Italy publishes tax rules implementing country-by-country reporting for large multinationals

Added on 15/03/2017

Italy’s new rules on country-by-country reporting for large multinationals were published March 8, putting into effect obligations set out in action 13 of the 2015 OECD/G20 base erosion and profit shifting (BEPS) project, reports MNE Tax.

The rules, published by the Ministry of Economy and Finance, implement Italy’s country-by-country reporting obligation introduced in n. 208/2015. The new rules are also compliant with the EU directive on mandatory automatic exchange of information in the field of taxation.

The first reportable period is the annual accounting period that begins in 2016.


The ultimate parent entity of a group resident in Italy is obliged to file country-by-country reports if consolidated revenues are above EUR 750 million and the group has a taxable presence in more than one country through subsidiaries or permanent establishments, the rules specify.

The rules define the ultimate parent company of the MNE group as the group member that controls the group without being controlled by other companies and the one that has the duty to draft consolidated financial statements according to its accounting principles.

In some cases, Italian subsidiaries of multinational groups have the duty to file country-by-country reports even though not the ultimate parent company.

Such cases arise when the non-resident ultimate parent company is not obliged to file or when there is no qualifying agreement for automatic exchange of the country-by-country reports. Local filing is also required when the ultimate parent company’s state of residence constantly violates the automatic exchange of information agreement.

The decree also provides cases where the Italian subsidiary is in all cases exempt from filing country-by-country reports.

In particular, the exemption applies if another subsidiary of the group resident in an EU country is designated to file country-by-country reports or if the non-resident ultimate parent company appoints another group company to file country-by-country reports in its state of residence. In these cases, the subsidiary required to file country-by-country reports must receive all information needed.

For tax year 2016, the decree adds an exemption for situations where the ultimate parent company is resident in a jurisdiction that has not yet introduced the obligation to file country-by-country reports and voluntarily files the country-by-country reports with its tax authority.

This exemption is important to MNEs with an ultimate parent companies resident in the United States and other countries that implemented the country-by-country obligation from calendar year 2017.

For the exception to apply, the country-by-country report must be filed no later than twelve months from the end of the tax reporting period, the parent company’s jurisdiction must enact country-by-country reporting legislation by the deadline for filing the first country-by-country report under the rules, the parent company’s jurisdiction must not engage in systemic non-compliance, and the Italian subsidiary must communicate to the Italian tax authority the identity and the country of residence of the ultimate parent company.

The rules also require the entity to notify the Italian tax authority, within the deadline for the filing of the annual tax return, that it has this duty. All other Italian resident entities in the group must indicate to the Italian tax authorities which entity of the group has the duty to file country-by-country reports and the tax residence thereof.

The country-by-country report shall be provided to the tax authority within twelve months of the end of the reporting period. Within 3 months (6 months for the first filing) from such deadline the Italian tax authorities will transmit the file to all EU countries and to the other states having a qualifying automatic exchange of information agreement in force with Italy.

Contents of country-by-country reports

The rules provide instruction on the contents of the country-by-country report filing in line with OECD and EU recommendations (reporting consolidated data of all entities belonging to the MNE group and identification of each single entity of the MNE group with a description of its activity).

If an Italian subsidiary must file country-by-country reports but does not have the complete information from the ultimate parent company, it must inform the Italian tax authorities and prepare the country-by-country report based on the available information.

Finally, the decree states that the Italian tax authorities may use the country-by-country reporting information to assess transfer pricing risk or other base erosion or profit shifting risks and for statistical analyses.

However, no transfer pricing adjustments can be based on the information acquired through the country-by-country report, though such information can be the basis for further analysis in advance pricing agreement discussions or in tax audits, which may then entail a transfer pricing adjustment.