Establishing a business in Italy
A Q&A guide to establishing a business in Italy.
This Q&A gives an overview of the key issues in establishing a business in Italy, including an introduction to the legal system; the available business vehicles and their applicable formalities; corporate governance structures and requirements; foreign investment incentives and restrictions; currency regulations; and tax and employment issues.
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This article is part of the Global guide to establishing a business worldwide. For a full list of contents, please visit www.practicallaw.com/ebi-mjg.
The main types of Italian company (società di capitali) are the:
Joint stock company (Società per azioni) (SpA). The minimum corporate capital was recently reduced from EUR120,000 to EUR50,000, subject to higher capital requirements for "regulated" companies (for example, banks, insurance companies, among others). The corporate capital is divided into shares, which are commonly embodied in share certificates and are assignable through endorsement. Share certificates can also be "dematerialised" (that is, consist only of an electronic entry in an electronic register, as is the case for listed shares) and Italian law allows for "non-issued" shares (not embodied in a paper certificate nor in an electronic entry). Only SpA can be listed and issue bonds and/or hybrid financial instruments. Different rules apply depending on whether the shares are listed, widely held by the public, or held by few shareholders. Three different corporate governance systems can be selected by the shareholders: the traditional Latin system, the two-tier system and the one-tier system (see Question 24).
Limited liability company (Società a responsabilità limitata) (Srl). The minimum corporate capital can be as low as EUR1 but when the capital is below EUR10,000 special rules and restrictions apply. The capital is divided into quotas, which are not embodied in certificates and can be assigned only through a notarised deed. The Srl has a more streamlined (and flexible) corporate structure than the SpA. However, there are limitations which are peculiar to the Srl (including minority quotaholders' special withdrawal rights and majority quotaholders' potential joint liability with directors). The Srl cannot issue bonds, although it can issue debentures, under certain limitations. Italian law also allows for a simplified form of Srl (società a responsabilità limitata semplificata) (Srls), whose quotaholders can only be natural persons.
Company limited by shares (Società in accomandita per azioni)(SapA). This is a less common corporate type which is characterised by a hybrid nature; SapAs have both limited liability shareholders and unlimited liability shareholders.
The Italian types of partnerships (società di persone) are:
Simple partnership (Società semplice) (Ss).
General partnership (Società in nome collettivo) (Snc).
Limited partnership (Società in accomandita semplice) (Sas).
The members of partnerships are jointly liable with their partnership and do not benefit from limited liability for the partnership's business (except for limited partners of Sas). Partnerships do not require any minimum capital and are characterised by the central role played by their partners.
The main business vehicles are companies and partnerships, but companies are more commonly used than partnerships (except for small businesses) as, in principle, a company's shareholders are not jointly liable for the company's obligations and responsibilities.
Other forms of business vehicle that can be used in Italy are:
Investment funds, which are highly regulated by Italian law and are subject to supervision by the Bank of Italy.
Contractual consortia and corporated consortia (società corsortili).
The SE (societas europaea) is not common in Italy. Certain SEs have been created through mergers of Italian companies with foreign companies, but almost invariably the SE surviving from the merger has its registered office outside of Italy.
Establishing a presence from abroad
An overseas company can trade directly in Italy through a franchise, agency or distribution agreement, or an Italian branch. No trading activity can be carried out through a representative office. See Question 4.
There are no licensing requirements for overseas companies wishing to enter into a franchise, agency or distribution agreement in Italy. An Italian branch may face licensing requirements if it conducts regulated activities. From a labour law standpoint, an Italian branch is subject to the same social security obligations and formalities as other employers.
Foreign companies usually set-up an Italian branch or incorporate an Italian company.
The most common options for foreign companies establishing a business presence in Italy are:
Appointment of an agent, distributor or franchisee. The principal of the agent, distributor or franchisee does not have legal presence in Italy and the vast majority of the legal risks are borne by the agent/distributor/franchisee. Under Italian law, special rules apply to agents and franchisees.
Opening of a representative office. This is the simplest business structure since:
it does not require a high budget to be established; and
no preliminary filings or authorisations are required in order to start its activities; the opening of the representative office only needs to be communicated to the Register of Enterprises (RoE).
However, a representative office can only operate for promotional and networking purposes. No trading or productive activities are authorised and the local manager cannot enter into agreements in the name and on behalf of the parent. The representative office is not a separate legal entity and therefore is not subject to corporate income tax.
Establishment of a branch. A branch is not a separate legal entity and does not have a separate legal personality. A branch does not have its own corporate bodies and its debts are borne by the parent company. Unlike a representative office, a branch can carry on a commercial activity and the branch manager can sign for the parent company. The establishment of a branch requires a resolution of the competent parent company's corporate body, which must be notarised and filed with the RoE. After establishment, certain disclosures must be made with respect to the financial statements of the parent company. A branch manager must obtain an Italian tax code and the branch must apply for its own tax code and VAT number. Branches of foreign companies carrying on a commercial activity are subject to the same corporate taxes as companies in respect of income earned in Italy. Remittance of profits from Italy to the foreign parent company is generally not subject to tax in Italy.
Incorporation of a subsidiary. The incorporation of a subsidiary as an autonomous Italian legal entity requires:
notarisation of its deed of incorporation;
subscription and payment of the corporate capital;
appointment of the directors, statutory auditors and auditing firm; and
registration with the RoE.
The directors and shareholders/quotaholders must apply for a tax code. The foreign parent of the Italian subsidiary is not liable for the company's debts and obligations (except for the special rules for sole-shareholder companies and responsibilities originated from direction and co-ordination). In principle, the bankruptcy of the Italian subsidiary does not trigger the bankruptcy of its shareholders.
See Question 8.
Under Italian law, partnerships are incorporated through deed. The partners can partially derogate from the statutory partnership requirements. The articles of association and bye-laws (deed of incorporation) must be registered with the Register of Enterprises (RoE).
Consortia are created by contract and registration with the RoE.
Partnerships are generally treated as transparent entities from a tax perspective. Accordingly, income derived by Italian partnerships is attributed pro-quota to each partner. Profit distributions from the Italian partnership to its partners are disregarded for income tax purposes.
Italian partnerships are generally required to:
Comply with accounting and bookkeeping duties.
File an annual income tax return showing income attributed to the partners.
Act as withholding agents.
Several forms of joint venture are contemplated by Italian law. The basic distinction is between:
Contractual joint ventures (forms of co-operation based on contracts among the venturers without creation of a new legal entity).
Incorporated joint venture (new legal entities created by the venturers).
Contractual joint venture may have the characteristics of:
Temporary groups of enterprises (associazioni temporanee d' imprese).
Profit participation agreements (associazioni in partecipazione).
Network agreements (distretti produttivi, catene di fornitura and reti d'impresa).
Joint venture companies can be incorporated as incorporated consortia, partnerships or, more frequently, companies.
Italian law does not regulate trusts but, following the ratification of the HCCH Convention on the Law Applicable to Trusts and on their Recognition 1985 (effective from 1 January 1992), it recognises the "internal trust" (trusts where the involved parties are Italians and the relevant assets are located in Italy but the trust agreement is governed by a foreign law).
From a tax perspective, trusts are in principle treated as taxable persons for corporate income tax (IRES) purposes and the applicable regimes vary according to whether they are:
Transparent trusts (trasparenti), whose beneficiaries under the trust deed are clearly identified and have a right to receive (pro-quota) the income derived by the trusts.
Opaque trusts (opachi) whose beneficiaries are not directly identified in the trust deed.
Mixed trusts (misti) having the characteristics of both transparent trusts and opaque trusts.
The answers to the following questions relate to private Italian companies.
Forming a private company
Tailor-made or shelf company
The Italian limited liability company (Srl) is characterised by a greater flexibility compared to a joint stock company (SpA), and its quotaholders have wider autonomy in shaping the bye-laws. However, regulation of the Srl can sometimes be vague and there are certain specific disadvantages, for example:
A greater number of withdrawal rights for minority shareholders.
Difficulty in making reserved capital increases, limitations on debentures.
Potential joint liability of directors and quotaholders.
In many transactions, the company's bye-laws are tailored to reflect the underlying shareholders' agreements to achieve specific enforcement remedies in case of breach.
Shelf companies can be used in Italy, but, due to incorporation and management costs, companies are usually incorporated when needed.
The main steps required for the incorporation of an Italian company subsidiary are:
Drafting of a notarised deed of incorporation.
Subscription and payment of the corporate capital.
Appointment of the directors and, in certain cases, statutory auditors and auditing firm.
Filing and registration with the competent Register of Enterprises (RoE).
Directors and shareholders/quotaholders must apply for an Italian tax code. The company (and its directors) must state whether the company has a sole share/quotaholder and whether it is subject to direction and co-ordination by a parent.
The incorporation is completed on registration with the RoE, when the company legally comes to existence as a separate legal entity. Any action before registration implies the personal liability of those who have acted and/or that of the shareholders.
Fees are paid in connection with the incorporation to the notary and the RoE.
The notary will not legalise the deed of incorporation unless the corporate capital is subscribed and paid-in in the minimum legal proportion.
The deed of incorporation must include the following:
Registered office and local branches.
Information on the share/quotaholders and their stake in the company.
Amount of the corporate capital.
Information on the shares.
Rules concerning the management.
Information on the directors and, if any, the statutory auditors and the auditing firm and their appointment.
Value attributed to the in-kind contributed credits and/or assets.
Rules on distributions.
Term of office of directors, statutory auditors and auditing firm.
Duration of the company.
Amount of expenses necessary for incorporation.
The deed of incorporation is publicly available and any amendments to it must be notarised and filed with the RoE.
The company must also open accounting and corporate books and records, and make a filing with the VAT office.
Shareholders' agreements may be executed among the share/quotaholders. They are not publicly available save for shareholders' agreements concerning issuers of financial instruments that are widely held by the public.
Italian companies must annually approve their financial statements (which are then filed with the Register of Enterprises) (RoE)) and keep corporate, accounting and tax books and records.
Italian branches of non-Italian resident entities that qualify as permanent establishments (stabile organizzazione) for Italian tax purposes are not treated differently from Italian resident subsidiaries.
Each non-Italian resident entity must, with specific regard to its Italian branch:
Keep accounting and other related books for Italian tax purposes (including, drawing up a specific profit and loss account for income tax purposes and keeping VAT registers).
Comply with periodic reporting duties for income tax, VAT and IRAP purposes.
Carry out certain filings and deposits with the Italian RoE.
Italian companies must be registered with the competent Register of Enterprises (RoE).
The companies' correspondence and records must contain certain information, including:
The registered office.
RoE where the company is registered.
Paid-in corporate capital.
Whether the company is held by a sole shareholder and/or is subject to direction and co-ordination by a parent.
This information must also appear on the company's website.
The yearly financial statements, along with the documentation required by law, as well as certain corporate resolutions, must be filed with the RoE and are publicly available.
Several categories of contracts do not require particular formalities. In certain cases, a written agreement or deed is necessary or may be required for validity or enforceability.
Agreements and deeds must be executed by a director or an authorised attorney. Usually, the bye-laws provide that representative powers are granted to the chairman of the board and/or to the executive directors. The chairman and the executive directors can sub-delegate such powers to attorneys by means of board resolutions or powers-of-attorney. Powers-of-attorney to sign deeds must be notarised.
Lack of authority can result in the personal responsibility of the director signing without powers. However, in principle, in a joint stock company (SpA) or limited liability company (Srl), an agreement signed by a director, even if is not vested with appropriate authority, remains enforceable towards the company, unless the company can prove that the other party knew of the lack of powers and intentionally acted to the company's detriment.
Before notarising/legalising an agreement, the notary will require evidence of the powers to sign.
Companies must have a minimum of one shareholder. No restrictions are provided as to the maximum number of shareholders. Only natural persons can be quotaholders of a simplified limited liability company (Srls).
Special rules apply in case of sole-shareholder company:
The sole shareholder must pay in full its capital contribution on subscription or when it becomes the sole shareholder.
Filings must be made with the competent Register of Enterprises (RoE).
No limited liability is provided for the sole shareholder unless these conditions are complied with.
Minimum capital requirements
In joint stock companies (SpA), the minimum corporate capital is EUR50,000.
In limited liability companies (Srl) the minimum corporate capital can be as low as EUR1, although when the capital is below EUR10,000 special rules and restrictions apply.
Different rules apply to regulated companies (for example, banks, insurance companies, managers of investment funds, among others).
If the capital is lost during the life of the company, Italian law can impose measures such as liquidation, recapitalisation up to the minimum legal requirement, or transformation into a partnership.
Shares/quotas in private companies are generally freely transferable. Specific restrictions can be provided for in the bye-laws and/or shareholders' agreements. The most common restrictions include:
Rights of first refusal or rights of first offer.
Prior approval rights (by the shareholders' meeting, board or, in case of a limited liability company (Srl), third parties).
Tag-along rights and/or drag-along rights.
Shareholders and voting rights
Italian law provides for a set of rules that grant some control powers to qualified minority shareholders, who can, among other things:
Challenge corporate resolutions.
Request the calling of shareholders' meetings or their postponement.
Exercise a liability action against the directors, the statutory auditors and/or the general manager(s).
The scope of minority shareholder control varies significantly whether the company is listed or non-listed and whether it is a joint stock company (SpA) or limited liability company (Srl). For listed SpA, minority shareholders have additional protections. The bye-laws may contain further rules.
Different specific quorum requirements apply to hold shareholders' meetings and pass resolutions. Quorum requirements vary depending on:
The type and subject matter of the resolution.
Whether the company is listed or non-listed, or regulated.
Whether the meeting is a first, second or subsequent call.
Depending on the specific case, quorum requirements may be computed in relation to the entire company capital or to the capital present or represented in the meeting. A company's bye-laws can amend legal quorums to a certain extent.
Rules on conflicts of interest also apply. Special rules apply to treasury shares, shares without voting rights and shares not eligible to voting.
Joint stock company (SpA)
An SpA's bye-laws can require higher majority requirements than those provided by the law, except for the approval of the yearly financial statements and the appointment and revocation of corporate offices.
In principle, all shares have the same rights, unless otherwise provided by the bye-laws. Recently, the possibility for the bye-laws of private SpA to allow the issuance of shares granting multiple voting rights has been introduced in Italian law. However, each share cannot grant more than three voting rights. Different rules apply for listed companies.
Special classes of shares can be provided for in the bye-laws (for example, non-voting shares, shares with limited or conditioned voting rights). The overall amount of shares with restricted voting rights must not exceed 50% of the corporate capital.
Limited liability company (Srl)
The bye-laws can derogate from the quorum requirements in the law.
The voting rights of each quotaholder are proportional to his percentage of subscribed corporate capital.
No different categories of quotas are allowed (except for certain special type of companies, such as innovative start-ups). However, the bye-laws may reserve special voting rights to one or more identified quotaholders.
Specific quorum requirements apply to extraordinary shareholders' meetings (for example, an increase/decrease in capital, mergers/demergers, and other changes to the bye-laws). Quorum requirements vary depending on:
The type and subject matter of the resolution.
Whether the company is listed or non-listed, or regulated.
Whether the meeting is a first, second or subsequent call.
The bye-laws can provide for supermajorities except only, with respect to joint stock companies (SpA), for resolutions on the approval of the yearly financial statements and/or the appointment and replacement of directors/statutory auditors. Even when supermajorities are admitted, commonly the insertion of unanimity requirements in the bye-laws is not consented/considered valid.
Veto rights may also be provided for in the bye-laws. Special classes of shares (in SpA) or special rights for quotaholders (in limited liability companies (Srl)) may in fact give certain shareholders veto rights on a number of topics.
In private SpA shares granting multiple voting rights (up to a maximum of three voting rights) can be issued.
Italy has enacted new rules with respect to foreign investments in strategic Italian companies. The new rules apply to share or asset deals involving Italian companies owning or controlling strategic assets (irrespective of whether the state is a shareholder) in the fields of:
Defence and national security.
Energy, transports and telecommunications.
The Italian government must be provided with notification of these investments. If the conditions for the exercise of the golden powers are met, the Government can either:
Condition the transaction to specific requirements.
Impose certain undertakings.
Exceptionally, veto the transaction.
Foreign investment restrictions
There are no exchange controls in Italy. Residents and non-residents of Italy can hold foreign currency and securities of any kind within and outside of Italy.
However, transfers to and from foreign countries, by residents and non-residents, of cash and securities in EUR or foreign currency in excess of (the equivalent of) EUR10,000, must be reported to the Customs Agency (Agenzia delle Dogane). Sanctions are applied in case of breach.
There are no nationality restrictions or requirements for directors (save for the reciprocity principle). The bye-laws of the company may provide for special requirements.
Interdicts, disabled persons, bankrupts, and those who have been sentenced to a penalty entailing interdiction from public office or incapacity to exercise managerial functions cannot be appointed as directors.
In limited liability companies (Srl), only shareholders can be appointed as directors unless otherwise expressly provided for in the bye-laws (this possibility is excluded in simplified Srls).
Companies that do not have their shares widely held among the public can entrust the management to a single director or directors of their choice. Italian listed companies must designate a board, of which:
All directors must meet certain integrity requirements.
At least one board member (or two, if the board is composed by more than seven directors) must meet independence requirements.
At least one director must be appointed by the minority shareholders.
Companies that do not have their shares widely held among the public are free to lay out their own sets of rules regarding the election of the directors (such as through majority vote, or reserved seats for special classes of shareholders). Italian listed companies designate directors through a mandatory ballot system dictated by the law and based on different lists, so as to allow at least one director to be appointed from a minority list.
The bye-laws of listed companies (and state-owned companies) must also provide for a balanced gender representation in the board.
Directors in Italy are subject to disclosure duties and duties to make informed decisions. Directors with interests in the resolution must disclose such interests. The rules differ in joint stock companies (SpA) and limited liability companies (Srl), but a breach of disclosure duties may trigger the invalidity of the resolution and personal responsibility for the director.
Directors of SpA cannot carry out any activity in competition with the company (save as authorised by the shareholders' meeting or otherwise provided for in the bye-laws).
In an SpA, there are three alternative corporate governance systems:
Traditional (Latin) system. This is the standard and most commonly used model in Italy. The shareholders' meeting appoints:
the board of directors or a sole director;
a board of statutory auditors.
An auditing firm controls the accounts of the company, unless the audit of the accounts is carried out by the statutory auditors (consented to in limited instances). This model applies unless a different model is explicitly chosen within the bye-laws.
Two-tier system. This model is based on:
the supervisory board, appointed by the shareholders' meeting, which exercises the same kind of controls of the statutory auditors in the traditional system, as well as other functions, including approval of the financial statements and the appointment of the managing board; and
the managing board which carries on the company's management.
An auditing firm controls the accounts of the company. Certain Italian banks and listed companies have opted for the two-tier model.
One-tier system. This model provides for a board of directors, appointed by the shareholders' meeting, and a controlling committee, internal to the board of directors and consisting of independent, non-executive directors. An auditing firm controls the accounts of the company.
For a limited liability company (Srl), the management of the company is usually granted to the board of directors or a sole director. Alternatively, the bye-laws may opt for a system in which the managing powers are granted (without the need of holding meetings and pass resolutions) to one or more directors with a single signature or joint signature. Mixed systems are allowed.
Number of directors or members
Italian law requires a statutory minimum of one director, but there is no statutory maximum. Listed companies and companies adopting the two- or one-tier systems cannot have a single director. The minimum and maximum number of directors is determined in the bye-laws.
Employees do not have a statutory right to board representation. Employees' representation in a company may originate from the incorporation of an SE (societas europaea).
Reregistering as a public company
Public companies must have an adequate number of shareholders so as to comply with free float and market capitalisation requirements (see below). No restrictions are provided as to the maximum number of shareholders.
Shares admitted to listing shall be freely transferable. For the purposes of admission to listing on the MTA (see below) a foreseeable market capitalisation of at least 40 million euros is generally required. as well as a free float of at least 25%. For the purposes of admission to listing on AIM Italia (see below), a free float of at least 10% is generally required.
The main Italian Stock Exchanges where a company's shares can be admitted to listing are the:
Mercato Telematico Azionario (MTA) organised and managed by Borsa Italiana SpA (BORSA).
Alternative Investment Market (AIM Italia), which is not a regulated market.
Listing on the MTA
The Italian authorities involved in the procedure for the admission of a company's shares to the listing on the MTA are BORSA and the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa)(CONSOB). The company must:
File with BORSA an application for the admission of its shares to listing, provided that certain requirements are met with respect to both the company and its shares.
Apply to CONSOB to obtain the authorisation for the publication of the listing prospectus required for the admission of its shares to listing.
A company can be admitted to listing on the MTA as long as it carries out an activity capable of generating revenues and its standalone and/or consolidated financial statements for the previous three financial years are available (unless limited exceptions apply). Specific rules are provided for foreign issuers.
Listing on the AIM Italia
AIM Italia is the BORSA's market dedicated to small and medium-sized enterprises with strong growth potential.
AIM Italia is a Multilateral Trading Facility (MTF), not a regulated market. The regulations applicable to AIM Italia are those provided for by BORSA.
The foregoing is to be considered as a summary of the main Italian tax rules applicable as of 1 March 2015, since the Italian Government and Parliament are still considering several amendments to the applicable rules (including a comprehensive reform of the Italian tax system, under Law No. 23 of 11 March 2014), but which has yet to be fully implemented.
Italian corporate income tax
Italian corporate income tax (IRES) generally applies at the ordinary rate of 27.5% on the worldwide income of resident companies (or on the income attributable to an Italian permanent establishment of a foreign entity). A surcharge on IRES, commonly referred to as the "Robin Hood Tax", is levied at the 6.5% rate (from 2014) on companies operating in the energy sector, if certain thresholds are exceeded. Decision No. 10 of 13 January 2015 of the Italian Constitutional Court (Corte Costituzionale) has declared that the "Robin Hood Tax" regime is in breach of the tax principles contained in the Italian Constitution. Therefore, the "Robin Hood Tax" regime is to be considered repealed as of 13 January 2015. However, the same Court clarified that the decision has not retroactive effects (accordingly, the "Robin Hood Tax" applied until 2014 included will not be reimbursed to taxpayers). The same has been confirmed by the Italian tax authorities. It may not be excluded that the Italian Parliament will amend the current regime in order to comply with the principles contained in the decision at issue.
Another surcharge on IRES, increasing the standard 27.5% rate by an additional 10.5% (that is, to 38%) applies in respect of so called "non-operative companies" (società non operative o in perdita sistematica), if certain conditions are met (in practice, this surcharge is levied where companies do not generate a certain level of profits and there are not sufficient business justifications for this situation).
The taxable base is the accounting profit, subject to several adjustments (sometimes having a substantial impact on the determination of the actual taxable basis). Ad hoc provisions apply to entities adopting International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) accounting principles in their own yearly financial statements. For such entities, the qualification, accrual and definition criteria provided for under IAS/IFRS are, in principle, also relevant for tax purposes.
Regional tax on productive activities
Both Italian entities and non-Italian entities carrying out a business activity in Italy are subject to a regional tax on productive activities (IRAP), at the rate of 3.9% (regions are entitled to increase or decrease such rate up to 0.92%). The costs of personnel (subject to exceptions), losses on bad debts and interest paid are in general not deductible. Special rules for calculating the taxable base and an increased rate are provided with respect to banks (up to 4.65%) and insurance companies (up to 5.9%).
The Italian value added tax (VAT) system conforms to the EU directives. VAT is generally due on the following types of transactions:
Supplies of goods and services carried out, for consideration, in the course of a business activity or of the execution of an artistic or professional activity.
Importation of goods.
Private consumption (consumo personale o familiare) of goods and services by a VAT registered person.
VAT is levied at the following rates:
Standard rate: 22% (pursuant to the budget law for 2015 this rate will be increased to 24% starting from 1st January 2016, to 25% starting from 1st January 2017 and to 25.5% starting from 1st January 2018).
Reduced rate: 10%, applicable to certain supplies of goods and services (such as sales of and repair works on residential real estate, supplies of certain food and non-alcoholic, drinks and so on) (pursuant to the budget law for 2015 this rate will be increased to 12% starting from 1st January 2016 and to 13% starting from 1st January 2017).
Reduced rate: 4%, applicable to the sale of certain residential real estate, supply of basic food stuff, books and other printed matter.
Since the aforementioned rises of the Italian VAT rates have been qualified (by the same 2015 budget law) as "safeguard" provisions, it is expectable that both the Italian Government and the Italian Parliament will work in the next months on alternative solutions that will prevent such rises from applying.
Almost all legal documents are subject to stamp duty (imposta di bollo). The tax ordinarily amounts to EUR16 every four pages or 100 lines of the document (every 100 pages for corporate ledgers).
Deeds and legal documents executed in Italy must be registered with the Revenue Agency (within 20 days from the date of execution) and are subject, on registration, to registration tax (imposta di registro) at rates that vary depending on the nature of the deed (up to 12% for the transfer of agricultural land). In addition, the taxable base may vary depending on the nature of the deed.
Exceptions may apply for deeds and legal documents directly relating to transactions falling within the scope of Italian VAT.
Deeds, agreements and legal documents executed outside the territory of the Republic of Italy are generally not subject to registration tax.
Mortgage and cadastral tax
Registration of deeds, agreements and legal documents in the Italian public real estate registers are subject to mortgage tax (imposta ipotecaria) applied at rates that vary depending on the nature of the deed (from EUR200 to 3%) and to cadastral tax (imposta catastale) applied at rates varying from EUR200 to 1%.
Financial transaction tax
Transfers of ownership of shares and participating financial instruments issued by certain Italian companies (excluding partnerships and limited liability companies) are subject to a financial transfer tax (FTT) at the rate of 0.2% on the value of the transaction.
Transfers taking place in regulated markets are subject to FTT at a reduced rate of 0.1%.
Some broad exemptions and exclusions from the FTT apply.
Appeals, deeds, decrees, orders and the other documents relating to, among other things civil, criminal, tax and administrative proceedings, are subject to a single charge (contributo unificato per le spese degli atti giudiziari), due up front, of up to EUR1,686, depending on the value of the proceeding (exceptions and increases may apply in specific cases).
IMU and TASI
Real estate properties located in Italy are generally subject to:
A local tax on real estate (Imposta municipale unica) (IMU).
A local tax on services relating to real estate (tributo per i servizi indivisibili) (TASI).
IMU applies at the proportional rate of 0.76% on the sum of the estimated value for the type and the class of immovable property (as determined by the Cadastral Office) for the months of possession during the calendar year, multiplied by certain coefficients. Each municipality is allowed to decrease or increase such rates up from 0.46% to 1.06% (a 0.4% rate applies with regard to the main abode of the taxpayer and additional reduced rates are allowed with regard to specific business activities).
TASI applies at proportional rates up to 0.33% (as set forth by each municipality) on the same taxable base relevant for IMU purposes. However, the sum of IMU and TASI rates cannot exceed 1.14%.
Tax payment and related fulfilments
In general terms, IRES and IRAP are determined on a yearly basis and the related payments are due in different instalments (advance payments and settlement payments) over the year, strictly depending on the tax period of each taxpayer concerned. In both cases the tax period corresponds to the financial year (for commercial purposes) for companies and similar entities.
VAT is generally determined and payable on a monthly basis (or on a quarterly basis where certain thresholds are not exceeded). The tax period corresponds to the calendar year.
Taxpayers must fill in and submit an annual return for IRES, IRAP and VAT purposes.
There are no specific annual reporting duties for, registration tax, mortgage tax, cadastral tax and stamp duty. FTT may require, in certain cases, an ad hoc annual tax declaration.
Entities that are not resident in Italy for tax purposes are generally taxable in Italy on their income derived from Italy under specific rules.
Business income is taxable in Italy if derived through a permanent establishment located in Italy. The Italian definition of permanent establishment generally conforms to the OECD definition in referring to:
A fixed place of business through which the business of an enterprise is wholly or partly carried on (physical permanent establishment).
A person acting on behalf of an enterprise and has, and habitually exercises, an authority to conclude contracts in the name of the enterprise (personal permanent establishment).
The identification of a permanent establishment does not depend on the number of employees employed in Italy by the foreign enterprise but on a case-by-case analysis of the activities carried out in Italy.
Italian permanent establishments are taxed as Italian resident corporations and related entities and are subject to the same periodic fulfilments (see Question 26).
Interest payments, royalty payments, capital gains and other financial incomes sourced in Italy are generally subject to Italian withholding/substitutive taxes (the ordinary rate is equal to 20%, although different rates may apply).
Selected entities established in "white listed" jurisdictions may benefit from some exemptions if specific subjective and procedural conditions are met.
Withholding/substitutive tax rates may be reduced under tax treaties entered into by Italy with other states, if applicable.
For Italian income tax purposes, companies are treated as resident in Italy if their legal seat, their place of effective management or their main business purpose, is located in Italy for the majority of the tax period (generally the financial year). Accordingly, the place where the company was incorporated is not relevant for such purposes.
In addition to the above, several anti-abuse provisions may apply.
Remittances of profits to a non-resident entity's head office from an Italian branch that qualifies as a permanent establishment for income tax purposes are generally not subject to income tax in Italy.
If an Italian company elects to be treated as a transparent entity for corporate income tax purposes (where all the conditions required by the law are met), profits attributed to its non-Italian resident shareholders are in principle taxable in Italy.
The portion of interest expenses in excess of interest payments received by an entity during the same fiscal year is deductible from the taxable base up to 30% of the EBITDA (earnings before interest, taxes, depreciation and amortisation) of the entity, as resulting from the profit and loss account (subject to certain adjustments). Carry forward provisions apply.
Interest expenses on mortgage loans entered into for the acquisition of real estate to be rented are outside the scope of this "thin cap" rule. Banks and other financial entities are not subject to the above thin cap regime; however, they are allowed to deduct only 96% of interest expenses.
The transfer pricing rules provided for by Italian tax laws and implementing regulations and instructions are in line with the OECD Transfer Pricing Guidelines.
Documentation requirements have been introduced from 2010. Specifically, if the taxpayer makes adequate transfer pricing documentation available in the course of a tax audit (and had previously informed the authorities of the existence of such documentation, by properly checking a box in the annual tax return), in case of assessment, penalties may not be charged. Otherwise, a penalty ranging from 100% to 200% of the additional tax due on the price adjustment could also be imposed.
A so-called "international ruling" procedure (substantially equivalent to an advance pricing agreement) is available to companies with international activities to fix through an agreement with the Italian Revenue Agency, in advance and for five fiscal years, tax issues relating to transfer pricing, interest, dividends, royalties or specific transactions with cross-border implications. The Italian Government and the Italian Parliament are currently working on a provision aimed at broadening the scope of the current "international ruling" (it is expected that such new provision will be enacted within the following months).
Grants and tax incentives
The main incentives include the following:
ACE regime. Corporate income tax (IRES) or individual income tax (IRPEF, in the case of entrepreneurs) is reduced by an amount determined with regard to the increase of the net equity (determined without taking into account the profit of the year) of the relevant taxpayer. The deduction at issue is equal to 4%, 4.5% and 4.75% of the increase for years 2014, 2015 and 2016 respectively. The applicable rates starting from 2017 will be determined by specific ministerial decrees.
Tonnage tax regime. Corporate income tax may be determined on a forfeit basis by eligible Italian maritime enterprises. Under this regime, taxable income is determined by applying daily coefficients with reference to the tonnage and age of the relevant ship. Capital gains and losses on the ships for which the tonnage tax is applicable are included in the income determined.
Research and development incentives (as amended by the budget law for 2015). From the tax year 2014 to tax year 2019 (included), companies investing at least EUR30,000 (annually) in research and development (R&D) activities benefit from a tax credit equal to 25% of the annual increase in R&D expenses compared to the average of the investments made in 2013, 2014 and 2015 (within certain limits per tax year).
Companies located in particular depressed areas in the south of Italy (Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily) are entitled to a tax credit in relation to their investments made in financial years 2007 until 2013 in new business assets (plant, machinery, equipment, software and patents on new technologies or on new production systems). Limitations may apply. Such incentives may be extended in the future.
Costs relating to open-term employment agreement are fully deductible from the regional tax on productive activities (IRAP) taxable base. A 10% tax credit (only for IRAP purposes) is applied to taxpayers without employees.
"Patent box" regime. Starting from 2015 (included), for R&D companies, 30% of income deriving from the exploitation of selected IPs (such as patents, trade-marks, designs or models, processes) will not be subject to income tax. The tax incentive will be increased to 40% for 2016 and to 50% from 2017. Capital gains deriving from the sale of the aforementioned assets are fully exempt from income tax, provided that at least 90 of the same capital gains are re-invested into other assets of the same type. The “patent box” regime is applied upon election of the taxpayer and is mandatory for at least 5 fiscal years. In the case of direct use of the IP asset, the taxpayer must conclude an agreement with the Tax Authority based on the same provision of the international ruling procedure, under Article 8 of Law Decree No. 269/2003 (for example, in the case of intragroup operations where the taxpayer can activate the same procedure to reach a "safe harbour" position in regard of the amount of the incentive.
A rebate in social security contributions has been established for the hiring of new employees under open-term contracts occurred in the year 2015. The grant will apply for a period of three years from the date of hiring.
Italian employment rules are contained in a number of sources. In principle, Italian labour legislation is mandatory and overcomes any less favourable terms and conditions established by collective agreements or individual contracts. National collective agreements at sector level are widely applied and introduce an extensive body of rules. Company–level collective agreements are present in larger companies. According to 2011 legislation (so far deployed only in peculiar situations), company–level and territorial collective agreements can in certain circumstances depart from the standards established by the law or the national agreements.
Italian labour laws apply in general terms to all the employees (either Italians or foreigners) working in the territory under an Italian employment contract, including those foreign employees on temporary assignment in Italy (principle of equality of treatment).
Italian employees working abroad are usually subject to the law of the country where they perform their duties. However, certain special rules exist regarding the continuing application of certain aspects of Italian social security to Italian employees working abroad.
In case of temporary assignment abroad under their original employment contract, Italian employees continue to benefit from Italian labour laws and on the basis of European legislation or bi-lateral agreements, and from the continuing contributions to the Italian pension system.
EU nationals are entitled to enter and stay in Italy without formalities for a maximum of three months and then can remain in the territory with very simple formalities, for work or study or simply if they prove they have sufficient means to sustain themselves. After five years of stay, they are entitled to claim a permanent residence permit. Nationals of EFTA counties receive substantially the same treatment.
Non–EU nationals are subjected to quite stringent limitations. Their entry into Italy requires a visa for work that is issued keeping into account annual entry quotas established by a ministerial decree. Certain categories of employees are exempted from the quota regime, and a recent 2013 legislation loosened the entry requirements for academics/researchers and highly qualified employees (EU Blue Card initiative). The establishment of any subordinate work relationship with a third-country national residing abroad requires the filing of a request for authorisation, bearing the name of the person, to the immigration office. Once the authorisation is issued, within the limits of the entry quotas, the foreign national can obtain a visa from the Italian consulates/embassies and enter the country.
A foreign national who intends to carry out an industrial, professional, craftsmanship or commercial self-employment job, or intends to establish a company or to take up posts in a company must meet the same integrity and professional requirements as an Italian citizen.
Proposals for reform
Rules governing Italian companies set forth under the Italian Civil Code were substantially amended in 2003/2004. Since then, many other reforms have been enacted.
In 2014, a significant liberalisation was enacted in connection with rules on fixed-term contracts and apprenticeships.
The main development is however the reform of the rules on dismissals enacted in 2015, aimed at excluding reinstatement in case of unfair dismissals notified to new employees.
The regulatory authorities
Register of Enterprises (RoE)
Main activities. Storing information delivered under Italian law and making this information available to the public.
Italian Securities and Exchange Commission (Commissione Nazionale per la Società e la Borsa) (CONSOB)
Main activities. Protection of the investing public. In particular, CONSOB is the competent authority for ensuring:
Transparency and correct behaviour by securities market participants.
Disclosure of complete and accurate information to the investing public by listed companies.
Accuracy of the facts represented in the prospectuses related to offerings of transferable securities to the investing public.
Compliance with regulations by auditors entered in the special register
CONSOB conducts investigations with respect to potential infringements of insider dealing and market manipulation law.
Main activities. Performing the functions aimed at maintaining financial stability, acting on the basis of the powers and responsibilities it is assigned by Italian law with regard to the control of individual intermediaries and the financial system as a whole.
Italian Insurance Supervisory Authority (Istituto per la vigilanza sulle assicurazioni) (IVASS)
Main activities. Supervision on private insurance companies.
Description. Normattiva is a database where all Italian laws published on the Official Gazette from 1946 to date, including the Italian civil code, are stored.
Andrea Fedi, Partner
Legance – Avvocati Associati
Professional qualifications. Member of the Rome Bar 1994
Law Degree, maxima cum laude, "LUISS – Guido Carli" University, Rome, Italy, 1990
Areas of practice. M&A; corporate; compliance.
Languages. Italian, English and French
Professional associations/memberships. Scientific Committee of the Istituto per il Governo Societario
Publications. Several publications on joint ventures, corporate governance, share purchase agreements on Italian and International Law Reviews.
Marco Graziani, Partner
Legance – Avvocati Associati
Professional qualifications. Member of the Perugia Bar, 2000; admitted to practice before the Italian Supreme Court (Corte di cassazione) and before the Courts of the EU.
Areas of practice. Tax, restructuring and insolvency
Non-professional qualifications. LL.M. (Tax), University of London, UK, 2002; Law degree, maxima cum laude, "LUISS - Guido Carli" University, Rome, Italy, 1997.
Languages. Italian, English, French and Spanish
- Former officer of the Italian Tax Police (Guardia di Finanza).
- Member of the Tax Committee of the International Bar Association (IBA).
- Member of the Tax Committee of the International Fiscal Association (IFA).
Silvia Tozzoli, Partner
Legance – Avvocati Associati
Professional qualifications. Member of the Milan Bar 2002
Areas of practice. Labour and Employment
Non-professional qualifications. Ph.D., Labour Law and Industrial Relations, with merit, University of Pavia, Italy 2004; LL.M., Labour Law, with merit, London School of Economics and Political Sciences, UK 2003; Introduction to English Law, Summer School, with distinction, London School of Economics and Political Science, UK 2000;Law Degree, maxima cum laude, University of Pavia (Collegio Ghislieri), Italy 1999
Languages. Italian, English and French
Professional associations/memberships. European Employment Lawyers Association; international associate of the American Bar Association.
Publications. Several publications on employment laws, social security contributions, expatriates.