The Italian budget law 2023 has introduced new tax rules concerning the investment funds industry which provide certainty as to whether the activities of an investment fund manager could give rise to a permanent establishment in Italy for a non-Italian resident fund or its investors.

Cross-border fund investments often require the Manager to carry out managerial activities in the jurisdiction where the target company is located. In such cases, there is a risk that local tax authorities may argue that the Manager's activities trigger the threshold for a permanent establishment  to exist. Where this is so, income attributable to the permanent establishment  will be subject to local tax, resulting in double taxation.