Tax Treaty Case Law around the Globe 2018
1. Aufl. 2019
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S. 107Chapter 10 Italy: The Fragmented Road Transportation Activity Case
Guglielmo Maisto and Paolo Arginelli
10.1. Introduction
The decision of the Supreme Court (Corte Suprema di Cassazione) no. 4576/2017, rendered on 20 December 2016 (and lodged at the registry of the Court on 22 February 2017), provides an interesting case to reflect on how far tax authorities may go in inferring the existence of a permanent establishment (PE) from indirect evidence. It also puts the spotlight on the difficulties connected with the application of article 7 of OECD Model-based tax treaties in cases where the assessment of the existence of a PE is based only on indirect evidence.
10.2. Facts of the case
The case concerns the interpretation and application of article 5(1) of the France-Italy Income and Capital Tax Treaty (1989) (hereinafter the tax treaty) and, more specifically, the existence in Italy of a PE of a French resident company (hereinafter “FraCo” or “taxpayer”) for the tax year 2003.
FraCo was a French company with its legal seat in Mentone (a small town situated in France, on the Italian border), active in the road transportation business. The majority shareholder and director of FraCo, Mr X, wa...