We are delighted to feature an interview with Fabio Mastrangelo who is the Senior Partner at Studio Mastrangelo, Rome, Italy. Fabio is "Dottore Commercialista" and a highly experienced professional advisor to international groups and multinationals with operations in Italy. He is a tax expert with extensive success in transfer pricing (ruling requests, negotiations with tax authorities, resolution of tax audits and tax litigation cases). Fabio also has great knowledge and awareness of EU transfer pricing matters. His contact details are set out at the end of this article.
What practical impact is BEPS currently having on the day to day approach taken by tax authorities in Italy?
None at present as discussions continue.
How do you see this approach changing as BEPS develops and tax authorities in Italy continue to respond to it?
Increasing enthusiasm to implement initiatives.
In your experience, what types of intercompany charges are most problematic in Italy?
Charges for services and royalties.
What are the most common mistakes which large corporates make in dealing with tax authorities in Italy in relation to intangibles?
Lack of documentation, missing economic justification and insufficient arm’s length pricing support.
From a practical perspective, how important are intercompany agreements for MNE’s when responding to transfer pricing challenges in Italy relating to intangibles?
One word … fundamental!
How likely are tax authorities in Italy to require copies of intercompany agreements to be provided when reviewing an MNE’s transfer pricing?
APAs and lower level rulings - how significant are these in Italy?
APAs are significant but timing is crucial, the average time to close an APA is well over a year. Lower level rulings do not apply. In any case, local regulations for rulings is changing these days.
Do you see this changing as a result of BEPS?
Yes, particularly if the EU’s profit split by country approach is adopted, the need for APAs may disappear or reduce significantly.
Intellectual property rights and related royalty charges are a key feature of the global operations of many MNEs. How do you see BEPS changing the approach taken by MNEs in relation to the management of intellectual property rights?
Prompt a review of the location of the IP entity and the pricing applied to charges for intangibles and their usage. Greater need to identify the real company performing the main IP functions and assuming risks.
In what ways will BEPS affect the level of compliance resource which MNEs will need to invest in managing transfer pricing issues?
If BEPS results in more taxable presences being recognised, then local tax compliance needs will increase. Greater information requests from global tax authorities will also increase compliance needs. Result will probably be a need for substantially more resources, in-house and/or greater usage of advisors.
How would you change the OECD’s approach in relation to BEPS?
In two main areas:
- Improve and simplify the Mutual Agreement Procedures between countries to introduce mandatory strict timelines for Governments/Tax Authorities to observe so that the expected increases in BEPS driven tax litigation cases are resolved quickly with the least suffering by companies.
- More attention and obligations on Countries to introduce similar Corporate Tax rates globally and minimise the inclination to set up structures in low tax countries which in turn would reduce the number of tax disputes.
Contact details for Fabio Mastrangelo
Associazione Professionale di Dottori Commercialisti
Piazza Navona, 49
00186 Roma, Italy
Tel.: + 39 06 69921100
e mail: email@example.com