Creating a Permanent Establishment in Italy: What It Is and How to Set Up One

A permanent establishment in Italy is a crucial concept for foreign companies wishing to operate in the Italian territory. Defined by Article 162 of the Income Tax Code, a permanent establishment allows non-resident companies to conduct their business activities in Italy, either with a physical presence or through online activities or representatives. This article explores the different types of permanent establishments, legal requirements, and procedures for setting one up.

What is a Permanent Establishment in Italy?

According to Article 162 of the Income Tax Code, a permanent establishment is defined as: "...a fixed place of business through which the business of an enterprise is wholly or partly carried on."

Types of Permanent Establishment

1. Permanent Establishment with Physical Presence

This type involves the physical presence of the foreign company in Italy, through offices, warehouses, stores, etc. The establishment must be physical, tangible, and enduring, where commercial activities are carried out.

2. Permanent Establishment without Physical Presence

Introduced to regulate digital activities, this type entails a significant and continuous economic presence in Italy without a physical structure. Foreign companies operating online and serving Italian clients must pay taxes in Italy if their website servers and users are located in Italy.

3. Personal Permanent Establishment

This type involves foreign companies operating in Italy through a representative who concludes contracts on behalf of the foreign company. This representative plays a crucial role in closing contracts, either in the name of the foreign company or the representative.

Legal and Tax Requirements for Permanent Establishment

Electronic Invoicing and Taxation

A permanent establishment in Italy must comply with electronic invoicing for active operations and register passive invoices. Additionally, it must annually file an income tax return using the SC income model to determine the tax payable in Italy.

How to Create a Permanent Establishment in Italy

To set up a permanent establishment, follow these essential steps:

1. Establishment Minutes

   • Formalize the decision to open a secondary office in Italy in the minutes.

2. Appointment of a Representative in Italy

   • Appoint a legal representative to operate in Italy.

3. Activate a PEC (Certified Email)

   • Necessary for official communications.

4. Notarize the Minutes and Statute

   • Register the minutes and statute with a notary within 45 days, including a translation into Italian.

5. Register with the Business Register

   • The notary must register the act with the Business Register within 30 days.

6. Request a Tax Code and VAT Number

   • Apply to the Revenue Agency to obtain a tax code and VAT number.

7. INAIL Registration

   • Required if there are employees.

8. INPS Registration

   • For social security of employees.

Final Considerations

Creating a permanent establishment in Italy requires several formal and legal steps but offers numerous advantages for foreign companies. Establishing a legal address in Milan, for instance, can confer prestige and facilitate access to the European market. It is essential to carefully follow the procedures and meet all tax and administrative requirements to ensure a solid legal and operational presence in Italy.