Cost contribution agreements under the new OECD guidelines: the Italian perspective

The Organization for Economic Cooperation and Development (OECD) issued in 2017 the new Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, revising thoroughly the Chapter VIII on Cost Contribution Arrangements (CCAs). The new guidance introduces stricter provisions on control and substance requirements, gives emphasis to the expected benefits and changes the method to evaluate CCAs contributions. In Italy, the new rules have been indirectly implemented by the new art. 110, par. 7, of the Italian Income Tax Code and the Italian tax administration is expected to verify if the transfer pricing results of a CCA properly represent the value-creating functions and the control of risks, in accordance with the arm’s length principle. Thus, the new rules present relevant challenges for Multinational Enterprises (MNEs) both for developing new CCAs and maintaining the existing ones.