The spread of the pandemic has led to a change in business models structures.

Since many companies have given employees the opportunity to perform their work in smart working mode, it is necessary to analyse the effects that these choices can have as concern the terms of permanent establishment.

With reference to the relationship between permanent establishment and smart working, the Italian Tax Authority expressed its position in Circular No. 33/E/2020, also referred to in the response to Ruling No. 596 of September 16, 2021.

As part of this examination, the Financial Administration also dwells on the possibility of setting up a permanent establishment whenever the employee of a foreign company settles in Italy to perform his duties remotely.

In detail, the said Circular specifies that in the presence of all the requirements of art. 16 D.lgs. n. 147/2015 (facilitations of repatriated workers): can access the facility persons who come to work in Italy for an employer based abroad, or whose clients (in the case of self-employment or business) are foreigners (non-residents).

With specific reference to the issue of permanent establishments, the Authority states that in the case of a repatriated worker, can be configured a permanent establishment in the territory of the State of the non-resident employer, pursuant to a Convention against double taxation concluded by Italy, where it exists, or pursuant to art. 162 of the T.U.I.R. In this case, the scheme in question does not extend to the corporate income attributable to the foreign employer, who will, therefore, be subject to ordinary taxation.

In view of the increasing use of the smart working mode by employees, facilitated by the progressive emergence of the phenomenon of digitalization of companies, it is necessary for the employers to carry out an overall assessment of all the risks related also to the possible configuration of a permanent establishment of a foreign company in Italy.

From the analysis of the orientation expressed by the OECD, within the Commentary and the documents Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 as well as Updated guidance on tax treaties and the impact of the COVID-19 crisis, specific considerations emerge regarding the possible configuration of the permanent establishment in the cases of carrying out the activity in smart working mode. In contrast to what is stated by the tax administration, the OECD guideline limits the case to situations where there is also an expressed will of the company to have its employee use that workstation to carry out the working activity.

These considerations will therefore have to be coordinated with the guidelines expressed by the Italian Tax Authority within the Circulars and the Rulings, that suggest the possible configuration of permanent establishments for all employees of foreign companies that perform their work in Italy remotely.