The 2018 Financial Bill added a new item to the local regulations PE definition, covering a non-resident company that has a “…significant and continuous economic presence in the territory of the State arranged in such a way that does not result in its physical consistency in such territory.”
Following the significant economic presence theory, this new PE would be created even without any physical presence of the company in the market territory. There is no explanation about how economic presence must be understood and at what level of the market it would play or what happens when there is an applicable tax treaty in place.
In the Digital Economy Taxation arena, Italy becomes therefore one of the first tax administrations to break in it’s internal law a long lasting fundamental international principle that was based upon common consensus: recognizing corporate profits taxing rights only when real physical activity happening through significant people functions was identified in the country. A long set of OECD arguments surround this concept, some of them develop only in 2010.
The further elaboration of this new rule targeting internet giants in principle, requires close follow up; the uncertainties it currently opens are many. To be seen if this is the first fracture of the international tax status-quo, or the first brick in to the future of modern economy taxation.