Italy: Taxation for non-resident sports agents The dilemma of permanent establishment

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BY LUCA FERRARI, ALESSIA MURGIA AND MARIO D’ANNA[1]

 

Sports agents play a pivotal role in the modern sports industry, operating within an increasingly globalised market where cross‑border negotiations are the norm. In both the international and Italian contexts, the profession has enhanced in commercial relevance while simultaneously becoming the subject of intensified regulatory intervention and increased scrutiny by tax authorities.

 

Against this backdrop, this article examines a recent criminal judgment of the Court of Milan which, for the first time, articulates clear limits to Italy’s taxing jurisdiction over international sports intermediation activities through a strict interpretation of the permanent establishment. The analysis first outlines the domestic tax framework applicable to fees paid to non‑resident sports agents, with particular attention to the classification of such income as either business or professional and the resulting tax consequences.

 

Subsequently, it examines the notion of permanent establishment under Italian and international tax law, including relevant Organisation for Economic Co-operation and Development’s (“OECD”) guidance, before turning to a detailed assessment of the Milan Court’s reasoning and its far-reaching implications in the industry. The article concludes by placing the judgment within an evolving regulatory landscape and identifying the main issues that remain open for future judicial and legislative developments.

 

Classification of the income earned by non-resident agents

 

Over time, the role of the sports agent has been shaped by numerous legislative interventions within the Italian legal system, progressively redefining its legal and fiscal framework.

 

From a tax standpoint, the main interpretative issue has concerned the classification of the income earned by sports agents, and in particular whether such income should be treated as self-employment income or business income. This distinction is crucial, as it affects both the applicable tax regime and the possible application of withholding taxes to payments made to non-resident agents. Over the past decade, such qualification issue has been addressed and tackled by several court decisions, with diverse outcomes.

 

An initial statutory reference was provided by art. 1(373) of Law No. 205/2017, which defined a sports agent as “a person who, on the basis of a written representation agreement, brings together two or more parties operating within a sport recognised by CONI for the purposes of concluding a professional sports employment contract, transferring such performance, or registering with a professional sports federation”[2].

 

This definition appeared to align the activity of sports agents with that of the “atypical mediator” (a broker operating outside the statutory definition of mediation under art. 1754 of the Italian Civil Code), thereby allowing the related fees to be characterised as business income. Coherently, art. 25-bis of Presidential Decree No. 600/1973, governing commissions for intermediation activities, would apply, providing for a withholding tax rate of 23%, calculated on 50% of the gross commissions. However, for non-resident entities, the application of this regime is conditional upon the existence of a permanent establishment in Italy. In the absence of a permanent establishment, business income generated by foreign entities is not taxable in Italy, in accordance with art. 23(1)(e) of the Italian Income Tax Code (“TUIR”) and the relevant double tax treaties.

 

A shift in perspective appeared to be brought by Legislative Decree No. 37/2021, governing the sports agent profession, which repealed art. 1(373) of Law No. 205/2017 and redefined the role of the sports agent as “a person who, in the performance of a sports representation agreement, brings together two or more parties […] while providing professional services of assistance, consultancy and mediation”. The express reference to assistance and consultancy reinforced the advisory nature of the activity, supporting a different classification of the fees earned, which can no longer be regarded solely as mediation income and may instead qualify as self-employment income.

 

The tax consequences of this alternative classification are substantial. Where the activity is characterised as professional self-employment, fees paid to non-resident agents are subject to a 30% withholding tax on the gross amount, applied as a final tax pursuant to art. 25(2) of Presidential Decree No. 600/1973, subject to any limitations arising under applicable double tax treaties. Conversely, where the activity is characterised as business activity, such fees are not taxable in Italy in the absence of a permanent establishment.

 

In practice, commissions for sports intermediation are typically paid by the clients (sports clubs and players), who may therefore act as withholding agents for Italian tax purposes. In such a case, the Italian client is required to assess, at the time of payment, the correct tax treatment of the fee and to apply the relevant withholding, where applicable. Where the activity is classified as self-employment and the client acts as a withholding agent for Italian tax purposes, the client must apply 30% withholding tax on the gross commission and is directly responsible vis-à-vis the Italian tax authorities for its correct application, including potential penalties in the event of under-withholding or failure to withhold.

 

A different scenario arises where the client is an Italian‑resident football player whose activity does not qualify as entrepreneurial and who is therefore not required to act as a withholding agent on the fees paid to a non‑resident agent. In such a case, subject to the Italian source‑of‑income rules being satisfied and insofar as the applicable double tax treaty does not provide protection from Italian taxation, the non‑resident agent may be required to file an Italian tax return directly and pay Italian personal income tax on the relevant income.

 

By contrast, where the activity is classified as business income and no permanent establishment exists in Italy, no withholding obligation arises, and the payment may be made gross without any Italian tax burden at source.

 

In this regard, in the recent ruling No. 136 of 6 March 2026, the Tax Court (Corte di Giustizia Tributaria) of Cagliari[3]  addressed the issue concerning a factual scenario governed by ratione temporis in art. 1(373) of Law No. 205/2017. The Court upheld that where the activity of a sports agent is limited to bringing parties together and defining the terms of an agreement, qualifies as “atypical mediation”, with the resulting proceeds to be treated as business income. Conversely, it falls upon the tax authorities to demonstrate the predominance of a qualified professional advisory component.

 

At the same time, such ruling acknowledged that the new framework introduced by Legislative Decree No. 37/2021 outlines a more complex profile of sports agents, placing greater emphasis on the professional/advisory dimension of the activity.

 

In this context, a potential structural shift in the applicable tax regime may emerge. Should the classification of sports agents’ activities as self-employment income be established, fees paid to non-resident agents could be subject to 30% withholding tax, resulting in a significantly higher tax burden than under the previous interpretative approach, whereby fees paid to foreign companies were generally not taxable in Italy in the absence of a permanent establishment.

 

In any event, the Tax Court (Corte di Giustizia Tributaria) of Cagliari did not definitively endorse either classification but merely indicated that the new legislative framework may offer interpretative guidance. In practice, the tax treatment continues to depend on the nature of the services effectively carried out, case by case, with the existence – or absence – of a permanent establishment remaining a key factor where the agent’s services are categorised (predominantly) as intermediation.

 

The concept of permanent establishment under Italian and international tax law

 

In this context, determining the tax treatment applicable to a non-resident sports agent’s commission requires assessing whether the activities carried out in Italy on behalf of a foreign entity may give rise to PE.

 

Under Italian tax rules, broadly aligned with art. 5 of OECD Model Tax Convention and the related OECD commentary (“Commentary”), a non-resident entity is deemed to have a permanent establishment in Italy where one of the following alternative conditions is met.

 

–  A permanent establishment may arise where the foreign entity carries out its business activity in Italy through a fixed place of business (“Fixed Place of Business”). This requires the simultaneous presence of four cumulative elements:

 

    1  the existence of a place of business;

    2  a sufficient degree of permanence, both from a geographical and temporal perspective;

    3  the availability of such place to the foreign enterprise; and

    4  the carrying on of the business activity through that place on a habitual basis.

 

–  A permanent establishment may arise in the absence of a physical presence where the foreign entity operates in Italy through a dependent agent (“Dependent Agent”). This occurs where a person habitually acts in Italy on behalf of the foreign entity and is authorised to conclude contracts in its name or plays the principal role in the negotiation and conclusion of contracts that are routinely finalised without material modification by the enterprise.

 

Conversely, no Dependent Agent can be assumed where the agent qualifies as independent, both from a legal and economic perspective, and acts in the ordinary course of its business. However, where the agent acts exclusively or almost exclusively on behalf of one or more closely related enterprises, such independence is generally excluded.

 

Recent developments at OECD level have further refined the interpretation of the concept of PE. In particular, the 2025 update to the OECD Model Tax Convention (“2025 Update”) introduces, for the first time, a structured framework for assessing whether remote work performed from a home office (or other private location) may give rise to a Fixed Place of Business.

 

According to the revised Commentary, two cumulative criteria must be satisfied in order for a home-office permanent establishment to exist.

 

1  A temporal criterion: a permanent establishment will generally not arise where the individual performs remote work for less than 50% of their total working time over a twelve-month period. The assessment must be based on actual working patterns rather than formal contractual arrangements.

 

2  A functional criterion: even where the temporal threshold is met, a permanent establishment arises only if the individual’s presence in the foreign jurisdiction is driven by business-related reasons that facilitate the activities of the enterprise. This requires a clear link between the individual’s activity in that jurisdiction and the core business operations of the enterprise.

 

Importantly, the 2025 Update also clarifies that the traditional “availability” requirement – namely the need for the enterprise to have full access to the premises – plays a less decisive role than in the past. Limited access to a home office does not, in itself, exclude the existence of a permanent establishment where the other criteria are satisfied.

 

At the same time, the OECD specifies that certain situations do not constitute sufficient business reasons to trigger a permanent establishment, such as remote work arrangements driven primarily by personal convenience, cost-saving policies, or the mere presence of clients or business partners in the jurisdiction.

 

It should be noted, however, that these clarifications apply exclusively to the Fixed Place of Business and do not alter the criteria governing the Dependent Agent qualification.

 

The Milan Court’s judgment on permanent establishment in sports intermediation

 

Against this legal background, a recent decision of the criminal Court of Milan provides a concrete application of these principles, offering important guidance on how the notion of a permanent establishment should be assessed in the context of international sports intermediation. Indeed, for the first time, an Italian Court has clearly delineated the boundary between international sports intermediation activities and domestic tax obligations, providing sound guidance on the conditions required to trigger a permanent establishment in Italy.

 

The case arose from criminal proceedings brought under art. 5 of Legislative Decree No. 74/2000, wherein the prosecution alleged that several foreign agencies, and their directors, had failed to submit tax returns in Italy, which were assumed to be due in the light of the existence of a “hidden” permanent establishment within the Italian territory. According to the prosecution, the agents’ extensive involvement in the Italian football market – including the negotiation and conclusion of player transfer agreements, employment contracts and image rights arrangements with Italian clubs – was sufficient to give rise to a permanent establishment, with the resulting income being taxable in Italy pursuant to art. 23 of the TUIR.

 

The Court decisively rejected this approach, adopting a substance-over-form analysis focused on the effective and continuous presence in Italy and the territory where the value-generating activities actually took place.

 

In this respect, the Court added significant weight to the lack of a permanent territorial tie to Italy. In particular, it found that the agents:

 

1    did not have offices or organisational structures in Italy;

2    did not employ personnel based in Italy; and

3    spent only limited and non‑continuous periods of time in the country.

 

On this basis, the Court excluded the existence of the required habitual presence, emphasising that merely being in Italy for meetings or negotiations does not, in itself, create a stable economic link to the Italian territory.

 

A second key aspect of the decision concerned the verification of the places where such contracts were concluded. Aligning with OECD principles, the Court clarified that the territory where a contract is formally signed is not decisive. Rather, the relevant criterion is where the core negotiating activity, that is, the phase of the transaction that generates economic value, is actually carried out.

 

The evidence showed that:

 

1    negotiations were conducted across multiple jurisdictions;

2    key discussions and decisions often occurred outside Italy; and

3    the signing of contracts in Italy represented merely the final step of a broader and international negotiation process.

 

Accordingly, the Court concluded that the contracts could not be considered as “concluded in Italy” simply since they were physically executed there.

 

The Court also stressed the inherently international nature of sports intermediation, acknowledging that the activity of sports agents:

 

1    is not fixed territorially;

2    involves continuous travel among different countries; and

3    typically involves cross-border negotiations among multiple stakeholders.

 

This element further weakened the prosecution’s argument that the agents’ activities were effectively carried out in Italy through a permanent organisation.

 

In light of these factors, the Court held that the factual elements relied upon by the prosecution were insufficient to demonstrate the existence of a permanent establishment in Italy. As a result, the underlying assumption of the criminal charge – namely the existence of a tax obligation in Italy – was not met, leading to the acquittal of the defendants on the basis that “the [criminal] fact does not exist” (il fatto non sussiste).

 

An evolving legal framework: future perspectives

 

The regulatory and case-law framework outlined above appears to reflect a broader and evolving trend, progressively shaping with greater clarity the tax treatment applicable to both resident and non-resident sports agents. This is hardly surprising, considering that it is a relatively “young” profession which, for many years, operated in a largely unregulated environment.

 

This is somewhat of a transitional and, to some extent, exploratory phase, wherein the tax and legal framework governing the profession is still being defined. In this respect, it is worth noting that the recent Italian Prime Ministerial Decree No. 218/2025, published on 19 January 2026 (“Decree”), introduced an important clarification regarding such Italian tax framework of the profession.

 

In particular, art. 15 para. 8 of the Decree confirms that the newly introduced domiciliazione regime – which allows non‑resident sports agents to operate in Italy for up to six months per calendar year through cooperation with an Italian-licensed agent registered in the Italian National Register – does not, in itself, give rise to a permanent establishment in Italy. This legislative clarification significantly strengthens the position of non‑resident sports agents operating in Italy under such regime, effectively providing a clear protective framework in relation to this specific connecting factor and helping to reduce legal uncertainty in this area.

 

At the same time, the Decree does not rule out the possibility that a sports agent may still be considered to have a permanent establishment in Italy. It merely clarifies that such a conclusion cannot be based solely on the existence of a domiciliazione relationship. In the absence of specific interpretative guidance on this new provision from the Italian Tax Authorities, the assessment of the existence of a permanent establishment will, therefore, continue to be based on a comprehensive analysis of the relevant factual circumstances, in line with the approach adopted by the Court of Milan in the case discussed above. Conversely, the presence in Italy of an office or constant collaboration with local scouts or agents, who are economically dependent upon the foreign agent or agency, will continue to be regarded as constituting a permanent establishment.