BGSM & Partners

International Taxation
Transfer Pricing in Intercompany Transactions
Deductibility of Price Adjustments

Explanation:

International Taxation (Fiscalità Internazionale): This refers to the field of taxation that deals with cross-border business activities and the tax rules that apply to international operations, including issues like double taxation, international tax treaties, and compliance with the tax laws of different countries.
Transfer Pricing in Intercompany Transactions (Transfer Pricing nelle operazioni infragruppo): Transfer pricing refers to the rules and methods used to determine the price at which transactions occur between related entities, such as subsidiaries, branches, or divisions of the same multinational company. The goal is to ensure that intercompany transactions are priced fairly and in line with the “arm’s length principle,” which is the idea that prices should be the same as if the entities were unrelated.
Deductibility of Price Adjustments (Deductibilità degli aggiustamenti di prezzo): In the context of transfer pricing, adjustments are made to ensure that the prices set for intercompany transactions are in line with market conditions. For tax purposes, the question arises as to whether these price adjustments can be deducted as expenses for the purposes of calculating taxable income. Deductibility of these adjustments often depends on local tax laws, compliance with international guidelines like the OECD Transfer Pricing Guidelines, and whether the adjustments are properly documented and justified.
In summary, this topic explores how multinational companies manage transfer pricing in their intercompany transactions and how adjustments to those prices are treated from a tax perspective, particularly in terms of their deductibility.