"NEWS July 14, 2016-Economic Statement and payment of compensation for the permanent establishment"
The changes introduced by article 7 of Lgs. 147/2015 ("internationalization") to the determination of income produced in Italy by the companies and commercial entities residing abroad have a significant impact in relation to preparatory accounting that have kept the existing permanent establishments in Italy of foreign firms who perform constituent branch and, indeed, productive business income business on the territory of the Italian State.
The new text of paragraph 1 of article 152 of the tax code provides that "the income of the permanent establishment shall be determined according to the profits and losses related to it," adding that this income is calculated "on the basis of specific economic and financial statements to be drawn up according to the accounting standards required of residents having the same characteristics".
Therefore, the detection of operations attributable to the permanent establishment takes place, according to the new rules, on the basis of specific economic and financial statements; It is not intended, with a view to simplification, the cash flow statement.
The legislature then stated that this accounting statement is prepared according to the accounting standards required of residents "having the same characteristics".
In this regard, we observe first that a first simplification is envisaged, as an exception, in the case of foreign companies that have issued financial instruments disclosed or admitted to trading on regulated markets in any Member State of the European Union, so that such parties that their countries are not required to prepare financial statements in accordance with international accounting standards Ias/Ifrs , should be solely for the purpose of financial reporting of operations of their Italian branch; Therefore, by virtue of this exception, they will prepare a profit and wealth of the permanent establishment and applying the ordinary Italian accounting principles.
Outside of this special circumstance, for most cases, there is the theme correctly identify what the subject having the "same characteristics" to refer to define the correct ways of financial reporting. In fact, this might be the foreign parent company – compared to which, therefore, should discover an equivalent commercial entity-Italian law, deposing the aforementioned content in this sense of the report accompanying the Decree internationalization and also the fact that, in legal terms, the legal entity is a foreign corporation while the permanent establishment is nothing more than an existing business unit in Italy; on the other hand, however, the subject to which refer subject might be the same Italian branch abroad.
Assuming it's a comparison that, in most cases, will take as a reference the Italian accounting principles applicable to the preparation of the financial statements of companies, the operations of the permanent establishment will then in a balance sheet and a profit and loss statement prepared according to these principles; being "cash flow" as being so, should not necessarily be requested to prepare a supplementary note, much less a Directors ' report, since the application of accounting standards is invoked by the legislature for the purpose of establishing the technicalities that they oversee the determination of business income in the tax period subject to Declaration by the permanent establishment, while no call is made to the provisions of the Civil Code relating to financial statements.
Fabio Lad
