Advance tax agreements for enterprises with international activities
- AT A GLANCE - ADVANCE TAX AGREEMENTS FOR ENTERPRISES WITH INTERNATIONAL ACTIVITIES
Aim: ensuring taxpayers certainty on international tax issues through the assessment of facts and circumstances by the Italian Revenue Agency.
Qualifying taxpayers: enterprises with international activities.
Benefits: taxpayers can reach a prior settlement and a shared evaluation with the Italian Revenue Agency on:
- defining in advance methods and criteria applicable to determine the arm’s-length price of intercompany transactions
- defining entry or exit value of assets in transfer of residence cases
- assessing whether the conditions of a permanent establishment in Italy of a non-resident company are met
- assessing the tax treatment of income (such as dividends, interests, royalties or other income items) paid to/received from non-resident companies determining the attribution of profits/losses to a permanent establishment.
What is it
Advance Tax agreements are binding agreements between taxpayers and the Italian Revenue Agency (replacing the former procedure "international standard rulings") aimed at enhancing tax compliance and promoting the business of multinational enterprises by giving them certainty on international tax issues in advance. The arrangements are based on mutual cooperation and transparency between taxpayers and the Italian Revenue Agency.
Who can request an advance tax agreement
An advance tax agreement may be requested by resident companies conducting international activities, meeting one or more of the following requirements:
- having transactions with non-resident associated companies
- holding stakes in the assets, funds, capital of non-resident companies or whose assets, funds, capital are held by non-resident companies
- paying to or receiving by non-resident companies income items such as dividends, interests or royalties
- conducting their business through a permanent establishment outside Italy
- transferring their residence from Italy to another State or from another State to Italy.
Non-resident enterprises may request an advance tax agreement if conduct or wish to conduct their business in Italy through a permanent establishment.
Enterprises with international activities wishing to reach a prior settlement and a shared evaluation with the Italian Revenue Agency, may request for an advance tax agreement in order to:
- define the most appropriate transfer pricing methods and criteria applicable to the transactions carried out with related parties, according to Article 9 of OECD Model tax convention as provided for by paragraph 7 of Article 110 of the Presidential Decree no. 917 of 22 December 1986
- determine the entry or exit value of assets when the entity transfers its residence in or out of Italy
- in case a non-resident company starts a new business in Italy, verify through prior assessment whether the conditions for permanent establishment to exist in Italy are met, before the business starts
- define the tax law provisions, including double taxation treaties provisions applicable to cross-border items, among which the tax treatment of income (such as dividends, interests, royalties or other income items) paid to/received from non-resident companies
- determine the attribution of profits to a permanent establishment in Italy of a non-resident company or to a permanent establishment in another State of a resident company, according to the international standard recommended.
The Advance Tax Agreements procedure is also applied in the “Patent Box” regime.
The agreement signed by the taxpayer and the Tax Administration remains in force for five years starting from the fiscal year in which it is signed, provided that the circumstances – specifically, the critical assumptions - under which the agreement was signed remain unchanged.
In case of bi/multilateral APAs, the validity period can start from the date of the application filing, consistently with the mutual agreement concluded with the treaty partner(s) under Article 25 of the Model tax convention.
How to submit the application
Qualified taxpayers wishing to apply for an advance tax agreement can send an application to Agenzia delle Entrate, Ufficio Accordi preventivi e controversie internazionali, Settore Internazionale della Direzione Centrale Accertamento – Via Cristoforo Colombo 426 c/d 00145 Roma – by:
- hand delivery
- registered mail with return receipt
Before filing an advance tax agreement request, taxpayers can ask for a pre-filing meeting or any further information concerning the procedure by sending an e-mail to email@example.com