ALFA (hereinafter referred to as “Applicant,” “SO,” or “Branch”) claims to be the Italian permanent establishment of ALFA (Europe) (referred to as the “Head Office” or “Parent Company”), a Luxembourg company engaged in individual portfolio management and subject to VAT in Luxembourg.
The Applicant reports that the Head Office’s activities include marketing to potential clients, information desk services, financial market analysis, selection of investment strategies, verification of documentation sent to custodian banks, and reporting to clients. According to the contract between the client and the Head Office, the Head Office operates in favor of Italian clients, both private individuals and entrepreneurs, directly from Luxembourg under the free provision regime. Specifically, under the asset management contract, the Head Office is authorized to manage the client’s portfolio at its discretion within the investment strategy defined with the client, for which it receives a delegation to operate from Luxembourg on the client’s accounts opened with custodian banks.
In the first half of 2022, the Head Office establishes a branch in Italy, referred to as the Applicant, which engages exclusively in commercial activities towards the Head Office.
The Branch specifically reports:
– Engaging solely in promotional activities towards potential Italian clients to facilitate the contracting of services between the client and the Head Office. This includes searching for and contacting clients and preparing contractual documentation to be sent to the Head Office.
– Managing post-sale relationships with acquired or existing clients in Italy.
The Applicant also mentions that:
– The core portfolio management activities, including investment decisions and other operations, are conducted by the Head Office in Luxembourg.
– The staff employed in Italy consists of 4 individuals: a branch manager (legal representative of the Applicant) and three employees responsible for promotion and acquiring clients in the territory. The Branch manager also serves as the anti-money laundering officer for the Bank of Italy, although the procedure is carried out in Luxembourg by the chief compliance officer. Additionally, a specific resource from the Group coordinates the execution of business strategies in the Italian market at the Head Office level and supports the Branch in defining its development strategies. According to the Applicant, the Branch does not have the technical or human resources to independently carry out individual portfolio management activities.
In terms of the Branch’s activities and its relationship with the Head Office, the following can be summarized:
1. The Head Office defines and implements the marketing strategy, while the Branch engages in commercial activities aligned with the Head Office’s marketing strategy and manages relationships with potential clients. When a potential client decides to engage the services, Branch staff collects the necessary information and sends it to the Head Office for assessment and necessary anti-money laundering checks. Once confirmation is received from the Head Office, the potential client signs the documentation at the Branch, which then forwards it to the Head Office for countersigning.
2. Once an account is opened and funded with the designated custodian, the Head Office manages the portfolio, while the Branch staff manages client relationships, including reporting activities (reports are partially prepared in Italy based on data, information, and processing provided by the custodian bank and/or the Head Office). Regarding the future development prospects of services in Italy, the Branch states that it has almost completed the start-up phase of its organizational structure and will further enhance its commercial activities, including the possible activation of an off-site offering channel, subject to the appropriate selection of personnel.
Based on the service agreement between the Head Office and the client, the client pays commissions to the Head Office, while the Applicant’s activities are remunerated by the Head Office in accordance with the Transfer Price Policy adopted by the Head Office. Specifically, according to the contract between the Branch and the Head Office (Article 3 – Annex 1), “the consideration for commercial services provided is determined as a percentage of the rebate established, based on the 2022 Transfer Price Policy, at 40% calculated on the amount of fixed commissions recognized to ALFA (EUROPE) by final clients managed by the Branch.”
The Applicant seeks an opinion on the correct billing method for the main service of individual portfolio management provided by the Head Office to Italian clients, considering the activities performed by the Branch. Specifically, they inquire whether the support functions carried out by the Branch involve its participation in the execution of the main service of individual portfolio management provided by the Head Office, thereby qualifying the Applicant as a tax debtor for VAT purposes in Italy for consideration related to the main service provided by the Head Office to Italian clients, both individuals and VAT subjects.
Source: agenziaentrate.gov.it
