Foreign company managed from Italy? Employees and Owners of a Foreign EU Company Working from Italy: Social Security, A1 Certificates and Permanent Establishment Risks
Updated September 14, 2026
A Danish company does not automatically become an Italian company simply because its owners move to Italy.
But if those owners also work for the business from Italy, manage customers from Italy and make the company's decisions from their Italian home, the answer becomes considerably more complex.
Three separate issues should be reviewed:
- social security;
- Italian permanent establishment exposure;
- possible Italian corporate tax residence of the foreign company itself.
The third risk can be more important than the first two.
Where are social security contributions due?
EU Regulation 883/2004 is based on the principle that a worker should normally be subject to the social security legislation of only one Member State.
For employees habitually working in two or more Member States, Article 13 provides that the legislation of the State of residence applies when a substantial part of the employee's activity is performed there.
A 25% threshold is commonly used when assessing whether the activity performed in the State of residence is substantial.
Working entirely from Italy for a Danish company
Consider a Danish shareholder and employee who has lived in Sicily since November 2025 and performs all work from Italy.
There is a strong starting point for the application of Italian social security legislation unless a valid exemption applies.
The fact that the salary is paid by a Danish company does not by itself keep the employee within the Danish social security system.
Working mainly in Italy and two months per year in Denmark
The same principle is relevant where another employee works approximately ten months from Italy and two months physically in Denmark.
Because that person is resident in Italy and performs considerably more than 25% of the activity there, Article 13 normally points toward Italian social security legislation.
An A1 certificate does not allow you to freely choose the cheaper system
The A1 certificate documents the social security legislation that applies.
It is not a menu allowing a company to select Denmark or Italy according to convenience.
For a person habitually working in several Member States, the competent social security authorities must determine the applicable legislation under EU rules.
An A1 is especially important for employees regularly travelling between Italy and Denmark because it provides evidence of the applicable system and helps prevent double contributions.
Important: Denmark is not currently listed among the signatories of the cross-border telework Framework Agreement
A European Framework Agreement can, under specific conditions, allow an employee to remain covered by the social security system of the employer's country when cross-border telework in the country of residence represents less than 50% of working time.
Italy has participated since January 1, 2024.
However, the official list currently maintained by the Belgian Federal Public Service for Social Security does not list Denmark as a signatory.
In any event, an employee working almost entirely from Italy would exceed the Framework Agreement's less-than-50% telework threshold.
Does the Danish employer have to register in Italy?
If Italian social security legislation applies, a foreign employer may have to comply with Italian contribution requirements even without establishing an Italian subsidiary.
Depending on the circumstances, this may involve:
- registration with INPS as a foreign employer;
- Italian payroll processing;
- social security filings;
- contribution payments;
- INAIL analysis and registration where required;
- correction of previous periods;
- A1 procedures.
This should be coordinated with the Danish position to prevent duplicate social security costs.
Does registering with INPS automatically create an Italian permanent establishment?
No.
Social security registration and corporate taxation are different legal questions.
An INPS registration by itself does not automatically mean that the Danish company has an Italian permanent establishment.
But the facts that caused the registration may also be relevant for tax purposes.
Can working from an Italian home create a permanent establishment?
Potentially.
Relevant facts may include:
- whether the Italian home is effectively available to the company as a regular place of business;
- whether core business activities are performed there;
- whether customers are managed from Italy;
- whether contracts are negotiated from Italy;
- whether the Italian-based individuals habitually play the decisive role in concluding contracts;
- whether company management effectively takes place there.
Tax authorities look at what the business actually does, not merely at the registered address appearing in the Danish corporate register.
A bigger issue: could the Danish company itself become an Italian tax resident?
This question can be more significant than permanent establishment exposure.
Under Article 73 of the Italian Income Tax Code, a company may be considered tax resident in Italy when, for most of the tax year, Italy is where its:
- registered office;
- place of effective management;
- or ordinary management principally takes place.
Italian law defines effective management by reference to the continuous and coordinated making of strategic decisions concerning the company as a whole. Ordinary management concerns the continuous and coordinated conduct of the company's day-to-day business.
Consider two spouses who:
- own the Danish company;
- live permanently in Sicily;
- work mainly from Sicily;
- make strategic decisions from Italy;
- manage customers from Italy;
- control the company's banking and commercial activity from Italy.
The important question is no longer only:
“Do we have an Italian permanent establishment?”
It also becomes:
“Is the company still genuinely managed outside Italy?”
That question should be answered before a tax authority answers it for you.
What should be reviewed?
Employees
- residence;
- working days in each country;
- duties;
- employment agreements;
- contributions already paid;
- existing A1 certificates.
Company
- directors;
- board meetings;
- location of strategic decisions;
- banking powers;
- customer contracts;
- negotiation authority;
- office or home-office arrangements;
- employees;
- bookkeeping;
- management procedures.
The payroll and social security solution should be designed together with the international corporate tax position.
Frequently Asked Questions
Does a Danish company need an Italian subsidiary merely because an employee works from Italy?
Not necessarily. A foreign employer may have Italian social security obligations without incorporating an Italian company.
Does INPS registration automatically create a permanent establishment?
No. The two concepts are legally separate.
Can we simply continue paying Danish contributions after moving to Italy?
Not automatically. The applicable legislation must be determined under Regulation 883/2004.
What does the 25% rule mean?
For employees habitually working in more than one Member State, performing a substantial part of the activity in the State of residence can result in that State's legislation applying. The 25% criterion is central to that assessment.
Can we use the European cross-border telework agreement to remain in Danish social security?
Based on the official signatory list currently available, Denmark is not a signatory. In addition, the framework applies only where telework in the State of residence is below 50%.
Can an Italian home office create corporate tax risks?
Yes. Depending on how it is used and what functions are performed there, both permanent establishment and corporate residence questions can arise.
Official sources
INPS guidance on employees working in several EU Member States
Official signatory list for the Cross-Border Telework Framework Agreement
Italian Income Tax Code, Article 73
Foreign company managed from Italy?
International payroll cannot be separated from international taxation when company owners themselves move to Italy.
We can review the Italian tax implications, coordinate the social security and payroll specialists involved and help structure the Italian position before liabilities accumulate.
Dr. Massimo Cavallari
Italian Chartered Accountant with more than 25 years of experience, registered under no. 932/A Padova and Expert Contributor to Il Sole 24 Ore.
Tel. +39 049 613584
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