Title: WORKING AGREEMENT BETWEEN THE NATIONAL TAX BOARD OF SWEDEN AND THE MINISTRY OF FINANCE OF ITALY FOR THE CONDUCT OF SIMULTANEOU
Author: UCRI
Last saved by: utente
Company: Ministero delle Finanze

WORKING AGREEMENT BETWEEN THE NATIONAL TAX BOARD OF SWEDEN AND THE MINISTRY OF FINANCE OF ITALY FOR THE CONDUCT OF SIMULTANEOUS TAX EXAMINATIONS UNDER THE PROVISIONS OF THE EXCHANGE OF INFORMATION  ARTICLE 27 OF THE CONVENTION FOR THE AVOIDANCE OF  DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL AND THE PREVENTION OF FISCAL EVASION, SIGNED AT ROME ON 6th MARCH 1980, WITH REFERENCE TO THE EC COUNCIL DIRECTIVE 77/799 OF 19 DECEMBER 1977.

I  - Definition and legal basis

     For   the   purpose   of   the   Agreement   the  expression "simultaneous tax examination" means an examination undertaken by virtue of arrangement  between the two Contracting States  to examine simultaneously and independently,  each on its own territory, the tax affairs of (a) taxpayer(s) in which they have a common or related  interest,   with  a  view  to  exchanging  any  relevant information which they so obtain.
     
     The simultaneous tax examination shall be conducted under the exchange of information Article 27 of the Swedish-Italian Convention of 6th March, 1980, for the avoidance of double taxation, with reference to the EC Council Directive 77/799 of 19 December 1977, as far as the taxes covered by Article 1, paragraphs 3 and 4 of the said Directive are concerned.

	The exchange of information used by virtue of the Agreement must be performed within the scope and under the provisions of above-mentioned Article 27, as well as under Article 7, with specific reference to paragraph 3,and Article 8 of said Directive.

	Any exchange of information which follows from such examinations either on request or spontaneous will be made through the competent authorities.

II - Objectives

     The main purpose of  simultaneous tax  examination is "inter alia":
     
1. To determine a taxpayer's correct liability in cases where:
     
-	costs  are shared  or  charged and profits  are allocated between  taxpayers  in  different  taxing  jurisdictions  or more generally transfer pricing issues are involved;
     
-	apparent tax avoidance or evasion techniques or patterns involving substance versus form transactions, controlled financing schemes, price manipulations, cost allocations or tax shelters  are identified;
     
-	unreported income, money  laundering, kickbacks, bribes, illegal payments, etc. are identified;
  
-	transactions with tax havens and tax avoidance or evasion schemes  involving tax havens  are  identified.

2. To facilitate an exchange information on:
     
-	multinational business  practices,  complex transactions, fiscal examination  issues and fiscal non-compliance  trends that may be particular  to  an  industry  or group  of industries;
     
-	cost sharing arrangements;
     
-	on profit allocation methods in  special fields  such as global  trading  and   new  financial  instruments.
     
     A  simultaneous  tax examination is  not  intended  to  be a substitute for the mutual agreement procedure provided  for under Article 26 of the Tax  Convention.

III  Case selection and examination procedure

1.   The  competent   authority  of  each   State  will  identify independently taxpayers it intends to propose  for a simultaneous examination.

2.   The  competent  authority  of  each  State  will  inform its counterpart  in  the other  State  of  its  respective  choice of potential cases for simultaneous examinations using the selection criteria described below.   It will explain,  as far as possible, why it has chosen these cases and provide the information leading to its proposals,  together with any other  relevant information, as well  as  its statute of  limitation  applicable  to the cases proposed for simultaneous  examinations.
  
3.   Each State will determine if it  wishes to participate  in a simultaneous  examination.

4.   The  competent  authority  requested  to  participate  in  a simultaneous  examination  will consider the  information  in conjunction  with  information  from  its  own  sources  and will confirm in writing to its counterpart its agreement or refusal to undertake a specific simultaneous tax examination (mentioning the taxpayers,  taxes  and tax years  involved).   	Before  making its confirmation,  the competent authority  will seek  to  obtain any information that it requires in order to reach a decision, either under  its  domestic  laws  or  under   the   provisions  of  the appropriate  Exchange  of  Information  Article  27  of  the  Tax Convention, as well as under the provisions of the EC Directive 77/799.
	The same competent authority   will   indicate   a  designated representative  who  will  have   functional  responsibility  for directing  and  coordinating  the  examination.    The  proposing competent authority will  also  indicate in writing  a designated representative.
	The competent authorities may  then  present  to  each other requests for exchange of information or  provide each  other with information  spontaneously under and in  conformity  with the provisions of the Tax Convention and of the EC Directive 77/799.

5.   The designated representatives of  the competent authorities will take  care  of  the practical  aspects  of  the simultaneous examination (timetable, mode and periods to examine).

6.   The  prerequisite  and  therefore  essential   condition  of selection is that  the tax years be  open for  examination in the two States interested in having a simultaneous  examination.

IV - Criteria for case selection

     Any  case  selected  for  a  simultaneous  examination  will generally involve a taxpayer or taxpayers having operations either through associated enterprises or through permanent establishments  in the two contracting States.   The criteria taken into  consideration in determining  whether a  case  is  selected  for  simultaneous tax examination  may include,  inter  alia:

1.   the  scale  of  its  world-wide  operations;

2.   the extent of intragroup transactions;

3.   available indications of:

-	tax avoidance and evasion;
   
-	substantial non-compliance of tax law  in the Contracting States;
   
-	manipulation of  transfer prices to the potential detriment  of the Contracting States;
   
-	other  forms   of  international  tax   planning   which, if     countered  successfully,  may generate additional tax  yield     in the Contracting States;
   
-	economic performance  of   a taxpayer  or  related taxpayers,     over a period  of time, which is significantly  worse than it     might be expected, for instance:

       -- the economic  performance does  not reflect appropriate 
          profits when measured against sales, total assets, etc.;
      
       -- cases where  the  taxpayer  consistently  shows losses, 
          especially long-term losses;
      
       -- cases where the taxpayer,  regardless of profitability, 
          paid little or no tax over the relevant period;
      
-	transactions involving tax havens;
   
-	situations where the competent authorities consider it is in the interest of the tax administrations concerned  in order to promote international tax compliance.

V - Personnel

1.   Examinations    will  be  conducted  separately  within  the framework  of national  law and  practice solely  by tax administration officials of each State using the available exchanges of information provisions. No interchange  of personnel will be  made between the two countries.

2.  It is understood   that  the  term  "tax  administration officials"   used in this arrangement shall also include,  in the case of Italy, the members of the Italian "Corpo della Guardia di Finanza".

3.	The designated representatives  of  the two administrations will communicate with each other only through the competent  authorities.

4.	The competent authorities can settle that  the representatives  be allowed to  act  as  a  delegate  of the competent authority of their country.   The delegation will allow them to communicate with each other directly  either by telephone or  by  direct  consultation.   Notwithstanding this, the written communication shall always be done by the intermediary of each competent authority.

VI - Planning the simultaneous tax examination

    Before the start of the tax examination the tax officials in charge of the case will consider with their counterparts from the other State, the examination plans of each State, possible issues to be developed and target dates.   It may be appropriate to hold co-ordination meetings to plan and follow closely  the performance of the simultaneous examination.	However,  no  exchange  of formal examination plans  will be made between  the two States.

VII - Conducting the simultaneous tax examination

	A simultaneous tax examination requires the  co-operation of tax  administration  officials located  in  each  State  who will simultaneously but independently examine  the  taxpayer(s) within their  jurisdiction.   They  will  try  as  far  as  possible  to synchronise their work schedules.

VIII - Discontinuing the simultaneous tax examination

	If either State concludes that it is no longer beneficial to continue the simultaneous examination of a case,  it may withdraw by notifying the other State.

IX - Concluding the simultaneous tax examination

1.	The simultaneous  tax examination  will  be  concluded after co-ordination and consultation between  the competent authorities of each State. Issues pertaining to double taxation raised by the examination are reserved to the Mutual Agreement Procedure.

2.	The outcome of the examinations gained by the audit services in the two States  shall be  jointly  co-ordinated  by  the representatives  of the two  administrations. The representatives shall report to  their competent authorities  every question that cannot  be settled at representatives level and  could  involve a double taxation,  either juridical  or economic,  or could produce the effects of a double non-taxation.   The competent authorities shall endeavour to  solve these problems  by  means  of  a mutual agreement procedure under Article 26 of the Tax Convention.

X - Miscellaneous provisions

1.	This Agreement shall be operative beginning on 1st January, 1998.

2.	This  Agreement may be  modified at any time  by agreement between  the  competent authorities.

     Done, at Rome, in duplicate, on 29th April, 1997, in the English language.

For the Swedish National                        For the Italian Ministry
     Tax Board                                  	           of Finance

    (Anna WALLIN)                                  (G.M.LONGO)