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Employing in Italy

At a glance

Employment in Italy

The Italian labour market is highly regulated and skewed heavily towards employee-rights, making it notoriously tricky to navigate. There are numerous legislative requirements for employers to comply with, depending on the type of employee and contract that is of concern, and compliance with Italian labour and employment regulations is often costly and time-consuming. However, the global economic downturn has forced Italian lawmakers to embrace political, social and legal reform in order to enhance flexibility within the Italian job market.

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Payroll & Tax in Italy

Foreign companies operating in Italy may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Italy are: Individual income tax (IIT) for employees in Italy, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.

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Immigration / Work Permits in Italy

As Italy is both a member of the European Union (EU) and party to the Schengen Treaty, differing immigration rules will apply to foreign workers coming to Italy, depending on their nationality. EU and EEA nationals are free to work in Italy without the need for a work permit under European free movement principles. Foreign workers from non-EU / EEA countries are generally required to hold a valid work permit from their employer and work visa from the Italian consulate in their country of residence before entering Italy. While hiring of non-EU/EEA nationals is subject to a yearly quota system, highly-skilled professionals are generally exempt from this quota. However, they are still required to follow the relevant application process to obtain a work permit and visa.

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Incorporation

There are three types of business forms available to foreign companies in Italy. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Italy and the planned business activity.

When setting up a company in Italy, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Italy for business purposes. In particular, it looks at common pathways to establishing a business presence in Italy, generally through a corporation, branch office or representative office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Italy economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, August 2015 or closest available dates.

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GEO Solutions or DIY Employment in Italy?

GEO Solutions or DIY Employment

Companies entering Italy must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Italy Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have an Italian entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Italy

Payroll Italy
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

 
Grossed income Tax Rate (%)
0-€15,000 23
€15001-28000 27
€28001-55000 38
€55001-75000 41
Over €75000 43

Note that up to the fiscal year 2016, an additional 3% tax will apply on income exceeding EUR 300,000.

Tax Returns Supplied

N/A

Corporate Tax Requirements

Individuals and partnerships must file an annual tax return by the end of September of the following tax year, while limited liability companies must file the tax return within nine (9) months of the end of the company’s fiscal year.

Companies must also make advance payments of their corporate and local tax liability equal to a specified percentage of the tax paid for the preceding year.

Employers Social Security and statutory contributions

Aggregate contributions range from approximately 36% to 45% of the aggregate remuneration accrued in the relevant year. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Employees Social Security and statutory contributions

Contributions for the employees are approximately 9% of aggregate remuneration accrued in the relevant year. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Corporate Income Tax Rate

Companies doing business in Italy are subject to a number of taxes, including the corporate income tax (IRES), the regional tax on productive activities (IRAP), withholding tax, VAT, registration tax, social security taxes, transaction tax and stamp duty.

The current corporate tax rate (“Imposta sui Redditi delle Societe”) in Italy is 27.5%.

Payroll Tax

None

Sales Tax

Persons (individual person, partnership, company with share capital or institution) making taxable supplies of goods and services under the Italian Value Added Tax (VAT) regime are required to apply for an Italian VAT number before commencing business.

The current VAT rate is 22%, however the rate is scheduled to increase to 24% in 2016, 25% in 2017 and 25.5% in 2018.

Withholding Tax

Italy imposes withholding tax (WHT) on certain classes of income earned by non-residents:-

  • Dividends: 26% (unless participation exemption applies)
  • Royalties: 30% on 70% of the amount, resulting in an effective tax rate of 22.5%
  • Interest: Final WHT of 26%. Interest paid to non-residents on deposit accounts with banks and post offices is exempt.
 A reduced rate may be available under an applicable Double Tax Treaty.
Other Tax

Examples of other major taxes:

  • Corporate tax surcharge for hydrocarbons and energy companies whose revenue exceed EUR 3 million and declared taxable income higher than EUR 300,000 in the previous fiscal year. = 6.5%
  • Resident and nonresident companies are subject to a regional tax on productive activities (“imposta regionale sulle attività produttive”, or IRAP) on their Italian-sourced income. For non-residents, IRAP only applies when the activities are conducted over a period of at least three months through a permanent establishment. IRAP is imposed at a standard rate of 3.9% for manufacturing companies, however higher rates apply for banks and financial entities, companies granted concessions rights and public administration entities
  • Municipal (“Imposta Munici- pale Unica”) and other taxes are charged on the possession of buildings, buildable areas and agricultural lands situated within the Italian territory, intended for any use, including property used in performing company activities. The tax is usually calculated by applying the basic rate of 0.76% to the tax assessment basis, however rates vary by region.
Work Permits
Can Sponsor Work

N/A

Work Permit cost

Shield GEO does not provide sponsored work permits in Italy at this moment.

Work Permit processing time

Shield GEO does not provide sponsored work permits in Italy at this moment.

Work Permit process

Shield GEO does not provide sponsored work permits in Italy at this moment.

Can Work Permit be processed in country

Shield GEO does not provide sponsored work permits in Italy at this moment.

Business Visas
Can do Business Visa

N/A

Business Visa Cost

Shield GEO does not provide business visas in Italy at this moment.

Business Visa processing time

Shield GEO does not provide business visas in Italy at this moment.

Others
Can supply private health care

N/A

Can assist opening bank accounts

N/A

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