Tax Treaty Case Law around the Globe 2025

1. Introduction

The Italian Supreme Court (Corte di Cassazione) handed down a relevant decision (decision no. 26432 of 10 October 2024, Ilapak case) concerning the role of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations in the Italian hierarchy of sources of law.

The Supreme Court held that, from an Italian standpoint, OECD recommendations do not qualify as laws but only provide technical standards that may support the interpretation of legislative provisions, such as the Italian transfer pricing statute under Article 110(7) of Presidential Decree no. 917 of 22 December 1986 (“ITC”).

The decision relates to a tax period that predates Law Decree No. 50 of 24 April 2017 (“Decree 50/2017”) that amended Article 110(7) ITC and incorporated an explicit reference in this provision to the best international practices.

The decision is interesting because it (i) clarifies the role of the OECD Guidelines in the Italian hierarchy of sources of law and (ii) applies a dynamic approach with reference to the selection of the most appropriate method for transfer pricing purposes. This is because the court also relied on the OECD Guidelines (2010) to support it...