not in a standalone form

Source for row RS106: https://www.agenziaentrate.gov.it/portale/documents/20143/9764103/SC_istr_2026.pdf/51e462b7-2907-b093-4028-198631cbabdd?t=1772181405366 (Redditi SC 2026 instructions, section 17.17).

Section 5: Deadlines

Deadlines

Item	Deadline
Tax return filing	Last day of the tenth month after the end of the tax period: 31 October for calendar-year companies (art. 2(2) D.P.R. 322/1998)
Documentation signing and time stamp	By the date the tax return is filed
Late or supplementary return	A late return filed within ninety days of the deadline is valid, with a penalty for the delay (art. 2(7) D.P.R. 322/1998). For a late, supplementary or replacing return filed within those ninety days, the documentation must be signed by the date it is actually filed (Circolare 15/E)
Documentation submission on audit request	20 days
Additional information	7 days from the request, or longer for complex transactions
CbCR filing	Twelve months after the end of the reporting period

D.P.R. 322/1998 art. 2: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1998-07-22;322~art2!vig=

Section 6: Penalties

The penalty for an unfaithful return is in art. 1(2) D.Lgs. 471/1997. For violations committed from 1 September 2024 it is seventy per cent ("settanta per cento") of the extra tax or of the excess credit used, with a minimum amount (table below). Note (40) on Normattiva gives the start date. Before that, Circolare 15/E describes the penalty as ninety to one hundred and eighty per cent ("dal novanta al centoottanta per cento").

Item	Value	Note
Source	all figures below	https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:1997-12-18;471~art1!vig=
Minimum penalty for an unfaithful return	EUR 150	"con un minimo di euro 150"

Penalties

Scenario	Penalty
TP adjustment WITHOUT penalty protection	The unfaithful-return penalty in the text above (seventy per cent for violations from 1 September 2024), with the minimum in the table above
TP adjustment WITH valid penalty protection	The art. 1(2) penalty does not apply. Tax and interest are still due
Documentation held but box in RS106 not ticked	Protection lost: the law applies the art. 1(2) penalty when the notice is missing
Failure to maintain documentation	No separate penalty in art. 1(6). The documentation is optional; without it the ordinary penalty applies to any adjustment
CbCR non-compliance	Not checked for this refresh

Important Note on Penalty Reform

D.Lgs. 14 giugno 2024 n. 87 cut the unfaithful-return penalty. Its art. 5(1) applies the change to violations committed from 1 September 2024. When the violation is committed (normally when the return is filed) decides which rate applies. That timing rule was not read on an official page; confirm it. From 1 January 2027 the tax penalty rules are applied through the Testo unico delle sanzioni tributarie (D.Lgs. 5 novembre 2024 n. 173, art. 102 of its annex). A return for tax year 2026 is filed in 2027, so check the matching article of that Testo unico before quoting art. 1 D.Lgs. 471/1997 for it: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:2024-11-05;173:1~art102!vig=

Section 7: Advance Pricing Agreements (APA)

Advance Pricing Agreements (APA)

Item	Detail	Note
Source	all figures below	https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1973-09-29;600~art31ter!vig=
Availability	Yes, for companies with international activity	Art. 31-ter(1): transfer pricing methods, permanent establishments, dividends, interest and royalties
Types	Unilateral (comma 2); bilateral or multilateral, after a mutual agreement with foreign authorities (comma 3)
Governing legislation	Article 31-ter D.P.R. 600/1973	Not art. 31-bis, which covers exchange of information
Application	To the competent office of the Agenzia, as set by a Director's provvedimento (comma 6)
Duration, unilateral	The tax period in which it is signed and the four following periods	"per i quattro periodi d'imposta successivi"
Rollback, unilateral	To earlier open years with the same facts, if no audit has started	Through ravvedimento or a supplementary return, without penalties
Duration, bilateral	As agreed with the foreign authorities, from periods not earlier than the one in progress when the request is filed; rollback on the conditions in comma 3
Fee, bilateral or multilateral, group turnover below EUR 100 million	EUR 10,000	"10.000 euro nel caso in cui il fatturato complessivo del gruppo"
Fee, group turnover from EUR 100 million to EUR 750 million	EUR 30,000	"30.000 euro nel caso in cui il fatturato complessivo"
Fee, group turnover above EUR 750 million	EUR 50,000	"50.000 euro nel caso in cui il fatturato complessivo"
Fee on renewal	Halved (comma 3-ter)	"le commissioni sono ridotte alla metà"
Fee, unilateral	The statute sets no fee for a unilateral request	Comma 3-bis covers comma 3 requests only
Processing time	Not stated in the statute. The legacy estimate (12 to 24 months unilateral) is not verified
Annual compliance report	Comma 6 leaves checking to the provvedimento; the legacy "required" was not verified

Section 8: Safe Harbours

• No general safe harbours: Italy has no general safe harbour for transfer pricing. It has one simplification, for low-value services (Section 8.2).

Safe Harbours table

Area	Status
Low-value intra-group services	Optional simplified approach under art. 7 of the decree of 14 May 2018, with its own documentation (Section 8.2)
Interest rates	No formal safe harbour; market benchmarking required
General	All controlled transactions must be supported by arm's length analysis
Penalty protection	Not a "safe harbour" as such, but the penalty protection regime gives certainty on penalty exposure

8.1 Penalty Protection as Practical Safe Harbour

The Italian penalty protection regime works as a practical substitute for safe harbours:

• Properly documented transactions carry no art. 1(2) penalty on an adjustment
• This rewards full documentation rather than simplified pricing rules
• Taxpayers must show they applied appropriate methods even if the result is later adjusted

8.2 Low-Value Intra-Group Services

Item	Value	Note
Source	all figures below	https://www.agenziaentrate.gov.it/portale/documents/20143/3930122/Circolare+oneri+documentali+TP+26+11+21+h.+13.20+-+REV.pdf/5f23fab7-0853-68c6-cb5d-868fdfed9490
Profit margin on all direct and indirect costs of the service, simplified approach	5%	"pari al 5% dei suddetti costi"
A transaction is not marginal (must be described in the Documentazione Nazionale) if it exceeds this share of the total income components in the transfer pricing box of the return	5%	"risulti superiore al 5% del totale in valore assoluto"

• Low-value intra-group services cost-plus mark-up: this is a statutory option, not a practice tolerance. Art. 7 of the decree of 14 May 2018 lets the company price a low-value service at cost plus the margin in the table above. Circolare 15/E says qualifying services are supporting in nature, not part of the group's core business, do not use or create unique and valuable intangibles, and do not involve the provider taking on or controlling significant risk. To use it, the company must keep the specific documentation in point 7 of the provvedimento of 23 November 2020 (description of services and beneficiaries, why they are low-value, written contracts, the cost and margin calculation, and the allocation keys). It is handed over on the same 20-day terms. Circolare 15/E adds that an adjustment to a marginal transaction the company chose not to describe gets no penalty protection.

Section 9: Recent Developments

Recent Developments

Date	Development
1 September 2024	Unfaithful-return penalty cut to seventy per cent for violations from this date (D.Lgs. 87/2024 art. 5(1); Section 6)
2024	Risposta 174/2024: Documentazione Nazionale must be in Italian; Masterfile in English permitted
November 2020	Provvedimento 2020/360494: current documentation structure established
November 2021	Circolare 15/E: guidance on the provvedimento, including the ninety-day rule for late or supplementary returns
2023	Global minimum tax (Pillar Two) introduced by D.Lgs. 27 dicembre 2023 n. 209. Outside this Guide; start dates not checked
1 January 2027	New TUIR (D.Lgs. 117/2026) applies; article numbers in this Guide will change for tax year 2027
1 January 2027	Testo unico delle sanzioni tributarie (D.Lgs. 173/2024) applies

Section 10: Interaction with Other Guides

Interaction with Other Guides

Related Guide	Interaction
italy-bookkeeping	TP documentation relies on Italian accounting records; related-party disclosures
Corporate tax (IRES); it-irap	TP adjustments increase the IRES base and may affect the IRAP base
italy-vat-return	TP adjustments may affect VAT and customs values
CbCR	Used by the Agenzia for risk-based audit targeting
Financial statements	Italian GAAP or IFRS related-party disclosures should agree with TP positions

The method, step by step

1. Check whether art. 110(7) TUIR applies: is there a transaction with a non-resident company that controls, is controlled by, or is under common control with the Italian company? https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1986-12-22;917~art110!vig=
2. Price each controlled transaction at arm's length with the most appropriate method. For qualifying low-value services, decide whether to use the simplified cost-plus approach (Section 8.2). Circolare 15/E: https://www.agenziaentrate.gov.it/portale/documents/20143/3930122/Circolare+oneri+documentali+TP+26+11+21+h.+13.20+-+REV.pdf/5f23fab7-0853-68c6-cb5d-868fdfed9490
3. Decide whether to take up penalty protection. If yes, prepare the Masterfile and Documentazione Nazionale in the form the provvedimento requires, in the right language: https://www.agenziaentrate.gov.it/portale/documents/20143/2794495/Provv_prot_0360494_del_23112020.pdf/87a55907-b275-a3b5-1bc7-a6e316b70fef
4. Have the legal representative sign both with an electronic signature and time stamp by the day the return is filed (art. 2 D.P.R. 322/1998): https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1998-07-22;322~art2!vig=
5. In the Redditi SC return, fill row RS106: box A, B or C, the "Possesso documentazione" box, and the totals in columns 5 and 6: https://www.agenziaentrate.gov.it/portale/documents/20143/9764103/SC_istr_2026.pdf/51e462b7-2907-b093-4028-198631cbabdd?t=1772181405366
6. If the group is at or above the CbCR threshold, file or confirm the country-by-country report within twelve months of the period end: https://www.agenziaentrate.gov.it/portale/web/guest/schede/comunicazioni/rendicontazione-dati-nazionali-paese-per-paese/scheda-informativa-rendicontazione-dati-nazionali
7. On an audit request, hand over the documentation within 20 days. If an adjustment is made, the protection removes the art. 1(2) penalty only: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:1997-12-18;471~art1!vig=

Ask the client first

• Which foreign companies do you trade with, and what is the control link (you control them, they control you, or a common parent)?
• Do you want penalty protection for this year, and is the return already filed? If filed, was it within the last ninety days?
• Is the Masterfile only in English, and is the Documentazione Nazionale in Italian?
• What is your turnover, and does a company that controls you, or that you control, exceed fifty million euro? This decides the small-company relief.
• Do you provide or receive support services (IT, HR, accounting) that could use the low-value simplified approach?
• What is the group's consolidated revenue? This decides CbCR and the APA fee band.

When to refuse or refer

• An audit has started, or a notice of adjustment has been served: refer to a tax adviser or litigator.
• An APA or mutual agreement procedure is wanted or in progress.
• Downward adjustments under art. 31-quater D.P.R. 600/1973, permanent establishment profit attribution, or exit taxes (art. 166 TUIR).
• Financial transactions, IP transfers or business restructurings that need a benchmarking study.
• Pillar Two (global minimum tax) and hybrid mismatch documentation (art. 1(6-bis) D.Lgs. 471/1997).
• Questions for tax year 2027 or later, when the new TUIR applies.

Sources

• TUIR art. 110: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1986-12-22;917~art110!vig=
• D.Lgs. 471/1997 art. 1: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:1997-12-18;471~art1!vig=
• D.P.R. 600/1973 art. 31-ter: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1973-09-29;600~art31ter!vig=
• D.P.R. 322/1998 art. 2: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.del.presidente.della.repubblica:1998-07-22;322~art2!vig=
• Provvedimento of 23 November 2020: https://www.agenziaentrate.gov.it/portale/documents/20143/2794495/Provv_prot_0360494_del_23112020.pdf/87a55907-b275-a3b5-1bc7-a6e316b70fef
• Circolare 15/E of 26 November 2021: https://www.agenziaentrate.gov.it/portale/documents/20143/3930122/Circolare+oneri+documentali+TP+26+11+21+h.+13.20+-+REV.pdf/5f23fab7-0853-68c6-cb5d-868fdfed9490
• Risposta 174/2024: https://www.agenziaentrate.gov.it/portale/documents/20143/6314639/Risposta+n.+174_2024.pdf/f2013dc1-acb4-2459-77e9-bac69cc74e74
• Agenzia page on the documentation regime: https://www.agenziaentrate.gov.it/portale/schede/istanze/transfer-princing/scheda-informativa-transfer-pricing-imprese
• Agenzia page on CbCR: https://www.agenziaentrate.gov.it/portale/web/guest/schede/comunicazioni/rendicontazione-dati-nazionali-paese-per-paese/scheda-informativa-rendicontazione-dati-nazionali
• Redditi SC 2026 instructions: https://www.agenziaentrate.gov.it/portale/documents/20143/9764103/SC_istr_2026.pdf/51e462b7-2907-b093-4028-198631cbabdd?t=1772181405366
• Testo unico delle sanzioni tributarie (D.Lgs. 173/2024) art. 102: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:2024-11-05;173:1~art102!vig=

Disclaimer

This Guide and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this Guide. All outputs must be reviewed and signed off by a qualified professional before filing or acting upon.

Contributed by OpenAccountants.