The tax regime for professionals operating in Italy varies depending on whether they have a ’fixed base’ within the state’s territory – a concept historically understood as requiring sufficient material establishment to demonstrate ‘fixedness’. With Judgment No. 2286 of February 5 2025, the Italian Supreme Court offered a broader interpretation, shifting the focus from the availability of premises to “operational continuity”, thus opening the door to a new framework regarding taxing power and the withholding agent’s role.
The fixed base in the OECD model and Italian bilateral tax treaties
Until the 2000 update of the OECD Model Tax Convention on Income and on Capital, income from independent personal services was governed by Article 14. This provision was later removed to bring such income under articles 5 and 7 (permanent establishment and business profits); the removal of Article 14 reflected the view that the fixed base concept overlapped with that of permanent establishment, making a separate provision unnecessary (Commentary on Article 5, Section 2).
However, this amendment did not eliminate the conceptual distinction between a permanent establishment (for businesses) and a fixed base (for professionals), and Italy has entered a reservation to continue including a separate article for professional services in its tax treaties.
The fixed base clause appears regularly in treaties signed by Italy, yet the text does not define its scope; the rule merely assigns taxing rights to the source state “only if the professional has a fixed base regularly available to him for the performance of his activities”. The lack of a detailed definition – unlike permanent establishment – requires reference to the OECD Commentary on Article 5, which outlines three cumulative criteria:
A specific location – such as an office or a surgery – available, even if not exclusively, to the professional;
A degree of temporal permanence that distinguishes it from a mere occasional presence (normally not less than six to twelve months); and
The actual performance of all, or a significant part of, the activity from that location.
The commentary clarifies that a fixed base does not require the functional autonomy typical of a business; what matters is the territorial connection between the income and the location.
Italy’s treaties consistently state that professional income is taxable in the source state when the taxpayer “habitually has a fixed base” and only “to the extent that” the income is attributable to that base. The deliberately concise wording omits the three conditions above, leaving their application or exclusion to be interpreted case by case.
The notion of fixed base in the Italian framework
The fixed base concept has gradually broadened. Ruling No. 154/E of June 11 2009 defined a fixed base as “an autonomous nexus of legal and tax interests for the performance of independent work activities”.
Ruling No. 53 of January 17 2023 expanded this concept, stating that “determining whether the self-employed individual in question had at their disposal a place that may be considered a ‘fixed base’ in Italy—such as the logistical facilities made available by the client—depends on the non-resident taxpayer’s actual ability to use that location to carry out their independent activity, as well as on the extent of their presence at that location and the specific activities effectively performed there.”
The Italian Supreme Court, in Judgment No. 2116 of January 22 2024, considered a facility with psycho-pedagogical purposes for disadvantaged foreign individuals – regularly managed in Italy by a German self-employed individual receiving remuneration from a foreign association – to constitute a fixed base.
Supreme Court Decision No. 2286/2025
In the judgment under discussion, the Italian Supreme Court takes a further step by stating that “the fixed base is not a permanent establishment, but something less. To qualify as a fixed base, it is sufficient that the activity is carried out with continuity in a centre (or place) where the work is performed consistently, in a way that reflects how the same activity is carried out in the State of residence. It is not necessary for the location to ‘belong’ to the self-employed professional […] but only that it allows them to perform their activity on a continuous basis.”
Moreover, the court affirms that “the provision of personal independent services can occur entirely disconnected from a site, premises, or even a physical centre, and the fixed base can be considered present where there is continuity in the performance of the profession in the other State.”
With this, the court – taking a position at odds with the OECD Model Convention commentary – detaches the notion of a fixed base from material or physical requirements, considering a significant frequency of engagements and substantial economic presence as triggering Italian taxing rights. This new interpretative direction appears to reflect the ‘market-based’ principles explored in the context of digital permanent establishments.
The tax implications of a fixed base
If a fixed base is present, the foreign professional is “equivalent to a resident”, triggering a 20% withholding tax as an advance payment. The foreign professional must then file an Italian tax return, declaring the total income and offsetting the withholding tax against the gross tax liability.
In the absence of a fixed base, a 30% final withholding tax must be applied to the foreign professional, fully satisfying the tax liability. Where a double tax treaty applies, however, the taxing rights of the source state are limited, and the income may not be deemed to have a territorial nexus.
Symmetrically, if an Italian carries out professional activity abroad under a tax treaty, foreign taxes are creditable in Italy only if applied in connection with an activity carried out through a fixed base; otherwise, no tax would be due.
Conclusion: evolutionary trends and impact on withholding taxes
The developments reveal a tension between legal certainty and taxing capacity. The traditional notion of fixed base, based on material indicators, offers predictability and easier enforcement.
The Supreme Court has replaced this framework with one capable of capturing dematerialised professional arrangements (telemedicine, online consulting, itinerant surgeons). However, this approach may increase interpretative uncertainty for:
Italian withholding agents, who must assess the existence of continuous presence – often based on uncodified quantitative elements (days worked, revenue, number of assignments); and
Foreign professionals operating in Italy (and Italian professionals abroad), who may face double taxation if the residence state, adhering to the ‘material’ definition, refuses to grant credit for taxes paid in Italy, viewing them as unduly levied.
If this new interpretation is confirmed, it would be necessary to codify objective interpretative thresholds – such as a minimum number of days – to transform ‘continuity’ into a measurable standard, restoring certainty to stakeholders without relinquishing tax oversight.
An update of treaty clauses would be necessary to prevent divergence between the treaty definition (which lacks specific criteria) and the concept developed in domestic case law from resulting in attribution conflicts. However, such an overhaul would likely take decades.
In the meantime, the prudent approach for withholding agents should be to apply the reduced withholding rate where there is clear proof of establishment; in the absence of such evidence, the 30% withholding remains the lowest-risk option from a sanctions perspective.
As for foreign professionals, the risks include:
A challenge for failure to file tax returns, with possible recovery of taxes (and penalties) that would have exceeded the 30% rate under the progressive scale; and
Denial of tax credit in the country of residence due to a conflict of allocation – an issue that also affects Italian professionals working abroad.
