Transfer pricing – Italian Contract Manufacturer

The transaction A Group, European market leader in the production of clothing, located in Italy with a subsidiary engaged in typical activities of on demand production (contract manufacturing). In particular, the Italian company produces garments on the basis of specifications provided by the parent and resells them to the same with direct shipping to the parent’s final client. Activity carried out Following a notice of assessment aimed at challenging the existence of an Italian permanent establishment (foreign company) within the manufacturing company, the Group has requested a qualitative opinion on the company’s specific risk with particular reference to the Transfer Pricing policies hitherto practiced. Following this examination, the company has decided to conduct a study to support the adequacy of the transfer pricing applied as well as to document the new transfer pricing techniques to be adopted for the future. It was then carried out a benchmark analysis aimed at identifying the proper remuneration of the transaction between the parent company which distributes worldwide and the Italian manufacturer company. Details of the project The study was aimed at identifying the correct remuneration of the Italian producer for his activity of producer of garments designed and commissioned by the European parent. The following activities ...