With Order No. 13136 of 7 May 2026, the Italian Supreme Court issued an important ruling on transfer pricing and intra-group transactions. The Court held that a real guarantee granted by an Italian subsidiary in favour of a foreign parent company may fall outside the scope of transfer pricing rules where the transaction is supported by valid economic reasons.
The case concerned an Italian subsidiary that had granted, on a pro quota basis, real guarantees in favour of its US parent company in connection with a financing arrangement entered into with a pool of US banks. The guarantees were provided without any direct remuneration. The Italian Tax Authorities challenged the transaction, arguing that it lacked valid economic reasons, and reassessed the company’s taxable income by applying the CUP method and a 3.13% average remuneration rate to the guaranteed amount.
The Supreme Court confirmed that, in the context of intra-group transactions, the concept of “free of charge” should not be assessed merely from a formal or contractual perspective. Instead, it must be interpreted in economic terms, taking into account the overall economic interest pursued by the group and the indirect or mediated benefit obtained by the company providing the guarantee. Therefore, even where no immediate consideration is paid, the transaction may still be economically justified if it forms part of a broader strategy aimed at preserving business continuity and the economic success of the group companies.
In the case at hand, the Court considered the internal commercial reasons of the group to be decisive. These included the parent company’s liquidity issues, the reduction in the subsidiaries’ turnover, and the risk of insolvency proceedings involving the parent company, which could have jeopardised the survival of the Italian subsidiary itself. The free guarantee was therefore not regarded as an economically irrational transaction, but rather as a measure aimed at protecting both the group’s interest and the subsidiary’s own business continuity.
Accordingly, the Supreme Court dismissed the appeal filed by the Italian Tax Authorities and stated that transfer pricing rules should not apply where the guarantee granted by a subsidiary in favour of its parent company is justified by valid economic reasons and by the parent company’s interest in the economic success of the various entities within the group.
Practical implications
This ruling provides useful guidance for multinational groups: intra-group guarantees granted free of charge are not automatically challengeable under transfer pricing rules. However, taxpayers must be able to provide robust evidence of the economic and commercial rationale underlying the transaction.
In practice, groups should ensure that adequate supporting documentation is available, including evidence of:
- the financial and economic context of the group;
- the interest of the company granting the guarantee;
- the direct or indirect benefits expected from the transaction;
- the consistency of the transaction with the group’s overall strategy;
- the potential impact that the absence of the guarantee could have had on business continuity.
The decision confirms the importance of a substance-based analysis of intra-group transactions, where compensating advantages and valid economic reasons may play a decisive role.
This article was prepared by IC&Partners for the ETL GLOBAL Transfer Pricing Group. Visit the group’s dedicated page to learn more and get in touch for further assistance.
