Relevance and Arm’s Length Value: New Clarifications from the Italian Supreme Court on Intragroup Costs and Sponsorships
With Order No. 7216/2026, the Italian Supreme Court has clarified key aspects regarding the deductibility of costs and the determination of revenues. In the context of sports sponsorships, the presumption of relevance is not automatic but requires concrete proof of the promotional activity carried out. Formal documentation alone is not sufficient: it is necessary to demonstrate the actual consideration received through objective evidence. For intragroup consultancy costs, relevance must be supported by proof of their actual benefit to the company. The mere existence of a contract or invoices is not enough to justify deductibility. On the revenue side, the use of the arm’s length value pursuant to Article 9 of the Italian Income Tax Code is allowed. A significant deviation from market values may indicate uneconomic behavior that must be justified. The ruling therefore strengthens the taxpayer’s burden of proof regarding the effectiveness, usefulness, and economic consistency of the transactions.
Discounts and Variable Consideration: Tax Effects and Dual Track in 2025 Financial Statements
In the 2025 financial statements, discounts and allowances recorded as reductions of revenue have immediate tax relevance under the principle of enhanced derivation. In the absence of specific exceptions, these items follow directly the accounting treatment provided by OIC 34. A different regime applies to contractual penalties and mass estimated returns, for which the dual tax–accounting system continues to apply. In these cases, the adjustments recorded on an estimated basis are tax-relevant only when they become certain and objectively determinable. For bonuses, incentives, and various discounts, tax relevance is immediate, provided that the estimates are consistent with accounting principles. Significant effects also arise for financial discounts, which are now classified as reductions of revenue and are relevant for IRAP purposes. The new framework also affects the calculation of the ROL for IRES purposes, thereby increasing the overall tax impact.
Adequate Organizational Structures and Governance: The Central Role of Information Quality
With the document published on May 4, the National Council and Foundation of Chartered Accountants add a further step toward the proper implementation of adequate organizational structures. Under Article 2086 of the Italian Civil Code, such structures assume a dynamic nature and are fully integrated into corporate governance. Their effectiveness is measured not only formally, but above all by the quality, completeness, and traceability of the information produced. The objective is to support informed and verifiable decision-making by management bodies. The informational function becomes crucial in promptly identifying signs of crisis and corporate imbalances. The criterion of adequacy is based on the ability of the structures to detect and manage the specific risks faced by the company. A distinction therefore emerges between formal and substantive adequacy, linked to the actual functioning of organizational systems. Increasing digitalization and the use of artificial intelligence are raising the required standards, particularly in more advanced contexts. In this scenario, verifiability, internal control, and digital accountability become key elements of corporate governance.
EU Triangular Transactions: No Reverse Charge, No Simplified Regime
Failure to indicate the reverse charge in the invoice jeopardizes the correct classification of intra-EU triangular transactions. In the absence of this specific wording, the purchase loses its intra-Community nature and is treated as a domestic Italian transaction. This effect occurs even if the substantive requirements of the operation are met. The correct identification of the person liable for VAT in the invoice, in accordance with EU law and case law, is therefore crucial. As a consequence, the foreign entity is required to register for VAT purposes in Italy. Response no. 111/2026 from the Italian Tax Office confirms a rigorous approach in terms of form. Furthermore, inquiries involving penalties are inadmissible. Document management therefore remains crucial to avoiding reclassifications and tax disputes.
Representation Expenses: Mandatory Traceability Also Abroad
Starting from 2025, the deductibility of representation expenses for income tax and IRAP purposes is also subject to the use of traceable payment methods, both for companies and, subsequently, for professionals. This requirement is in addition to the traditional criteria of relevance, reasonableness, and proper documentation. Representation expenses continue to be defined as those incurred free of charge for promotional or public relations purposes, provided they are consistent with commercial practices and potentially capable of generating economic benefits for the business. The quantitative limits on deductibility remain unchanged, but greater importance is now placed on the payment method used. A particularly significant aspect is the extension of the traceability requirement to expenses incurred abroad, without territorial exceptions, unlike what is provided for certain travel expenses. Advertising and sponsorship expenses, on the other hand, being based on consideration rather than gratuitousness, are excluded from this requirement. Furthermore, when meals and accommodation expenses qualify as representation expenses, in addition to traceability, the 75% deductibility limit also applies.
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