A permanent establishment is a fixed place of business through which an undertaking not based in Italy carries out its business in the country (To open a company in Italy read more HERE).
The characteristics of permanent establishment in Italy. Tax representative
In summary, the necessary prerequisites for identifying a permanent establishment of foreign undertakings are:
- a place of business;
- stable presence in the territory of the place of business;
- the non-resident undertaking carries out, in whole or in part, its business, even without being productive and without employees, in the country through its fixed place of business by means of an instrumental link with the business of a “parent” company.
What is a fixed place of business?
The fixed place of business is made up of a tangible structure present on a continuous basis in the country. The structure must be made up of people, or must be technological, for example a server, or it must carry out a commercial activity.
A foreign undertaking with a permanent establishment in Italy is subject to taxation when it carries out its activities, including of a commercial nature, in Italy and not where the legal entity that owns or controls it is resident.
Cases in which an undertaking does not constitute a “permanent establishment”
A foreign undertaking based in Italy does not qualify as a permanent establishment when:
- the undertaking’s assets or goods are stored solely for the purpose of storage, display or delivery;
- a facility is used solely for the purpose of storing, displaying or delivering goods and merchandise belonging to the undertaking;
- assets or goods belonging to the undertaking are stored solely for the purpose of processing by another undertaking;
- a fixed place of business is used solely for the purpose of purchasing assets or goods or gathering information for the undertaking;
- a fixed place of business is used solely for the purpose of advertising, scientific research or similar activities of a preparatory or ancillary nature.
Conclusions
Activities of an auxiliary or preparatory nature should in any case be carried out on behalf of and in relation to the parent company. If the ancillary or preparatory activities are carried out for the benefit of third parties, this could be a commercial activity.
In addition to management premises, a branch or an office, workshops, laboratories, quarries, mines and deposits may also be considered permanent establishments of a foreign undertaking. However, it should be noted that the list is not exhaustive.
Finally, business income from activities carried out in Italy through permanent establishments abroad is considered to be produced in Italy.
Ask Damiani&Damiani for legal advice to open a permanent establishment of foreign undertakings in Italy
