Going Remote-Only Doesn't Reduce Your Permanent-Establishment Risk in Italy. It Can Raise It.
Published August 2026 · Facts verified as of August 12th, 2026. Tax thresholds and treaty interpretation in this area are evolving — this article is updated as they do.
There is a plan that nearly every US company considering Italy arrives at on its own, because it sounds prudent: we won't open an entity yet. We'll hire one good person on the ground — a senior salesperson, a country lead — let them work from home, and see if the market is real before we commit.
The logic rests on a single assumption: no office, no entity, no taxable presence. Keep the footprint invisible and Italian corporate tax can't reach you.
That assumption is wrong, and it has been getting more wrong. The trigger for taxable presence in Italy was never the office. It is the people and what they do — and the deliberate remote-first market entry, done casually, concentrates risk in exactly the profile of person these companies hire first. Here is the mechanism, precisely.
What a permanent establishment actually is
A permanent establishment (PE) — a stabile organizzazione, in Italian law — is the threshold at which a foreign company's activity in Italy becomes taxable there. Cross it, and Italy can tax the profits attributable to the Italian activity: corporate income tax (IRES, currently 24%) plus the regional tax (IRAP), with registration, filing, and — if the establishment is found retroactively in an audit — back taxes, penalties, and interest for every year it existed unnoticed.
The concept lives in Article 162 of Italy's income tax code and in Article 5 of the US–Italy tax treaty, and it has two doors. The first is the one everyone knows: a fixed place of business — an office, a branch, a workshop — through which the business is carried on. This is the door remote-first companies believe they've locked.
The second door has no office in it at all. A dependent agent creates a permanent establishment when a person in Italy habitually concludes contracts in the company's name — or, under the broadened standard Italy adopted in its 2018 reform, habitually plays the principal role leading to contracts that the company then routinely approves without material modification. The contracts generally have to be for the company's own business, which is why the risk concentrates in sales and commercial roles. But the boundary is a matter of degree, not a clean carve-out: a partnership or business-development role that feeds directly into Italian revenue is not automatically outside the analysis, even when the person never signs anything and the revenue arrives through some other channel. Bottom line is that no premises are required. One person, a laptop, and a pattern of deal-making is enough.
Read that against the job description of a remote country manager or senior sales hire — someone hired precisely to find Italian customers, run the negotiations, and bring deals to signature — and the problem comes into focus. The company avoided the office because it thought the office was the trigger. It then hired the trigger.
The home office door didn't stay locked either
For years, whether an employee's home could count as a fixed place of business of the employer was genuinely unsettled, and companies took comfort in the ambiguity. That comfort expired on November 19, 2025, when the OECD published its first comprehensive update to the Model Tax Convention commentary since 2017 — with the centerpiece being a new framework for exactly this question.
The framework has two steps. First, a working-time benchmark: if an individual works from home in a country for less than 50% of their total working time over a twelve-month period, the home is generally not a place of business of the enterprise. Second, where the 50% threshold is met, the analysis turns on whether there is a commercial reason for the person's presence in that country — a business-driven link between their location and the company's activity there, the paradigm case being that they are there to engage with the company's customers or suppliers in that market.
Notice what this does. For the accidental cases — the employee who moved to Italy for personal reasons and happens to do back-office work for a US employer, the executive spending a few remote weeks a year near Lake Como — the new framework is genuinely reassuring: below the threshold, or above it with no commercial link to Italy, no fixed place of business arises. The OECD is explicit that remote work adopted merely to save the company office costs is not a commercial reason.
But the deliberate market-entry hire fails both prongs by design. That person works from their Italian home essentially 100% of the time, and the commercial reason for their presence in Italy is the entire point of the role — they were hired because they are in Italy, to serve Italian customers. The OECD's own worked examples reach the conclusion directly: an employee working at least half their time from home in a state, present there for the commercial purpose of serving the company's customers in that state, constitutes a fixed place of business of the enterprise absent facts showing otherwise. The new guidance, in other words, drew a clean line between incidental remote work and remote market entry — and put the second on the wrong side of it, through both doors at once.
Two qualifications keep this from being a doomsday claim. Whether a permanent establishment (PE) exists is fact-specific, and reasonable positions can be taken; nothing here decides your case. And even where one exists, what Italy can tax is the profit attributable to the Italian activity — for a single salesperson in a young market, often a modest figure. The reason this still matters is timing. A permanent establishment isn't created by an audit; it exists from the moment the facts do, and the audit is merely when someone notices. By then you are looking at several undeclared years with back taxes, penalties, and interest — and a modest annual figure multiplied across those years, defended without documentation, is how a small exposure becomes an expensive one.
Two features of the Italian context sharpen that timing point. The first is technical: the governing text for a US company is the US–Italy treaty, and OECD commentary interprets rather than amends it — so nothing above is automatically binding in an Italian dispute. But Italian authorities and courts lean heavily on that commentary, which is why it matters anyway. The second is cultural, and it is the one that decides cases: Italian enforcement in this area is substance-over-form. The stabile organizzazione occulta — the hidden permanent establishment, reconstructed in an audit from what people in Italy were actually doing — is an established genre of Italian tax litigation, and it has caught companies far more sophisticated than a first-time market entrant.
Why remote-only can be the riskier structure
Here is the counterintuitive core, stated plainly. A company that opens an Italian SRL has a bounded, priced, deliberately chosen exposure: the subsidiary pays Italian tax on its own profits, employment runs through Italian payroll, and the boundary between the Italian activity and the US parent is documented from day one. The questions have answers because someone asked them.
The remote-only company has often not eliminated that exposure — it has un-examined it. If its person in Italy constitutes a permanent establishment, the Italian tax liability exists anyway; it is simply unregistered, unfiled, and accruing penalties, waiting to be discovered years later with the worst possible facts: no documentation, no profit-attribution analysis, no defense prepared. The entity route caps the downside. The casual remote route leaves it open. "No entity" was supposed to mean "no exposure"; what it actually delivered was "no visibility."
And the tax question is not even the whole bill. An employee physically working in Italy generally brings Italian employment law with them regardless of PE status — social security contributions, the applicable collective agreement (CCNL) operating as a minimum standard, Italy's smart-working framework — obligations that attach to where the work is performed, not to where the employer is incorporated. These are not prospective-only. Unpaid social contributions are recoverable for the periods worked, with penalties and interest; shortfalls against the applicable CCNL — wages, the thirteenth month, severance accruals — can be claimed by the employee, and often are, at exactly the moment the relationship ends badly. Companies that discover the PE question late usually discover this second bill at the same time.
What this means in practice — not "don't hire remotely"
None of this argues against entering Italy without an entity. Remote-first entry is often the right call — it is frequently the model we recommend, and there are compliant structures for it, from employer-of-record arrangements to direct foreign-employer registration for payroll and social security. The argument is narrower and more useful: the footprint decision is a decision, and the permanent-establishment analysis belongs before the first hire, not after the first audit letter.
Plenty of US companies employ people in Italy without creating a permanent establishment. Broadly, they do one of three things. They keep the role outside the dependent-agent test — the person supports, demonstrates, and services, but does not hold authority to conclude contracts and does not habitually drive them to a conclusion the US side merely rubber-stamps; negotiation and approval genuinely sit in the US, and the paperwork reflects how the work is actually done. That last clause is the whole difficulty: a job description written to avoid the test, describing a role that in practice does something else, is precisely what substance-over-form enforcement is designed to find — and what an auditor reconstructing your Italian activity from emails and calendars will find first. Alternatively, companies who want to avoid PE keep the person's Italian presence below the thresholds that make a home a fixed place of business, which is realistic for occasional or personally-motivated remote work but rarely for a hire made because the market is Italian. Or, at last, they accept the footprint and structure it properly — an employer of record, or direct registration as a foreign employer for payroll and social security — so the employment obligations are met on a declared basis and the tax position is examined rather than assumed.
Note what all three have in common: they are choices made before the hire, not defenses assembled afterward. The dependent-agent question turns on facts you get to shape at the start and merely inherit later. And one reframe dissolves the dilemma more often than any structuring trick: your first Italian-market hire does not have to be an Italian-resident hire. A bilingual, culturally fluent person selling into Italy from the US triggers none of the above — and for the validation phase most companies are actually in, covers most of what the role exists to do.
The companies that get Italy wrong on this point almost never chose the risk. They chose a hire, reasonably, and never learned that the hire was also a tax decision. Knowing that it is — that is most of the protection.
Where we come in. This is the decision we help US companies make before it makes itself. We work through what the Italian role should actually be — what it does, what authority it carries, and how that maps onto the tests above — and what a remote, light, or established footprint would each mean for you in cost, speed, and exposure. The determinations themselves belong with specialists, and we bring in the right ones: Italian tax counsel for the permanent-establishment position, an employment specialist for the CCNL and payroll questions, and my father, an Italian attorney whose work spans international business and contract law as well as property, citizenship by descent, and relocation for foreigners moving to Italy, for the legal structuring. What we add is the thing that's hardest to buy piecemeal — someone who speaks both languages and both business cultures, holds the whole decision in view, and makes sure the questions get asked in the right order, before the hire rather than after the audit.
This article is orientation, not tax or legal advice, and no article can assess your company's permanent-establishment position — that is a fact-specific determination under the US–Italy treaty that belongs with qualified tax counsel. At Galanti Bridge we help US companies design their Italian footprint deliberately — remote, light, or established — and we work alongside an Italian attorney and the right Italian specialists for the determinations that require them. If you're planning your first hire into the Italian market, that conversation is what our Entering Italy and Setting Up in Italy services are for.