DOING BUSINESS IN ITALY
Since 2003, Healy Consultants has assisted our Clients with business registration in Italy. Our services include i) Italy company registrationii) government license registration iii) business bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.
Press the link headings below to read detailed, relevant, up to date information.
Advantages and disadvantages
Advantages of Italy company registration
- An Italian limited liability company can be registered within 5 weeks with 1 director and 1 shareholder, who can be of any nationality. The minimum paid-up share capital required is €10,000 and our Clients do not need to travel to complete engagement;
- Italy offers fiscal incentives to holding companies including:
- Our Clients setting up an Italian SME will avoid complex audit requirements. LLCs are indeed exempted from audit if they have under €120,000 in share capital and meet two of the three following thresholds: i) income from sales and provision of services under €7.3 million ii) assets under €3.65 million and iii) less than 50 employees;
- Dividends from global subsidiaries will be quasi tax exempt if the distributing entity is not registered in a blacklisted tax haven. This benefit is neither conditional upon a minimum i) holding period nor ii) ownership threshold;
- The sale of shares of a global subsidiary will be quasi tax exempt if i) the shares have been held for 13 months and ii) the subsidiary is not registered in a tax haven and does not invest in real estate exclusively;
- Dividends, interest and royalties distributed to a non-EU company enjoy highly reduced rates in withholding tax if the non-EU company is based in one of 91 countries that have signed a tax treaty with Italy, including i) Australia ii) Canada iii) China iv) Singapore and v) the USA.
- The Italian government offers several business incentives including:
- The new Italian government has adopted reforms including i) regional corporate tax reduced from 3.9% to 3.5% ii) more flexible hiring by employers iii) electricity cost reduced by 10% for SMEs iv) eased requirements for debt issuance by SMEs. These reforms have been hailed by the Italian business community;
- Italy-based companies can carry forward their business losses indefinitely, for up to 80% of the year’s taxable income;
- Resident businesses investing in qualified R&D startups benefit from a tax credit of up to €1.8 million if they hold their participation for two years;
- Businesses investing in priority areas will receive incentives including government grants and low interest loans covering up to 60% of an SME’s initial investment value, with a €200,000 cap over three years;
- An Italy-resident company may benefit from a tax credit of up to €650 when hiring an employee i) under 29 years old ii) unemployed for over a year and iii) without high school qualifications.
Disadvantages of Italy company registration
- Current economic conditions in Italy are unfavorable for our Clients because:
- Italy-based businesses will suffer important tax increases in 2015 and 2016. Italy is indeed the world’s 3rd most publicly indebted country (135% of GDP) and its fiscal deficit must be reduced;
- Our Clients currently find little market opportunities in Italy. The Italian economy will not grow in 2014, according to the country’s own central bank. Around 45,000 Italian businesses have furthermore filed for bankruptcy during the first half of 2013, a figure at its highest for the past 15 years;
- Holding a corporate bank account in Italy is currently risky. Banks are suffering from high ratios of bad debt (averaging 13.6% of total loans) and Banca Monte dei Paschi, Italy’s 3rd largest bank, had to file for insolvency in 2013.
- Taxation is punitive in Italy because:
- Total tax paid by a company averages 66% of its profits. Main tax rates are set at i) Corporate tax – 31% of profits (regional corporate tax inclusive) ii) VAT – 22% and iii) employer’s social security contributions – 40% of gross salaries;
- Italy resident companies which i) are suspected of tax evasion or ii) have recorded tax losses for three subsequent years are subject to i) a 41.5% corporate tax rate instead of 31% and ii) lower VAT refunds;
- Withholding tax on foreign payments has been raised in April 2014 from 20% to 26%;
- Italian tax law is complicated and will require new businesses to hire an expert. Healy Consultants will be pleased to provide this service to our Clients for €950.
- Italy based companies have trouble finding productive employees because:
- Our Clients looking for an efficient workforce don’t go to Italy. As a fact, Italian workers’ hourly productivity is recorded at only €32, below the Eurozone average (€37);
- Local businesses are very reluctant to hire employees as it will be tremendously complex to dismiss them thereafter. Regulation related to hiring/firing practices has been ranked as 8th worst in the world by the World Economic Forum;
- Our Clients often face difficulties communicating with their Italian employees, as Italian people have the 2nd lowest English proficiency among all surveyed EU countries.
- Our Clients find it very difficult to secure a loan in Italy because:
- Italy-based businesses cannot finance the expansion of their operations in Italy as i) lending rates to SMEs are recorded at a record high of 4.1% (the 5th highest level in the Eurozone) and ii) 75% of applications for a corporate loan have been rejected by Italian banks in 2013;
- Because of the above, the World Bank ranks Italy as Europe’s 5th worst country for obtaining credit and other financial services.
- Corruption and red tape hinder businesses because:
- The Italy government creates unnecessary hurdles for startups. They are indeed required to use the services of a Notary Public at incorporation, resulting in high notary fees, averaging €2,600 according to the World Bank;
- Our Clients registering a company in Italy are also disappointed with the absence of a visa scheme facilitating residency for global entrepreneurs, such as the Investor Visa in the UK or the exceptional economic contribution visa in France;
- Italy is ranked as the 3rd most corrupt country in the EU. Furthermore, racketeering of business by organized crime is common in the southern part of the country and Sicilia;
- Dealing with the tax authorities can turn into a nightmare for Italy-based businesses. They indeed, on average, spend 269 hours annually to fill and pay taxes, almost twice the average time needed in other developed countries;
- Our Clients must be prepared to cope with a painfully slow bureaucracy in Italy. For example, a company willing to build a plant in Italy indeed needs i) to wait 230 days to obtain the construction permit and ii) to pay €44,000 in fees.
- Hiring non-EU citizens is a cumbersome process for employers in Italy because:
- Our Clients won’t be able to recruit foreigners in Italy, as they must prove that i) they have been unable to recruit Italy residents and ii) the foreigner will benefit from compensation and working conditions similar to those of current employees;
- The number of unskilled non-EU citizens allowed to come and work in Italy cannot exceed 11,000 in 2014.
Best uses for a Italy company
- Italy is a great place to register a manufacturing business in Europe because:
- Our Clients’ sales will be high in Italy, as the country boasts i) a large consumer market, with 60 million locals spending €1,300 billion annually and ii) the world 5th largest tourism market, with 43 million foreign visitors spending €33 billion in 2013 and iii) the 8th largest economy and a member of the G8;
- Italy-based manufacturing companies benefit from labor costs lower than in other Western Europe countries as i) there is no national minimum wage in Italy ii) labor costs are recorded at €28 per hour in the industry (3rd lowest in Western Europe) and iii) compensation of dismissed employees averages 7 weeks of salary, the 19th lowest level in the world;
- Our Clients setting up a manufacturing business will receive financial support from the government including i) interest-free loans for investments in machinery of up to €2 million and ii) grants and interest free-loans covering up to 40% of costs related to investments in high-unemployment industrial areas;
- Italy is an excellent location for product distribution within Europe, as the World Economic Forum ranks Italian airports and roads as the 18th and 29th best in the world;
- Italy is praised by businessmen for its industrial districts, in which success of startup businesses is facilitated by over 200 dense clusters of SMEs sharing technical know-how and access to consumers and suppliers;
- For the reasons listed above, Italy-based businesses are ranked as the world’s i) most competitive exporters in textile, clothing and leather products and ii) 2nd most competitive exporters of machinery after Germany.
- Italy is a great place to register a manufacturing business in Europe because:
- Time to incorporate: Two weeks
- Cost to set up: €12,150
- Minimum capital: €10,000
- Physical office required: No
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 27.5%
- Corporate tax base: Worldwide
- Shelf companies: No
- Main company type: S.R.L
Frequently asked questions
How to register a company in Italy?Registration of an Italian company involves i) reserving company name ii) signing incorporation forms iii) opening a corporate bank account and depositing the paid up capital iv) registering for tax, VAT and social security and v) subscribing to an employee retirement plan. Healy Consultants will assist our Clients throughout the entire process.
Useful links for Italy
Government and public authority websites:
- Investment Guide; Doing Business in Italy
- Italy – Europe’s Investment opportunity
- Foreign Direct Investment in Italy
- Deloitte; Taxation and Investment in Italy
- Destinazione Italia; A plan to Attract FDI in Italy
- Italy – Corporate Governance Codes and Principles