Italy vs Gulf Shipping & Trading Corporation Ltd Inc, October 2020, Supreme Court, Case No 21693/2020

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The Italian Revenue Agency had notified to Gulf Shipping & Trading Corporation Ltd Inc. several notices of assessment, relating to the tax years 1999 to 2006, contesting undeclared taxable income, having ascertained that the aforesaid company had a permanent establishment in Italy through which it traded in construction materials.

The company had lodged separate appeals against the above tax assessments, which were partially upheld by the Tax Commission, which, in particular, had partially recalculated the taxable income in relation solely to transactions involving the sale of stone materials to Italian clients

The tax authorities appealed the sentence of the court of first instance.

According to the Revenue Agency in regards to “permanent establishment”, what needs to be verified is the fact that, through the fixed place of business, the company based abroad carries out its activity in the Italian territory, i.e. an economically relevant activity for the subject to which it is referable, to be understood, however, in a broad sense, up to including the performance of a service, or, in general, any business activity, provided that it is referable, in fact, to the subject that exercises it. Where it is ascertained that a fixed place of business carries out both preparatory and ancillary activities and activities that may constitute the existence of a permanent establishment, the fixed place of business cannot but be considered a permanent establishment in its entirety

The Supreme Court set aside the judgement of the Tax Commission.

“…in particular the fact that he: issued invoices on behalf of the company; kept documentation in the interest of the company; executed sales contracts, affixing his signature/signature to all invoices; handled relations with domestic banking intermediaries with whom company, foreign and foreign currency current accounts were accessible; paid suppliers by issuing checks drawn on company current accounts but also on accounts in the name of a natural person; gave instructions to banking intermediaries to collect invoices

Moreover, the plurality of activities concretely carried out has not been specifically analyzed, in particular the activity of purchasing on behalf of the subsidiaries and the circumstance that the fees were sent directly to the current accounts opened in Italy and the possible nature of intermediation of the same or the specific financing function carried out, or even, for the purposes of framing the case within the provision of art. 162, paragraph 6, Presidential Decree no. 917/1986, the activity of money reuse;

In particular, these are relevant and decisive facts that were not sufficiently examined by the appeal judge, for the purposes of assessing the nature of the activity carried out and their inclusion in the category of permanent establishment;”


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Italy PE 2020


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