Italy vs Illva Saronno SpA, May 2026, Supreme Court, Case No 15698/2026
Table of Contents
Case Information
Court: Corte di Cassazione, Sezione 5 (Civil Tax)
Case number: 15698/2026
Citation: Civile Ord. Sez. 5 Num. 15698 Anno 2026
Applicant: Illva Saronno SpA and Illva Saronno Holding SpA
Respondent: Agenzia delle Entrate
Jurisdiction: Italy
Judgment date: 22 May 2026
Judgment Summary
Illva Saronno SpA (the consolidated entity) and Illva Saronno Holding SpA (the consolidating parent) received a tax assessment for the year 2008, resulting in a recovery to taxation of euro 7,559,840.00. The recovery followed a redetermination of transfer prices under Article 110, seventh paragraph, of the Testo Unico delle Imposte sui Redditi (TUIR) [para. 1].
The taxpayers appealed through two levels of Italian tax court. The first-level court (Commissione Tributaria Provinciale di Varese, judgment n. 139/2015) ruled in their favour. The regional appellate court (Commissione Tributaria Regionale della Lombardia, judgment n. 7130/2016) reversed that decision, upholding the tax authority's assessment [paras. 2 and 3].
The taxpayers then brought a further appeal to the Corte di Cassazione on four grounds. The Supreme Court rejected three of those grounds but upheld the third, which concerned the transfer pricing method applied. The regional court's judgment was quashed on that point and the case remitted for fresh examination [para. 9].
Background
Illva Saronno SpA belongs to the Illva Saronno Holding SpA group and produces and markets alcoholic beverages. Production takes place in facilities in Italy. Commercialisation in the Dutch and United States markets is carried out through the subsidiary Holland Alcomix BV [para. 1].
During a 2012 audit, the tax authority identified transfer pricing violations relating to the 2008 tax year. The assessment recovered euro 7,559,840.00 to taxation by redetermining the selling prices pursuant to Article 110, seventh paragraph, TUIR [para. 1].
Two connected issues arose within the assessment. First, the tax authority contended that Illva Saronno SpA had set transfer prices below the arm's length level, concentrating profits in the Netherlands. Second, the authority challenged euro 4,922,113.00 of marketing and advertising costs recharged by Holland Alcomix BV to Illva Saronno SpA, treating them as price reductions rather than genuine expense recharges [paras. 3 and 4].
The tax authority applied the Transactional Net Margin Method (TNMM), comparing the net margin of Holland Alcomix BV (28.21%) with the margin of independent distributors (4.71%) [para. 3]. The taxpayers contended that the Comparable Uncontrolled Price (CUP) method should have been used instead and proposed Campari and Pernod Ricard as comparables [paras. 3 and 5].
Core Dispute
Four grounds of appeal were raised before the Supreme Court.
First, the taxpayers argued that the regional court had wrongly held that the procedural requirement of prior adversarial dialogue (contraddittorio endoprocedimentale) under Article 12, seventh paragraph, of Law n. 212 of 2000 had been respected. They submitted that the assessment for 2008 was substantively different from the tax police report (PVC) of 19 December 2012, which concerned the 2010 tax year, and that the sending of a detailed questionnaire did not amount to adversarial dialogue [para. 1 of the Ragioni della Decisione section].
Second, the taxpayers argued that the regional court had reversed the burden of proof contrary to Article 2697 of the Civil Code, placing the obligation to prove arm's length pricing on the taxpayer rather than on the tax authority [para. 3 of the Ragioni della Decisione section].
Third, the taxpayers argued that the regional court had wrongly endorsed the tax authority's use of TNMM rather than CUP, which they contended was the method prescribed by law as most reliable. They further argued that the fourteen comparables used by the authority were insufficiently homogeneous [para. 5 of the Ragioni della Decisione section].
Fourth, the taxpayers argued that the regional court had omitted to examine the historical fact that the same transfer prices had been applied to Holland Alcomix BV before its acquisition by the Illva group, when it was an independent party, and that prior tax court judgments had definitively established the absence of any price differential [para. 7 of the Ragioni della Decisione section].
Court Findings
On the first ground (procedural fairness), the court held it was unfounded. The assessment arose from a desk audit (accertamento a tavolino), for which no general obligation of prior adversarial dialogue existed in relation to non-harmonised taxes under the law applicable at the relevant time. The court cited Cass., Sez. U., 24823/2015 and Cass., Sez. U., 21271/2025, confirming that such an obligation applied generally only to harmonised taxes, and noted Corte Costituzionale n. 47/2023 to the same effect. The taxpayers had not demonstrated any concrete prejudice [para. 2 of the Ragioni della Decisione section].
On the second ground (burden of proof), the court held it was not well-founded. Under the settled interpretation of Article 110, seventh paragraph, TUIR, the transfer pricing rules are not anti-avoidance rules in the strict sense but target the economic phenomenon of profit shifting. The tax authority's burden is to prove that intragroup transactions took place at a price apparently below the normal value; the burden then shifts to the taxpayer to demonstrate that the prices correspond to market values under Article 9, third paragraph, TUIR. The court held that the regional court had not departed from this allocation of burdens and had correctly found that the authority had discharged its part [paras. 4 and 4.1 to 4.3 of the Ragioni della Decisione section].
On the third ground (choice of transfer pricing method), the court held it was well-founded within the limits set out in the judgment. The court noted that neither the pre-2017 nor the post-2017 version of Article 110, seventh paragraph, TUIR prescribes a strict hierarchy of methods, and that the OECD Guidelines (1995) call for selection of the most appropriate method for the particular case. Article 4, paragraph 3, of the Decreto Ministeriale of 14 May 2018 provides that where CUP and another method can be applied with equal reliability, CUP is to be preferred. Article 4, paragraph 6, of the same decree requires the tax authority, where a taxpayer has applied a compliant method, to base its verification on that method. The regional court failed to explain why CUP was not appropriate in the concrete case, why the absence of marketing and advertising documentation rendered CUP unusable, why the comparison proposed by the taxpayers (sales by the Italian company to third parties) was not considered, and why the fourteen comparables used for TNMM were sufficiently homogeneous despite differences in product category, size and market [paras. 6 to 6.4.3 of the Ragioni della Decisione section].
On the fourth ground (omitted historical fact), the court held it was not well-founded. The alleged historical fact, namely that the same prices had been applied before Holland Alcomix BV joined the group, was described by the taxpayers in entirely generic terms. The judgment of the court gave no indication of when the acquisition took place or what prices had been applied. The prior tax court judgments cited by the taxpayers (CTP di Milano n. 5082, deposited 28 July 2017, and CTP di Milano n. 7074, deposited 20 December 2017, relating to tax years 2010 and 2011) had not been shown to have passed into res judicata, and no certification of finality was provided [paras. 8 to 8.3 of the Ragioni della Decisione section].
Outcome
The Supreme Court accepted the third ground of appeal and rejected the remaining three grounds. The judgment of the Commissione Tributaria Regionale della Lombardia n. 7130/2016 was quashed in relation to the accepted ground. The case was remitted to the Corte di Giustizia Tributaria di secondo grado della Lombardia, sitting in a different composition, for fresh and reasoned examination in accordance with the principles set out in the judgment, and for determination of the costs of the cassation proceedings [para. 9 and operative part].
TP Method Highlighted
The tax authority applied the Transactional Net Margin Method (TNMM), comparing the net margin of Holland Alcomix BV (28.21%) against the net margins of independent distributors (4.71%). The authority treated euro 4,922,113.00 of marketing and advertising costs recharged by Holland Alcomix BV to Illva Saronno SpA as price reductions rather than genuine recharges [paras. 3 and 4 of the Fatti di Causa section].
The taxpayers contended that the Comparable Uncontrolled Price (CUP) method should have been applied, comparing the prices charged by Illva Saronno SpA to third parties with those charged to Holland Alcomix BV. They proposed as comparables companies such as Campari and Pernod Ricard holding exclusive brand rights and operating solely in alcoholic beverages [paras. 3 and 5 of the Ragioni della Decisione section].
The Supreme Court held that neither the pre-2017 version of Article 110, seventh paragraph, TUIR nor the OECD Guidelines established a strict hierarchy of methods, but that Article 4, paragraph 3, of the Decreto Ministeriale of 14 May 2018 required CUP to be preferred where it could be applied with the same degree of reliability as another method. The regional court was required, but failed, to explain in specific terms why CUP was unsuitable and why TNMM adequately accounted for differences between the tested party and the comparables [paras. 6.1 to 6.4.3 of the Ragioni della Decisione section].
Major Issues / Areas of Contention
- Whether the procedural requirement of prior adversarial dialogue under Article 12, seventh paragraph, of Law n. 212 of 2000 applied to a desk audit involving a non-harmonised tax, and whether the tax authority had respected it.
- How the burden of proof is allocated between the tax authority and the taxpayer in a transfer pricing adjustment under Article 110, seventh paragraph, TUIR, including whether the authority must prove a concrete tax advantage.
- Whether the tax authority was entitled to apply TNMM rather than the CUP method chosen by the taxpayer, and whether the regional court was required to give specific reasons for endorsing that choice.
- Whether Article 4, paragraphs 3 and 6, of the Decreto Ministeriale of 14 May 2018 required the tax authority to base its verification on the method applied by the taxpayer and to prefer CUP where equally reliable.
- Whether the fourteen companies selected as comparables for the TNMM analysis were sufficiently homogeneous, given alleged differences in product category, size and markets.
- Whether marketing and advertising costs of euro 4,922,113.00 recharged by Holland Alcomix BV to Illva Saronno SpA constituted genuine recharges or disguised price reductions.
- Whether the alleged historical fact that the same transfer prices had been applied before Holland Alcomix BV joined the group constituted an examinable historical fact under Article 360, first paragraph, n. 5, of the Code of Civil Procedure.
- Whether prior tax court judgments relating to tax years 2010 and 2011, not shown to have passed into res judicata, could support a finding of res judicata binding the court in respect of tax year 2008.