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Permanent establishment and VAT transactions: analysis of the Response no. 193/2025

published on 10 October 2025 | reading time approx. 4 minutes

The Italian Revenue Agency has once again ruled on the attribution of VAT transactions to a permanent establishment in Italy of a non-resident entity. Indeed, although they have no legal autonomy with respect to the parent company, a permanent establishment exists for VAT purposes if transactions made or received through them are (Article 17, paragraph 4 of Presidential Decree 633/1972, Article 192-bis of Directive 2006/112/EC).

However, classifying transactions as carried out by the permanent establishment, and therefore attributable to it for VAT purposes, is often not easy, as it requires an examination of its actual involvement in purchases and sales to determine whether the permanent establishment is the entity responsible for the resulting tax obligations.

According to the established position of the tax authorities, this assessment cannot be based on abstract assumptions but must analyse the actual contribution of the permanent establishment in each transaction, according to a substantive case-by-case approach (Responses 52/2021, 57/2023, 336/2023 and 374/2023).

To understand how this principle is applied in practice, the content of response to ruling number 193/2025 shall be covered. Such ruling differs from previous documents on the matter in that, unlike the latter, which focused on the provision of services, it analyses the case of a transfer of goods.

The case concerns a non-resident company active in the wholesale trade of scientific measuring instruments, with a permanent establishment in Italy that employs a number of staff engaged in the sale of products and related support services, divided into two segments:

first product line: the permanent establishment in Italy maintains direct relations with customers and manages the marketing necessary to increase market share, while retaining a certain degree of autonomy and independence with regard to the organisation of promotional activities;
second product line: sales activities are handled exclusively by the parent company.

All products belonging to both the first and second segments are stored at the foreign parent company's warehouse and delivered directly from there to end buyers residing or established in Italy.

The question raised concerned the distinction between the following alternative scenarios:

the permanent establishment is directly involved in the sale of goods and therefore both an intra-Community purchase of products from the parent company and the subsequent resale of the products to end buyers in the country are involved, both transactions being attributable for VAT purposes to the permanent establishment located in Italy;
the sales of the products are considered to be carried out entirely by the parent company to end customers in Italy, as the permanent establishment's involvement is not such as to consider the transactions attributable to it for VAT purposes.

In formulating its decision, the administration initially referred to Article 53 of EU Implementing Regulation No. 282/2011, which highlights that in order for a permanent establishment located in a Member State to be attributed transactions relevant for VAT purposes, it must be 'characterised by a sufficient degree of permanence and an adequate structure in terms of human and technical resources and means of on to enable it to carry out the supply of goods or services in which it participates' (paragraph 1).

In addition, a further requirement must be met, namely that 'the technical or human resources of that permanent establishment [are] used for transactions relating to the supply or provision, before or during the supply or provision' (paragraph 2).

In light of these principles and analysing the various operational activities actually carried out by the permanent establishment with regard to the products of the first segment, it appears that customer relations, marketing activities and after-sales coordination are managed independently, without the need for prior authorisation of prices and discounts. In the opinion of the tax authorities, these elements are sufficient to consider the role of the Italian permanent establishment as qualifying.

Consequently, the supply of goods is to be considered as carried out thanks to the direct intervention of the permanent establishment with its own human and technical resources. Therefore, the burden of fulfilling VAT obligations falls on the permanent establishment, which becomes liable for tax and responsible for tax compliance limited to the goods of the first product line.

For the other transactions described in the ruling, on the other hand, the involvement of the Italian permanent establishment cannot be considered significant, as its activities are limited to technical and logistical support and do not involve direct intervention in the negotiation or conclusion of contracts.

The overall VAT treatment applicable can therefore be summarised as follows:

with regard to the goods in the first segment, an intra-Community purchase transaction from the parent company must be recorded. The tax on intra-Community purchases must be paid by the permanent establishment through the reverse charge mechanism;
the subsequent sale to resident parties is subject to VAT in Italy and must be documented by the permanent establishment issuing an electronic invoice (Article 17, paragraph 4, Presidential Decree 633/1972);
VAT obligations in relation to the goods in the second segment remain with the parent company. However, it is necessary to separate the transactions attributable to the parent company from those of the permanent establishment in the accounts, recording them in separate registers and in different sections of the annual VAT return.