Italy-Spain Double Taxation Convention: The Fixed Place of Business of a Non-resident Self-employed Worker

Italian Revenue Agency has published the Ruling no. 53 of 17 January 2023 about the activities and income of self-employment provided by a non-resident natural person and the concept of ”fixed base” pursuant to the provisions of the conventions.

In general, pursuant to Article 23, paragraph 1, letter d) of the “TUIR” (Italian consolidating Act on Income tax), income from self-employment deriving from activities carried out in the territory of the State is considered to be produced in the territory of the State. According to the Italian tax system, therefore, the link for the State to be able to attract the aforementioned compensation in its power to tax is determined by the place where the work is carried out or, in other words, only the remuneration paid to non-resident self-employed workers for the work carried out in Italy is taxable in Italy.

The Agreement between Spain and Italy – which prevails over the aforementioned art. 23 – provides that remuneration arising from professional activity is taxable only in the State of residence of the professional, unless that professional usually has a fixed base for the exercise of his activity in the Contracting State from which the remuneration originates. In this case, the income is also taxable in the Contracting State, but only to the extent that it is attributable to this fixed base.

In order to the correct tax treatment of income, it is therefore essential to verify whether or not the professional has had the availability of a fixed base in Italy for the performing his activity. In this regard,  although the double taxation Agreements stipulated by Italy refer, for independent professions, to the expression “fixed base”, they do not delimit its outlines.

According to the case-law (see for example Supreme Court n. 32078/2018), therefore, the fixed base can be equated with Permanent Establishment whose constituent elements are: a) the material and objective one of the fixed place of business and b) the dynamic one of the performing in whole or in part of its activity.

Furthermore, the requirement of ”fixedness” implies that the seat is in a phisical and specific place and has a certain degree of permanence in use (not necessarily for most of the tax period). It may also consist of office premises or room owned by other persons which, however, must be available to the self-employed worker and in which he carries out his activity or part of it.

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