The Concept of 'Permanent Establishment of a Group of Companies' in a Recent Case of the Italian Supreme Court (Corte Di Cassazione)

Abstract

A company resident in Italy can be considered as permanent establishment of various foreign companies belonging to the same group and pursuing a unitary business strategy. In this case the activity carried on by the national company must be unitary and related to the group's programme altogether considered in order to be qualified as auxiliary or preparatory to the latter.

The control activity on the exact execution of a contract between a resident and a non-resident company (the first being a third party company and the second a company belonging to the group) cannot be considered - in principle - auxiliary according to the article number 5, paragraph number 4, of the OECD Model.

The existence of a permanent establishment must be tested not only according to a formal approach, but also - and above all - by a substantial one: the second one must prevail even when the possibility to enter into contracts (autonomously or not) is considered as well.

Keywords: Philip Morris, Permanent establishment, OECD, Double taxation convention, Double taxation, Italian tax law

JEL Classification: K00, K19, K34