VAT Meets Transfer Pricing: Italy and EU Draw the Line
The Big Picture: Transfer pricing used to live squarely in the income-tax neighborhood, but a fresh Italian ruling and a brand-new Court of Justice of the European Union judgment, just moved the fence. Both say that when an adjustment can be pinned to a specific supply of goods or services, Value Added Tax (VAT) wants a piece of the action.
The Details: In Ruling No. 214 issued August 19, 2025, the Italian tax authorities analyzed a distributor’s year-end true-up under the Transactional Net Margin Method (TNMM). Because the adjustment “directly related to the pricing of identifiable supplies,” it was VAT-relevant, International Tax Review reports. Less than three weeks later, on September 4, the CJEU echoed that view in Arcomet Towercranes (C-726/23), ruling that intercompany TNMM payments from a Romanian subsidiary to its Belgian parent were within the VAT scope due to the “direct link” with management services rendered.
Why It Matters / What They're Saying: The reaction was swift. Practitioners note the decisions “blur the once-bright line between direct and indirect tax,” International Tax Review adds. Multinationals may now face dual-track compliance, documenting arm’s-length pricing while tracking VAT invoices for any mid-year adjustments. This mirrors the innovative approaches in domestic regulation, exemplified by updates to the Nigeria Tax Administration Act, 2025.
Around the Tax World
• Luxembourg’s Section 100a Stands Firm, The Administrative Court confirmed that tax officials have “full discretion” to reopen assessments, and taxpayers can’t compel a review, even if they file late amendments (International Tax Review).
• Rwanda, Nigeria Double Tax Deal Sealed, Kigali ratified its first treaty with Africa’s biggest economy, covering everything from Petroleum Profits Tax to Capital Gains Tax and aiming to stamp out treaty shopping (MSN).
• AI Joins the Fraud Squad, A meta-study of 163 papers says machine learning and blockchain tools could save governments billions by detecting complex cross-border tax evasion in real time (Devdiscourse).
• Cyprus Professionals Push Back, Lawyers and accountants lodged 432 objections to the island’s draft tax reform, warning of constitutional clashes and threatening court action if a proposed corporate-tax hike proceeds (Philenews).
By the Numbers
Tax Stat of the Day: USD 1 trillion, the annual corporate tax revenue the world loses to fraud, according to the AI oversight study.
Looking Ahead
All eyes are now on the European Commission, which is expected to issue additional guidance on VAT-linked transfer-pricing adjustments before year-end, guidance that could either harmonize rules or add new layers of complexity. In a similar vein, domestic tax reforms continue to shape global standards, as seen in the Nigerian Tax Laws 2025 - Comprehensive Tax Reform Legislation.