Intra-group services: a stricter burden of proof, two formulations by the Italian Supreme Court

In corporate groups, the parent company or an affiliate frequently centralises services such as administration, finance, consultancy or research and recharges their cost to the other group companies, on the basis of service agreements or cost-sharing arrangements. For the company receiving the recharge, the deductibility of these costs depends first and foremost on the inherence principle, which the Italian Supreme Court construes as a qualitative assessment of the link between the cost and the business activity, unrelated to considerations of economic convenience. However, where the cost arises from a service rendered within the group, case law requires the taxpayer to provide stricter evidence than for an ordinary cost. Rulings issued in recent months nevertheless show that this requirement is formulated in two different ways, and being aware of both is useful in structuring a sound defence.

The first formulation focuses on the usefulness of the service for the recipient company. In Order no. 26312 of 29 September 2025, the Court recalls that inherence “disregards, in itself, utilitarian (or economic advantage) or quantitative assessments”, but immediately adds that “the concept of inherence is framed in not entirely similar terms with regard to intra-group contracts”. In such cases, the recipient must “derive actual utility from the remunerated service”, which must be objectively determinable and adequately documented, and this evidence must be provided “regardless of a generic inherence to the business activity”. Judgment no. 5753 of 13 March 2026 follows the same approach and makes its rationale explicit. Within groups, transactions may spread which, “originally designed for the most advantageous allocation of taxable income among associated companies, have often resulted in genuinely abusive transactions”, hence the need for “particular rigour”. In the case at hand, concerning centralised and research services recharged by a UK affiliate, the Court set aside the appeal judgment because it had failed to verify “a specific relationship, identifiable in its content and value, between the services and particular needs of the Italian company”. It further clarified that this assessment logically precedes the arm's length (normal value) adjustment provided for by Article 110(7) of the Italian Income Tax Code (TUIR).

The second line of case law is found in Orders no. 3750 of 13 February 2025 and no. 10456 of 21 April 2026, which concern the same matter: consultancy services rendered by the parent company and remunerated with a fee equal to 1.75% per month of the taxable amount of sales. Here the Court restates the general rule in its strictest form, holding that inherence must be assessed “without any assessment in terms of utility – even merely potential and indirect – having to be made”. Nonetheless, it too finds the evidence put forward by the taxpayer insufficient because, in a case “where the service is rendered between companies of the same group”, neither the percentage set in a multi-year framework agreement, nor the signing of the contracts, nor the lack of qualified staff at the subsidiary can suffice. The missing requirement is the “determinacy of the costs”, which for the Court is “something different” from the formal regularity of the contract and the existence of the services, and corresponds to proof of the “actual and concrete provision of the service”. In other words, what is required is “proof of the specific costs incurred in relation to the transactions actually carried out in the relevant tax period”.

The two lines of case law do not refer to each other and, in terms of wording, remain in tension: the first requires a utility beyond generic inherence, whereas the second rules out any assessment of utility. The difference narrows, however, once the context is considered. In the orders on consultancy services, the existence of the services was not disputed and the issue concerned the quantification of a flat-rate fee, whereas in the other rulings it was precisely the benefit obtained by the company that was in question. What the two strands share is the outcome: for intra-group services, a link with the business activity is not enough, and the contract, the invoices and the recharge criterion must be backed by specific evidence. It should also be noted that this stricter burden of proof applies to groups made up solely of Italian companies as well, such as those examined in the 2025 and 2026 orders, to which transfer pricing rules do not apply, since domestic transactions are excluded by Article 5(2) of Legislative Decree no. 147/2015.

From an operational standpoint, the two formulations therefore lead to converging guidance. The orders on consultancy services point out that, even where invoices are generic, the correspondence between cost and service may be demonstrated “aliunde”, through other documents, messages or supplementary information that the tax authorities are required to take into account. It is therefore advisable for documentation to be produced while the service is being rendered, rather than reconstructed during a tax audit. Periodic reports, correspondence with central functions, minutes and schedules linking the amount recharged to the activities performed during the financial year make it possible to demonstrate, at the same time, what was received, which need of the company it met and how the consideration was quantified. In this way, the defence holds up whichever formulation the court adopts.