Other types of local units:
Construction site and warehouse

In addition to the representative office, other types of local units of the foreign company may consist of a construction site or a warehouse.
In this case too, these are entities without organizational and decision-making independence, having to limit themselves to performing support activities for the benefit of the non-resident company.

The installation of a construction site in Italy by a foreign company must be also considered, among other things, in light of Art. 5 of the OECD Agreement to safeguard against double taxation,which establishes that a construction, assembly or installation site is akin to a “Permanent Establishment”, provided that the site remains in place for more than 12 months, with consequences that will be discussed below in the Secondary Office section. The Italian legislation, however, is more restrictive; indeed Art. 162 of the TUIR (Consolidated Tax Act) establishes that the construction site is considered a “Permanent Establishment” if it is operational for more than 3 months. Each construction site of the foreign company has its own independent duration; therefore, the different durations of each individual construction sites are not cumulated, unless they constitute a single unitary complex. In the event that the foreign company also relies on the work of subcontractors, the duration of the construction site must also include the period of activity of the latter.

When these time limits are exceeded, therefore, the rules of the “local unit” discussed above for the representative office are no longer applicable; on the contrary, the status is now akin to a “Permanent Establishment”, whose practical implications will be discussed a little later below.

Construction sites in Italy that are staffed by employees sent by the foreign company from abroad, are subject to the legislation on transnational posting of workers, as well as to the appointment of a dedicated point of contact (POC) and to compliance with all workers’ health and safety requirements.

As it pertains to a depot or a warehouse in Italy used for the storage of goods belonging to the foreign company, the aforementioned Art. 5 of the OECD Convention in matter of double taxation, and Art. 162 of the TUIR (Consolidated Tax Law), provide that the availability of goods or merchandise belonging to a foreign company stored in Italy for the sole purpose of storage, display or delivery does not constitute a “Permanent Establishment”. It is possible to posit that for a warehouse to be a “local unit”, and, therefore, subject to the same rules discussed above for the representative office, it must engender “a cost” for the foreign company, rather than being just a source direct income for it. Therefore, any additional activity performed in Italy can lead to the presumption of the existence of a “Permanent Establishment”, with consequences that, as mentioned, will be examined later.