Accounting and tax
- The standard corporate tax rate in Italy is 27.5% (regional corporate tax inclusive). Companies suspected of tax evasion by the Italian authorities or having recorded tax losses for three subsequent years will suffer a corporate tax rate of 38%;
- The standard VAT rate is 22%, with returns being filed every February and September. Late filing will result in a fine of up to 240% of the outstanding amount of VAT;
- Capital gains are eligible i) for a 95% rebate on corporate tax if the shares are held for at least 12 months by a resident company or ii) for a reduced rate of up to 14% if the shares are held by a non-resident company;
- An Italian resident company does not suffer corporation tax on dividends received from global subsidiaries;
- An Italian resident company paying interest and dividend to non-EU companies suffers withholding tax of 26%, unless reduced via a tax treaty;
- Royalties’ payments to non-EU companies are subject to withholding tax at 30%, unless reduced via a tax treaty;
- A tax on financial transactions is levied on transfers of shares and other securities at a rate of up to 0.2%;
- Italian LLCs will require an audit only if they i) have a capital over €120,000 or iii) have exceeded during two subsequent years two of three following thresholds: i) annual revenue from sales and provision of services over €7.3 million ii) total assets over €3.65M and iii) more than 50 employees. An annual audit is mandatory for all PLCs;
- All Italian companies must file their corporate tax returns by the 9th month following the completion of the accounting year. Late payment results in a penalty of up to 30% of the amount due;
- Italy-based companies can carry forward their business losses indefinitely, for up to 80% of the year’s taxable income;
- Property tax is levied at a rate of up to 0.16% of the cadastral value of land and buildings;
- Italy has signed double taxation treaties with 91 countries including the Australia, Canada, China, Singapore and USA to reduce withholding tax on payments abroad;
- Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
Resident businesses must deal in Italy with a very complex set of regulations, accumulated over the years and creating acute compliance issues. Further information follows:
- Italian employees are hired on i) open ended contracts for permanent positions or ii) fixed term contracts for temporary positions. Fixed term contracts in the private sector are i) limited to durations of up to 36 months ii) deemed as open-ended contracts after that period and iii) limited to 20% of the company’s total workforce;
- Fixed term and part time contracts must be put in writing. This requirement does not apply to full-time permanent employees, although a written contract is still highly recommended to prevent later disputes;
- Employers are not required to pay their employees a minimum wage. However, over 80% of employees are covered by collective agreements setting minimum remuneration;
- The standard working time is 40 hours a week with maximal working time fixed at 8 hours per day and 48 hours per week. All employees are entitled to at least 4 weeks of annual paid leave;
- All dismissed employees are entitled to i) a notice period (except in cases of severe misconduct) and ii) a monetary compensation. All companies with more than 15 employees must also provide notice to the local Labor Office;
- Compensation for employee dismissal will be i) at least 13.5% of annual salary per year worked for the company if on an open ended contract or ii) all the gross pay due until the contract’s end if on a fixed term contract;
- All employers must register and pay contributions to wage guarantee funds. These funds guarantee compensation benefits of up to 1,100 per month if the company’s activity is disrupted due to unforeseen events including i) economic slowdown ii) bankruptcy filing and iii) natural disasters;
- Italian law bars discrimination in matters of employment on the grounds of age, gender, sexual preferences, ethnicity or race, religion and political and union views.
Collective bargaining and labor unions regulations
- Companies with more than 15 employees are required to have an union committee with i) 2/3rd of members nominated by unions and elected by employees and ii) 1/3rd of members nominated by unions and unelected;
- Members of the union committee are i) protected from dismissal and ii) entitled to at least one hour of time-off per month;
- Employers must abide by collective agreements, which cover a large set of employment issues including i) pay ii) pay increase schemes iii) working hours and holidays iv) health v) use of temporary contracts and vi) pensions;
- Every three years, employers must renegotiate the collective agreement ii) at the industry level and/or iii) at the company level. Please note that an agreement negotiated at the company-level cannot provide employees with less pay and/or benefits than the one prevailing at the industry level;
- Collective agreements must be agreed upon by i) the three main Italian union federations CGIL, CISL and UIL at the industry level or ii) the union committee at the company level.
- All Changes of board members must be notified to the Companies registry within one month, with a written consent statement for newly appointed directors;
- All Italian companies must file their financial statements with their local Chamber of Commerce within one month after approval by the general meeting of shareholders;
- Companies must notify the Italian Competition Authority before proceeding with i) mergers of over €470 million and ii) takeovers of over 47 million;
- Although not mandatory, we highly recommend our Clients to document any transfer pricing with i) the value of goods and services transferred ii) the pricing method and iii) to request an tax ruling before proceeding with the operation;
- Upon bankruptcy filing, a company must disclose to the designated liquidator i) the three last annual balance sheets ii) the company’s economic, capital and financial position and iii) and the company’s total debt exposure;
- To benefit from a pre-bankrupcy agreement, insolvent companies with i) assets below €300,000 and ii) less than €200,000 revenue and iii) less than 555,000 debt exposure must disclose a debt restructuring plan i) agreed upon with creditors covering at least 60% of total outstanding debt and ii) within 120 days after the procedure’s start.
- All businesses engaged in i) wholesale and ii) retail trade must notify the local mayor upon start of operations and are required to obtain authorization if the shop surface exceeds i) 150 sq. meters in cities with less than 10,000 inhabitants or ii) 250 sq. meters in larger cities;
- Italian commercial law require all businesses with a retail trade activity to provide a 2 years guarantee on all products sold to individuals.
Other company regulation
- All startups must hire a Notary Public in order to draft and execute the company’s M&AA, resulting in high and unavoidable legal fees, averaging €2,600 in 2014;
- Italy’s legal system is party to the New York convention on Recognition and Enforcement of International Arbitral awards. Arbitration in other countries which follow this convention will be enforceable in Italy;
- The Italian Data Protection Act bars companies from using personal information about individuals without their permission.