- The Italian Revenue Agency has issued a reply clarifying the assessment of permanent establishments for VAT purposes in Italy.
- The Agency states that the assessment must be conducted on a case-by-case basis, taking into account the specific characteristics of the non-resident entity’s operations in Italy.
- The involvement of a permanent establishment in transactions must be assessed based on the relevance of its activities to the main operations of the parent company.
- The ruling in question involves a Dutch company planning to establish a branch in Italy, with various activities to be carried out by the branch.
- The Agency clarifies that mere support activities are not sufficient to consider the participation of the permanent establishment as relevant.
- The involvement of the permanent establishment must be assessed in relation to each transaction.
- The Agency refers to Article 192a of the VAT Directive, which states that a taxable person is not considered established in a Member State if their permanent establishment does not participate in the supply.
- The internal VAT legislation in Italy provides that obligations related to supplies by non-resident persons are fulfilled by the transferees or purchasers, except for transactions carried out through a permanent establishment.
- The Agency also refers to Article 53 of EU Regulation 282/2011, which outlines the prerequisites for a permanent establishment to be considered an active party in VAT-relevant transactions.
- The assessment of the adequacy of human and technical resources and the degree of permanence of the permanent establishment is a key question in practice.
- The lack of clear guidelines for identifying the perimeter of operation of a permanent establishment may lead to conflicts of interpretation between tax authorities and taxpayers.
- It is advisable for companies to review processes and the distribution of activities between the parent company and the branch to fulfill tax obligations and avoid penalties.
Source: roedl.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
