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Italy: Ruling request process, certainty with regard to permanent establishments

Italy: Ruling request process, permanent establishments

Large multinational entities (MNEs) that engage in direct sales in Italy may request from the Italian tax authorities a ruling with regard to whether the MNE’s activities give rise to a permanent establishment (PE) in Italy.


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This ruling process is intended to provide certainty with regard to the taxation of the taxpayer’s transactions in Italy.

The request for such rulings is to follow a format that is available on the website of the Italian tax authorities. This concerns certain relevant information for the identification of the non-resident entity as well as of the Italian-resident auxiliary company or PE including information about the non-resident entity’s business model and transfer pricing documentation.  Other information to be provided includes financial statements and documentation supporting the non-existence of a PE in Italy.

The ruling process applies for non-resident entities that:

  • Belong to large multinational groups with a worldwide turnover exceeding €1 billion (in one of the last three years)
  • Enter into supplies of goods or services in Italy having a value exceeding €50 million (in at least one of the last three years)
  • Carry out the sale of supplies with the support of one or more Italian-resident auxiliary companies (or PEs) belonging to the same group

The PE ruling process does not apply to non-resident entities if the Italian tax authorities have already notified them (or the Italian-resident auxiliary company) that a tax audit or criminal audit has been initiated with respect to the existence of an undisclosed PE in Italy.

If after the filing of a ruling application, a PE is found to exist, the MNE can benefit from certain relief including penalty reduction, no criminal prosecution, and certainty with respect to the tax treatment of the profit attributable to the PE. The value added tax (VAT) treatment also applicable with respect to the transactions may provide other benefits.

The Italian tax authorities must make a determination within 30 days from receiving the ruling request and documentation (the deadline can be extended in certain instances) and the assessment procedure is to be completed within 180 days from acceptance of the application.

Read a May 2019 report [PDF 293 KB] prepared by the KPMG member firm in Italy

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