Compliance of withholding agents for a foreign non-resident entity

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The Italian Revenue Agency further clarifies the compliance of withholding agents for a foreign non-resident entity.

The Italian Revenue Agency further clarifies the compliance of withholding agents for a foreign non-resident entity.

With the reply to Question No. 297 published on 27 April 2021, the Italian Revenue Agency has provided clarifications regarding the application of withholding tax as advance payment on sums to be paid to the employee of a foreign company working in Italy as a withholding agent, pursuant to art. 23, D.P.R. n. 600/1973.

As the Italian Revenue Agency has clarified, an Italian representative office of a non-resident company does not constitute a permanent business establishment in Italy of the company itself within the meaning of Article 162 of the TUIR and of the Treaty concluded between Italy and a foreign State (in this case France) and therefore cannot qualify as a withholding agent and it is not required to make deductions from the employment income.

It follows that non-resident companies and entities become withholding agents only when they have a permanent business establishment in Italy (Circular of the Ministry of Finance no. 326/1997).

According to the Italian Revenue Agency’s reply, the Representative Office would be able to operate the withholding tax on a voluntary and prudential basis. In this case, all formal and substantive requirements should be observed (Principle of Law n. 8/2019), such as the preparation of the so-called Certificazione Unica, the submission of the Modello 770, etc.

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