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Italy: Advance tax rulings & permanent establishments

On 23 December 2013, the Italian government published a decree concerning the Italian advance tax ruling procedures. As a result of this decree, non-resident entities operating in Italy will be able to obtain an advance tax ruling from the Italian tax authorities on whether or not their local presence qualifies as a permanent establishment for the application of Italian tax and tax treaty provisions. The Italian parliament is expected to approve the decree by the end of February 2014. It is part of a larger package of measures introduced by the Italian government in order to attract more international investments to Italy.

After the conversion of the decree into law by the Italian parliament, the new advance tax ruling process will enter into force. The initial application for an advance tax ruling concerning a potential Italian permanent establishment must contain a comprehensive description of the Italian presence. Based on this description and the subsequent discussions with the non-resident entity, the Italian tax authority will determine whether or not an Italian permanent establishment will be recognised.

Once granted, the Italian tax authority as well as the non-resident entity are bound by it for the duration of five years, provided the relevant facts and circumstances do not change significantly.

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