This newsletter examines the permanent establishment risks associated with data centres operated by multinational enterprises with digital infrastructure in Italy. Starting from the Netflix case – where an unmanned network infrastructure was deemed functionally essential to the business conducted in Italy – the analysis covers the Italian tax authorities’ growing focus on co-location, web hosting and cloud providers serving non-resident enterprises, the relevant legal framework (including the “significant and continuous economic presence” concept under Article 162 of the Italian Income Tax Code, as clarified by Supreme Court Judgment No. 33390/2023 and confirmed in the 2025 OECD Commentary update), and the bill approved by the Italian Camera on 24 February 2026, which introduces a statutory definition of data centres without establishing specific permanent establishment rules.

From a practical standpoint, the newsletter highlights the importance of revisiting existing hosting and co-location arrangements, exploring advance engagement procedures with the Italian tax authorities and, where exposure is more significant, considering proactive regularisation – whether through a declared permanent establishment or the incorporation of an Italian subsidiary.

Our Infrastructure, Energy & Ecological Transition Focus Team provides a more detailed analysis of these issues in the document available here.