The importance of the changes to the OECD Commentary in the interpretation of treaties according to the Supreme Court
In its recent Rulings No. 36679 and 36690 lodged on 14 December 2022, the Italian Supreme Court, while noting that the definition of agent permanent establishment contained in Article 5(4) of the Double Taxation Convention between Italy and Switzerland corresponds to the1963 version of the OECD Model, also held that the changes made to the Commentary after the conclusion of the Convention should be taken into account.
In particular, the judges – in light of Italy’s observation that in interpreting the notion of permanent establishment, its own case law cannot be disregarded – concluded by attributing specific relevance to the mere participation in negotiations by an employee of the foreign company.
Italy’s position on the matter remains, on thewhole, contradictory if one considers that within the Multilateral Conventionto Implement Tax Treaty Related Measures to Prevent BEPS (‘MLI’), Italy has made a reservation not to apply in the entirety the provisions of Article 12 ofthe MLI, which deals precisely with the definition of a permanent establishment and has the same content as Article 5(5) of the latest version of the OECD Model (2017).