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Tax Pills

  • Tax treatment of hybrid mismatches under EU ATAD Directive rules. The public consultation on the draft Circular of the Revenue Agency is now open online

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    The Circular scheme provides fiscal clarifications on the discipline of "Hybrid mismatches" contained in the Legislative Decree no. 142/2018, or ATAD Decree, that transposed the EU ATAD Directive rules into domestic tax law. Particularly, interested parties have until 19 November 2021 to send their comments and proposals for amendments or eventual additions. The purpose of the consultation is to allow the Agency to evaluate the comments and suggestions submitted, in view of their possible transposition in the final version of the Circular.

    The topics covered by the draft Circular – As already said, the interpretative document, starting today in consultation, provides an extensive list of clarifications on the discipline of "Hybrid mismatches" currently in force. Particularly, the Circular-letter focuses on the requirements for its application, distinguishing the subjective aspects from the objective ones. Furthermore, the Circular provides several examples, which make it possible to clarify the complex rules of "reaction" which, depending on the case, act on the hybrid cause or on the effects deriving from the mismatching.

    About EU ATAD rules - Hybrid mismatches exploit differences between tax systems to achieve double non-taxation, double deduction, deduction without inclusion and non-taxation without inclusion. Therefore, hybrid mismatches often result in base erosion. To tackle this complex mechanism, the EU adopted “The Anti-Tax Avoidance Directive”, ATAD, whose rules are designed to seek to neutralize hybrid mismatches, in an effort to improve the resilience of the EU’s internal market as a whole by setting a minimum level of protection against mismatch fiscal outcomes.

    How to send proposals to the Agency - The draft Circular will remain in consultation until 19 November 2021. By this date it is possible to send proposals to amend the original draft-text or for adding further contents and notions. All these comments and observations can be sent to the email address dc.gci.settorecontrollo@agenziaentrate.it. To ensure an effective process of reception and analysis of the various contributions, interested parties are invited to send their proposals and comments following the following scheme: Topic / Paragraphs of the circular / Observations / Contributions / Purpose.
    Once the public consultation phase is over, the Revenue Agency will publish the comments received, with the exclusion of those containing an express request for non-disclosure.

    Stefano Latini

    URL: https://www.fiscooggi.it/tax-pills/articolo/tax-treatment-of-hybrid-mismatches-under-eu-atad-directive-rules-the-public
  • Starts the public consultation on transfer pricing documentation

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    Italy’s Revenue Agency will hold a public consultation on the draft Circular letter on transfer pricing documentation. Particularly, the Agency provides a set of new clarifications in relation to the documents, mainly Master File and National Documentation that interested parties must prepared each year, suitable for enabling verification of compliance with the arm length principle of transfer prices charged by multinational companies.

    Timing and technical procedures of the opened consultation - Interested parties have time starting from yesterday, 20 September, to 12 October to send their comments and proposals to the following e-mail address dc.gci.settorecontrollo@agenziaentrate.it. To facilitate the process of cataloging and examining contributions received, interested parties are invited to follow the following scheme: Topic - Paragraph of the Circular letter - Observation - Contribution - Purpose. Once the public consultation phase is over, the Revenue Agency will publish the comments received, with the exclusion of those containing an express request for non-disclosure.

    The issues addressed in the Circular letter - The draft Circular letter provides a vast range of clarifications on the TP discipline. In particular, having reminded the reference regulatory context, it investigates, as already said, the purposes and structure of the documentation suitable to allow the verification of compliance with the arm length principle of the transfer conditions and prices applied, having regard to the contents of the documents called Masterfile and National Documentation. It illustrates the aspects concerning the documentation relating to permanent establishments and the documentation suitable for small and medium-sized enterprises. Furthermore, it clarifies the profiles connected to the forms, extent and conditions of effectiveness of the suitable documentation, as well as the aspects concerning the communication of the possession of the suitable documentation and the documentation to be prepared if taxpayers choose the simplified approach to enhance an intragroup transaction consisting in the provision of low added value services. In conclusion, it addresses the issue related to the assessment of suitable documentation by competent supervisory bodies.

    The two main documents – Shortly, the Master File contains information on the multinational group activities and global allocation of income among different entities, while the National Documentation  supplements the Master File, with a focus on the domestic entity on a national level. Both document contains specific information on the peculiarities of the local entity, as well as the transfer pricing analyses related to the transactions occurring between the latter and related parties located in different jurisdictions.

    Stefano Latini

    URL: https://www.fiscooggi.it/tax-pills/articolo/starts-the-public-consultation-on-transfer-pricing-documentation