Intercompany relations are structured at market prices and conditions, ensuring value creation in the locations where the Group conducts its business. For all intercompany transactions relevant to transfer pricing regulations, the Enel Group has adopted a policy that is in line with the arm’s length principle, an international standard established by the Model Tax Convention and referred to in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereinafter also referred to as the “OECD Guidelines”).
To this end, the Group has put internal policies in place to support the methods set out in the OECD Guidelines, which provide for the application of the Comparable Uncontrolled Price – CUP method (which compares the price of goods and/or services transferred in a transaction concluded between associated companies with the price applied in transactions between independent third parties). In addition, consistent with the applicable regulations, the signing of Advance Pricing Agreements (APAs) with local tax authorities is promoted. These concern the definition of transfer pricing methods, the allocation of profits and losses to permanent organizations, and the application of rules regarding cross-border flows between Group entities.
With specific regard to intercompany financial transactions, the Enel Group has organizationally adopted a centralized finance model for its subsidiaries, which requires that the Group’s two financial companies, Enel Finance International (EFI) and Enel Finance America (EFA), centralize part of the treasury and financial market access activities and act as the primary point of reference for the management of financial or liquidity needs generated by the operating entities.
Finally, when analyzing the size of intercompany transactions, it can be seen that these account for a minimal percentage (generally around 7%(1)) of the Group’s total aggregate revenues,(2) due to the fact that the energy business is conducted almost entirely within the boundaries of the individual country, from the power generation process to market sales. In 2022, intercompany transactions as a percentage of the Group’s total aggregate revenue amounted to approximately 4%.