Italy: Criteria for selecting MNE taxpayers for audits

Companies with gross receipts of more than €100 million

Companies with gross receipts of more than €100 million

The Italian tax authority issued Circular No. 21/2022 (20 June 2022) clarifying the criteria for selecting taxpayers for tax audits.

According to the circular, large multinational entity (MNE) taxpayers—companies with gross receipts of more than €100 million—will be selected for audit based on:

  • Transparency, with the tax authority focusing mainly on taxpayers that have not applied for rulings or advance pricing agreements (APAs) and that have not implemented an agreement under the cooperative compliance program 
  • Data retrieved from an exchange of information with other countries (BEPS Action 5) and from country-by-country reporting (BEPS Action 13)

In general, tax audits of the subject MNE companies will focus on:

  • Cross-border transactions (tax treaty relief applications and transfer pricing adjustments)
  • Tax planning
  • Fraudulent schemes, such as those involving a permanent establishment (PE) claim in Italy
  • Compliance with the digital service tax
  • Undue tax credits and incentives—for instance, credits or incentives related to research and development (R&D), COVID-19 credits, and value added tax (VAT) credits

Certain tax findings—such as a failure to file tax returns in the case of a PE, and the offsetting of taxes against not-existent tax credits—could have criminal consequences for a company’s legal representatives. 
 

For more information, contact a KPMG tax professional in Italy:

Giorgio Dal Corso | gdalcorso@kpmg.it

 

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