DOING BUSINESS IN ITALY IN 2023
Since 2003, Healy Consultants Group has assisted our Clients with business registration in Italy. Our services include i) Italy company registration, ii) government license registration, iii) business bank account opening, iv) employee recruitment, v) visa strategies and vi) office rental solutions.
|Compare different Italy entities||LLC||PLC||Free Zone company||Representative office||Branch office|
|Also known as||Societa a responsabilita limitada||Societa per azioni||Free Zone||Ufficio di rappresentanza||Succursale|
|Best use of company?||All products and services||To get pub. funding||Shipping and out of EU sales||Marketing & research||Specific projects|
|How soon to invoice Clients?||2 weeks||3 weeks||2 weeks||Cannot trade||2 weeks|
|How soon can you hire staff?||2 weeks||3 weeks||2 weeks||2 weeks||2 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank a/c?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|How long to supply co. reg / tax numbers?||2 weeks||3 weeks||2 weeks||2 weeks||2 weeks|
|Corporate tax rate on annual net profits?||24%||24%||24%||0%||24%|
|Simplified VAT filing procedures for non EU sales?||No||No||Yes||Cannot trade||No|
|Limited liability entity?||Yes||Yes||Yes||No||No|
|Res. director/partner/ legal rep. required?||No||No||No||Yes||Yes|
|Minimum paid up share capital?||€1||€50,000||€1||None||None|
|Corporate bank account location?||Intesa SanPaolo||Deutsche Bank||Deutsche Bank||Barclays||HSBC|
|Can secure trade finance?||Yes||Yes||Yes||No||Yes|
|Standard VAT payable on sales to local customers?||22%||22%||22%||None||22%|
|Average total business set up costs?||14,150||14,650||12,000||12,150||14,150|
|Average total engagement period?||2 months||3 months||2 months||3 months||3 months|
|Accounting and tax considerations||LLC||PLC||Free Zone company||Representative office||Branch office|
|Statutory corporate tax payable?||24%||24%||24%||0%||24%|
|Legally tax exempt if properly structured?||No||No||No||Yes||No|
|Must file an annual tax return?||Yes||Yes||Yes||No||Yes|
|Must file annual financial statements?||Yes||Yes||Yes||No||Yes|
|Must appoint an auditor?||No||Yes||No||No||No|
|Access to double taxation treaties?||Yes||Yes||Yes||No||Yes|
|WH tax on payments to foreign s/holders?||26%||26%||26%||None||26%|
|Company Registration||LLC||PLC||Free Zone company||Representative office||Branch office|
|Res. director/partner/ legal rep. required?||No||No||No||Yes||Yes|
|Minimum number of shareholders/partners?||1||1||1||Parent company||Parent company|
|Minimum statutory paid up share capital?||€1||€50,000||€1||None||None|
|Security deposit to be kept with Government?||Yes||Yes||Yes||No||No|
|Shelf companies available?||Yes||Yes||No||No||No|
|Time to incorporate a new entity?||2 weeks||3 weeks||2 weeks||2 weeks||2 weeks|
|Can easily convert to a PLC?||Yes||Yes||Yes||No||No|
|Public register of shareholders and directors?||Yes||Yes||Yes||No||No|
|Can have preference shareholders?||Yes||Yes||Yes||No||No|
|Business Considerations||LLC||PLC||Free Zone company||Representative office||Branch office|
|Good entity for trademark registration?||Yes||Yes||Yes||No||Yes|
|Can secure an import and export license?||Yes||Yes||Yes||No||Yes|
|Sponsorship by a local citizen required?||No|
|Our Client must travel to Italy?||No|
|Temporary physical office solutions available?||Yes|
|Government grants available?||Yes|
|Government approval required for foreign owners?||No|
|You need a local resident as bank signatory?||No|
|Can be wholly foreign owned?||Yes|
|Maximum shareholding for foreigners?||100%|
|The entity will likely be regulated by?||Government grants available?|
|Can bid for Government contracts?||Yes|
|Minimum number of directors/managers?||1|
|Quaterly VAT reporting to the Government?||Yes|
|Group HQ tax incentives?||No|
|Sign office lease during incorporation?||No|
|S/holder/director docs attested/translated?||Yes|
|Foreign director needs personal tax no.?||No|
|Foreign director needs a residence visa?||No|
|Maximum number of staff allowed?||No maximum number for any entity|
|Expatriate to local staff ratio?||None|
|Can secure residence visa for business owner?||Yes|
|Other useful information|
|What will be included in my customer sales invoice?||Read more|
|This country has signed free trade agreements?||Yes|
|This country is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||Yes|
|Average custom duties suffered?||0.027|
|Govt foreign investment approval required?||No|
|Average monthly office rental? (€ per sq m)||€40|
|Average €salary for local skilled staff||€2,407|
|€ deposit interest rate? (1 year average)||0.02|
|Overseas remittance currency controls?||None|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Good|
|Crowd funding available in this country?||Yes|
Italy business setup summary
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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 has been lowered to just €1 in 2017, and our Clients do not need to travel to complete engagement.
- Italy offers significant fiscal incentives to holding companies, including:
- Italian SMEs will avoid complex audit requirements due to exemption from audit if they have under €120,000 in share capital and meet two of the three following thresholds: i) income from sales and 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 neutral jurisdiction. 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 at least 13 months and ii) the subsidiary is not registered in a tax neutral jurisdiction and iii) the subsidiary does not invest in real estate exclusively;
- Dividends, interest and royalties distributed to a non-EU company enjoy 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) USA.
- The Italian government offers several business incentives, including:
- The Italian government has adopted positive 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 and 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;
- A 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.
- Italy’s excellent geographical location gives a strategic advantage to its businesses.
- The industrial triangle of Italy, consisting of the cities of Milan, Turin and Genoa, are favorably positioned near the rich lands of the Rhone-Alps and the Rhine-Ruhr region, which is the heart of the heavy industry in Europe;
- Italy is a resource-rich nation having a diverse reserve of coal, zinc, marble, mercury, natural gas and crude oil. This is a significant factor that attracts innumerable manufacturing and related firms to Italy.
Disadvantages of Italy company registration
- Current economic conditions in Italy can be unfavourable for our Clients, because:
- Italy is indeed the world’s 3rd most publicly indebted country (135% of GDP) and its fiscal deficit may be reduced with increased taxation in the near future;
- Our Clients currently find little market opportunities in Italy. The Italian economy’s GDP growth for 2018 was just 0.8%;
- Holding a corporate bank account in Italy is currently risky. Banks are suffering from high ratios of bad debt (averaging 8.4% 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 – 28% 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 24% and ii) lower VAT refunds;
- Withholding tax on foreign payments has been raised since 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 14th worst in the world by the World Economic Forum;
- Our Clients often face difficulties communicating with their Italian employees, as Italian people have the 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 119th 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 53rd 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 238 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.
- Italy can be a tough jurisdiction to start a business in, especially for new or small-scale companies:
- The Italian market is mature and sophisticated in nature. New entrants are likely to face tough competition from the local and other EU companies in every business avenue;
- The regulatory environment of Italy is complex and lacks the qualities that the regulatory system of a developed nation is expected to have;
- Moreover, the introduction of i) accelerated tax depreciation regime for new capital investments and ii) newly approved regulations by the Budget Act 2019 affect the ease of doing business in Italy.
Best uses for a Italy company
- Italy is important destination for manufacturing companies, due to having: i) the 3rd lowest labour costs in Western Europe, ii) interest-free loans for investments in machinery of up to €2 million and iii) grants and interest free-loans covering up to 40% of costs related to investments in high-unemployment industrial areas;
- Italy is a great place to register clothing and textile products company as the country: i) is consistently ranked as the world’s most competitive exporters in these fields, as well as ii) abundant of 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;
- Italy is an excellent jurisdiction for tourism companies. The country witnessed more than 420 million tourists in 2017 contributing to 12% of its GDP. This is majorly due to Italy’s reputation for having i) an excellent tourist service infrastructure; ii) rich cultural resources including archaeological and heritage sites; and iii) improved sanitation and health services for its travellers. As a consequence, Italy has been ranked as the 8th most competitive country (out of 140 countries) in the 2019 Travel and Tourism Competitiveness Index.
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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.