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A new case-law about permanent establishment by Italian Supreme

  • Italy
  • General


With decision no. 21693 filed on October 8, 2020, the Italian Supreme Court provides additional clarification to the definition of permanent establishment (“PE”) in Italy.

The aspect suitable for qualifying a PE is the exercise, on the Italian territory, of an economically relevant activity - such as a provision of services - linked to the business interest of the foreign company.

This principle leads to the following two consequences.


The Supreme Court clarifies that when a fixed place of business carries out both:

  • preparatory and ancillary activities and
  • business activities as above,

the whole is considered a PE.

In other words, the presence of preparatory and ancillary activities is less relevant than the business activities with the result that all the income is subject to taxation as PE.


The preparatory or ancillary activities are exempt from the PE if they are carried out only in the interest of one (foreign) company.

In case the fixed place provides preparatory or ancillary activities also in favour of other companies of the group, the said activities become a business in itself, capable to produce an independent economic result.

Therefore, the fixed place although carrying out preparatory and ancillary activities is considered a PE.

Specifically, if the merely preparatory or ancillary activities, are aimed exclusively in favour of one company (i.e. the one which bears the cost), no income can be attributed to the fixed place of business.

The case at stake was the procurement activity performed on behalf of more than one company of the group.

According to the Court, such ancillary activity (procurement)  becomes a provision of services in favour of other companies - even if they are part of the group; therefore the fixed place is deemed to pursue an autonomous economic result, that indeed is subject to taxation as a PE.





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