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The Ultimate Guide To
Employment in Italy

Italy Facts

Population size: 59,801,004
Currency: Euro €
Capital city: Rome
Languages spoken: Italian, French
Ease of Doing Business: 50

Employing in Italy: What You Need to Know

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.

 

Key Factors to Consider When Employing in Italy

Some key points to note on the Italian labour market:

- Each industry has a National Collective Bargaining Agreement that regulates the employment relationship

- Companies with more than 15 employees come under the umbrella of the Workers’ Statute

- A collective dismissal is triggered when at least five dismissals are served within 120 days. Executives are now included in this count

In Italy, individual contracts of employment and labour relationships are governed [in order of priority] by:

1. The Constitution

2. The Civil Code: Employment and labour matters are regulated under Section III (“On the employment relationship”), articles 2094-2134.

3. Laws enacted by Parliament: Italy has extensive employment and labour legislation

4. Regulations issued by authorities other than Parliament and the government.

5. National Collective Bargaining Agreements

6. Custom and practice – for issues not governed by legal provisions or by the collective agreements. Customs more favourable to employees prevail over legal provisions, but do not prevail over individual employment agreements.

Employees in Italy have a basic right to establish and join a Trade Union association in the workplace or perform Union activity. This right is protected by the anti-discriminatory provisions (Articles 14-17 of Law no. 300/70, i.e. “Workers' Statute”). “Rappresentanze Sindacali Unitarie” (RSU) were established by national agreement in 1993 and reformed in 2014. RSUs are formed by a general election among the workforce. The Unions compete in the election and are represented in proportion to the votes they have received.

Alternatively, a union can establish its own Rappresentanza Sindacale Unitaria (RSA).

Both the RSA and RSU are involved in collective bargaining and the verification of the correct application of laws and collective agreements. They have both information and consultation rights, as laid down both by collective bargaining and by law. Both unions are generally consulted with regards to issues such as overtime levels, employment policy, hiring policy or corporate restructuring.

  1. Contracts

    Generally, all employment contracts in Italy are required to be in writing. Given Italy is a member of the European Union (EU), the country is also subject to various EU directives and legislation.

    As such, European Union Directive No. 533/91 requires that information on the main terms and conditions of employment relationships be evidenced in writing in the employment contract and provided to the employee within 30 days of hiring. In general, individual employment contracts must specify:-

    1. Parties to the employment agreement;

    2. The starting date of the employment and the duration of the trial period, if any;

    3. The expiration date, if the employment is for a fixed term (where these contracts are permitted by law);

    4. The salary, method for calculation of the salary, frequency of payment, and any particular term or condition related to the salary and fringe benefits;

    5. Working hours;

    6. Annual entitlement to paid holiday leave; and

    7. Employee’s duties and the related work “category” as established by the Civil Code under article 2095.

    Employment contracts in Italy are usually for an unlimited duration, however fixed-term and open-ended contracts are also available.

    Specific types of contracts

    A. Part-time contracts

    Part-time employment contracts must be in writing. All contracts must also specify the hours of work (e.g. by day, week, month and year). Pay and other entitlements of part-time employees are normally pro-rated according to rates of full-time equivalents.

    Ancillary clauses can also be added to give the employer a greater degree of flexibility. Some examples include:-

    • “elastic clauses” (clausole elastiche) which permit an employer to increase working time,
    • “flexible clauses” (clausole flessibili) which permit an employer to vary working hours during the day.

     B. Fixed-Term Contract (Legislative Decree no. 368/2001)

    Companies can hire employees on a fixed-term contract for a limited period of time. Fixed-term contracts can last up to 36 months, including any extension. A maximum of 8 extensions/renewals are permitted. Renewals can be made between the same parties, for the same duties and for a further limited period of time. However, a certain time gap has to lie between the renewals:  10 days if the previous contract had a duration of less than six months; 20 days if the previous contract had a duration of more than six months. Where the above mentioned interruption periods are not complied with, the new contract will be considered as an open-ended one.

    Quantitative limits are usually set by the labour authorities, however the law states that the overall number of fixed-term contracts may not exceed 20% of the permanent workforce. Fixed-term contracts also cannot be used to replace workers on strike or to replace employees temporarily laid-off or involved in collective dismissals in the past few months.

    Contracts may be carried over for a limited period of time after the expiration of the term. However, the grace period may not exceed either 30 days (less than 6 months) or 50 days (if more than 6 months). If the grace period has lapsed, the employment is automatically regarded as an open-ended one.

    C. “Cn Call” jobs (“Lavoro a Chiamata o intermittente” , Legislative Decree no. 276/2003)

    “On call” job contracts are contracts where an employee declares his/her availability to work over a certain period of time, during which he/she can be called in – even for a few days only – with short-term notice.

    In some cases, the contract may provide that the employee is bound to work if called in by the employer. In this instance, the employee is eligible to an additional 20% of the wage set by the National Collective Agreements (NCA)s.

    D. Apprenticeship (“Apprendistato” , Legislative Decree no. 276/2003)

    An apprenticeship is a type of open-ended contract, specifically focussed on vocational training. An employer can hire apprentices within certain quantitative thresholds (usually depending on the number of employees hired) and is responsible for ensuring that the apprentice acquires the relevant professional skills and qualification.

    E. Temporary agency contracts (“Contratto di somministrazione di lavoro”)

    Temporary contracts (both fixed-term or open end basis) can only be agreed with qualified employment agencies. Workers must be subject to the same legal and economic conditions available to employees of the user company. Similar to fixed-term contracts, employers may not use staff supply contracts to replace workers on strike or to replace employees temporarily laid-off or involved in collective dismissals in the previous few months. The overall number of temporary contracts may not exceed the 20% of the workforce hired on permanent basis, unless different thresholds are set under collective bargaining agreements.

Probation

Information Explanation
Probation Period ?

Employment contracts may contain a probation or trial period (“periodo di prova”). Article 2096 of the Civil Code requires that the trial period be written in the employment contract and must be entered into on the first day of the employment. If not, the probation period is considered null and void and the employment is will be considered as an open-ended employment contract from the start.

The statutory trial periods are as follows:

1. 3 months, for employees not assigned to managing functions;
2. 6 months, for all other employees

However, the probation period is commonly set in the relevant NCAs depending on the category of the employee.

During the probation period, each party is free to terminate the contract without notice and without having to pay any indemnity in lieu of such notice. The duration of the probation period is set by the applicable collective agreement and varies according to different categories of employees (the maximum duration being 6 months for high level employees).

Using Shield GEO EOR Services: How We Can Help You

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Italy. For companies which intend to employ their staff directly through their incorporated Italian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Italy.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Italy.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Italy

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Italy

– the company needs help with tax, employment, immigration and payroll compliance in Italy

A GEO EOR Solution vs 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

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

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

Euro €

Tax Amount
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.

Can supply private health care

N/A

Can assist opening bank accounts

N/A

Work Permits

Work Permits
Can Sponsor Work Permit

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

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.

Payroll and 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.

Your Payroll Options in Italy

Information Explanation
Remote Payroll ?

A remote payroll in Italy is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Italy. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Italy is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Italy under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Italy may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage an Italian payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Italian employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Italy to a GEO, like Shield GEO. This is possible for both foreign workers and Italian nationals. This is the easiest, fastest and safest way to payroll staff in Italy.

Shield GEO manages all aspects of payroll for workers in Italy, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Italy

Information Explanation
National Currency ?

Euro €

Tax Figures

Information Explanation
Corporate Income Tax ?

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%.

Income Tax Rate ?
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.

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.
Time to prepare and Pay Taxes ?

240 hours

Time required to start a Business ?

6.5 days

Italy Immigration and Work Permits

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.

Your Options

Use your own company?

A foreign company that wishes to get a work permit for one of its employees must first set up its Italian subsidiary/branch/representative office. This Italian entity may then apply for the work permit.

There are three steps to the entire process:-

  • Authorization requests made by employers to the Immigration Single Desk (ISD);
  • Visa request by prospective workers in their country of origin;
  • Request and delivery of the stay permit for working purposes

Step 1: Authorisation request (Nulla Osta) 

Employers have to request authorization to hire a foreign worker living abroad from the ISD. Every Italian province has an office that the government describes a one-stop shop for immigration, the ISD (“Sportello Unico per l’Immigrazione”). These offices are responsible for the entire process of hiring foreign workers in Italy.

Each applicant employer is expected to submit a so called “Stay contract” (“Contratto di soggior- no”) in which she/he commits him/herself to guarantee adequate lodging for the requested worker and to fund travel costs for his/her repatriation in case of expulsion before the expiry of the contract. In addition, the contract has to include the work contract’s details that must comply with existing collective contracts for the specific sector/occupation in which the requested worker will be employed.

Once all the checks have been made by both Labour authority (“Direzione Territoriale del Lavoro”) and local State Police offices (“Questura”), the authorization (“nulla osta”), may be delivered to the applicant employer.

Migreat states that a nulla osta application typically requires the following information:

  • Employer’s details – the company’s and legal representative of the company’s name, address and place of business;
  • Prospective employee’s foreign address
  • Signed undertaking to report any changes in the employment contract to the Employment Centre (Centro per l’Impiego) or INPS (for domestic workers), within 5 days of the event;
  • Evidence of suitable accommodation which meets local public housing standards and complies with hygiene and habitation requirements. Any contribution towards accommodation expenses and the corresponding salary deductions from the employer must also be declared;
  • Confirmation that the company’s Chamber of Commerce registration corresponds with the activity on the application;
  • Proposed employee contract – specifying the terms and conditions of the employment, open-ended, fixed-term, full-time or part-time, salary and social security contributions. It must also include an undertaking to pay the foreign national’s repatriation costs, if the immigrant is expelled from the country, and a confirmation of accommodation;
  • For applications relating to a person under 18, documentation confirming that compulsory education has been completed must also be included. This certification must be issued by a state school or equivalent public institution in accordance with the laws in force in the minor’s country of origin. It must be stamped by the Italian diplomatic representation or Consulate, after the foreign institution has checked that the parent or legal guardian has consented to the child leaving the country.

Time: 40 days

Cost: No charge

Step 2: Issue of visa (visto nazionale)

Once the nulla osta is delivered to the employer, he/she sends it on to the prospective foreign worker. The foreign worker is then required to present him/herself at the Italian diplomatic representation / consular in his/her country of origin and request a visa for working purposes.

The nulla osta is valid for 6 months and the working visa may be issued during this period. The type of work visa required and the required procedures to obtain these items differ depending on how the work relationship is classified (for example, as a self-employment activity or an employment activity).

Documentation vary by embassy and country, however some documents that are typically required:-

  • Completed Visa application form (for a copy of the form, please visit here).
  • Recent passport-size photograph
  • Passport or relevant travel document
  • Nulla osta granted by the ISD
  • International Medical Certificate- for all applicants
  • Proof of Accommodation in Italy
  • Copy of Flight Itinerary- where applicable
  • Copy of Birth Certificate­­s- for all applicants, legalized and translated into Italian
  • Marriage Certificate (if applicable) – legalized and translated into Italian
  • Visa Fee- payable in cash at the consulate

Costs and time:  Approximately € 116.00, however this may vary by country.

Step 3: Issue of residence permit (permesso di soggiorno)

Within eight days of his/her arrival in Italy, the foreign national must sign the stay contract presented by the employer
at the ISD and simultaneously apply for the residence permit (“Permesso di soggiorno”) for working purposes. The residence permit will be issued by the Questura.

The residence permit is issued at the new arrival’s local police station. This requires filling out an application form specifying the type of permit required, proof of identification, fingerprints and photos. Different types of permits may have different requirements. The residence permit is an electronic smart card to guard against fraud. In order to get a residence permit, the foreign national will have to submit a variety of documents including application forms, a passport and photocopies, passport photos and an application fee.

The receipt an applicant receives while waiting for their residence card affords them the same rights as the permit they are applying for.

The residence permit has the same duration as the employment contract with a maximum of 2 years. It is renewable for 24 months and then a further 12 months.  Therefore, the foreign national would be allowed to work in Italy for a maximum period of 5 years.

Use the Shield GEO Employer of Record Solution ?

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

Types of visas in Italy

Category Description of Visa
EU/EEA Nationals

In accordance with the principle of free movement of persons, goods, services and capital, EU (European Union) and EEA (European Economic Area) nationals can be employed in Italy without a work permit from the Italian authorities. Swiss citizens have the same right of entry, residence and access to work as EU country nationals.

An EU, EEA or Swiss national who intends to reside and work in Italy must enrol with the Office of Resident Population (Anagrafe) if his or her stay exceeds 90 days. He/she should apply for a so called “Stay card” (“Carta di Soggiorno”), which is normally issued by the local State Police office (“Questura”). This permit is renewable.

Non EU/EEA Nationals

Non-EU/ EEA nationals wishing to work in Italy, either temporarily or permanently must obtain a work permit from their prospective employers as well as a work visa from the Italian Consular authorities before coming to Italy. Work visas are usually granted based on a particular work capacity, for example knowledge of the local language of the investor and specific market or technical knowledge.

The admission of non-EU foreign workers is based on a quota system for new entries on a yearly basis. The quota system is intended to regulate the admission of third country nationals and their access to the Italian labor market. The determination of annual quotas is established by the government, which sets the quota through a Prime Minister Decree (known as “Decreto Flussi”).

The admission of some categories of workers is explicitly exempt from the limits set by the quota system. In particular, specific professional profiles can be admitted without any quantitative cap to regulate their inflow. Workers exempt from this system are primary the following:-

1. Executives or managerial employees assigned to the Italian branch of a foreign legal entity
2. Highly skilled workers assigned to the Italian branch of a foreign legal entity for carrying out a specific project
3. Others include university lecturers and professors, translators and interpreters, professional nurses, etc.

Italy is one of the countries that has implemented the Blue Card EU directive, which enables companies to locally hire executives and high-skilled workers, avoiding the quota system.

Despite the lack of explicit quantitative limitations, the admission of workers in these categories is still subject to the authorization (“nulla osta”) granted by the territorial ISD, even if admission procedure have been further simplified for specific categories.

Self-employment visas

Foreign nationals may engage in the following self-employment activities in Italy:-

1. They may be directors of companies
2. Freelance or other professional activities

In both cases, foreign nationals must obtain a self-employment visa (“Visto di Lavoro Autonomo”).

Schengen visas

Italy is a signatory to the Schengen Treaty, which allows the . Currently, there are 25 Schengen countries: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The Netherlands, Norway, Poland, Portugal, Slovenia, Slovakia, Spain, Sweden, and Switzerland.

A Schengen visa allows the holder to stay for a period of up to 90 days within 6 months for either tourist or business purposes. Applicants holding Schengen visa may travel freely within any country within the Schengen territory. There are several types of Schengen visas:

1. A and B visas – these are airport and transit visas for those travelling through the Schengen area
2. C visa – this allows a foreigner to spend up to 90 days within a Schengen country for various purposes, including business, medical treatment, sports competitions, study and tourism
3. D visa – this is a long-stay visa, which allows the holder to reside in Italy for up to one year.

Family member visas

Family members who accompany a non-EU foreign national to Italy or wish to join a foreign national in Italy must request special visas from the Italian consulate in their last country of residence. These visas (“Visto per Familiare al Seguito” or “Visto per Ricongiungimento Familiare”) allow family members to work in Italy after the relative residence permit for family purpose is obtained (see below).

After the consulate abroad issues the relevant visas,  family members accompanying a foreign national must report to the police in the area where they will live within eight days of their arrival in Italy to request their Residence Permits (“Permesso di Soggiorno per Motivi Familiari”).

A special rejoining procedure (“coesione familiare”) may be available to family members who have legally entered Italy and hold valid residence permits.

Setting up a company in Italy

When setting up a company you may want to consider these factors:

  1. Business Factors

    Generally, Italy does not impose any specific requirements on foreigners wishing to establish a business presence in the country, although there is a condition of reciprocity imposed on participation by non-EU nationals. Natural or legal persons from the European Union and European Economic Area (EEA) are treated as Italian nationals, with no restrictions or limitations on their capacity to conduct business. On the other hand, investments made by non-EU nationals are subject to certain restrictions. In particular, non-EU nationals may participate in Italian entities based on reciprocity (i.e., the country of citizenship of the foreign investor must allow the same benefit to Italian citizens or legal entities).

    You may also want to consider the following when making your decision :-

    • The industry and type of business that will be conducted
    • Nationality of the headquarters / individuals (s)
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

Your Options

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

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.

Corporation

In Italy, there are two main types of corporations that can be set up:

  • Società a responsabilità limitata (S.r.l.) [equivalent to a private limited liability company]
  • Società per azioni (S.p.A.)
    [equivalent to a public limited liability company]

The most commonly selected option is the Srl due to its organisational flexibility and autonomy for its shareholders, however the choice largely depends on the expected activity level in Italy.

Types of Corporations

1. Società a responsabilità limitata (S.r.l.)

The S.r.l. is usually the vehicle of choice for smaller companies due to its organisational flexibility and shareholder autonomy.

Investment Capital Requirements

Minimum of €10,000. The minimum shareholders required to incorporate a S.r.l. is one, and there are no restrictions imposed on the nationality, residence or number of shareholders required.

The investor may choose not to fully pay up the registered share capital. However, at least 25% of the capital has to be paid up before registration.

If the S.r.l. is founded by a single stockholder, 100% of the capital must be paid in at that time.

In an S.r.l., participations are not represented by shares but rather by portions (quotas) which cannot be incorporated in certificates.

The transfer of shares may be limited and even prohibited, depending on the circumstances.

For contributions made in kind, the value of the contribution must be determined on the basis of an independent expert’s appraisal, as appointed by the local court.  The shareholders of the S.r.l. may appoint the expert for the appraisal.

Management 

The form of management for an S.r.l. is extremely flexible. Shareholders define how the company will be managed and controlled/supervised in the Articles of Association (By-laws).

The investor may choose to appoint a a Sole Managing Director, a Board of Directors, or even a form of management where Directors are not appointed as a board and where they can exercise their powers jointly or separately, or, depending on the corporate governance model, jointly and others separately. Special rights may be assigned to particular shareholders, including administrative rights or the right to the distribution of profits.

Directors do not need to be Stockholders, however for S.r.l.s, this must be explicitly stated in the company’s by- laws. There are no restrictions regarding their number, nationality or place of residence. The law does not specify a minimum or maximum number of directors, but if only two shareholders make up the S.r.l. membership, they are deemed to form a board of directors.

However, the appointment of non-EU (European Union) nationals as Directors is subject to certain restrictions. In particular, non-EU nationals may be appointed as Directors of Italian entities based on reciprocity (i.e., the country of citizenship of the Foreign Director must allow the same benefit to Italian citizens).

Recently, another type of S.r.l. has also been introduced, the Società a Responsabilità Limitata Semplificata [ or Simplified limited liability company (S.r.l.s.)] which has lower capital requirements to encourage entrepreneurship.

Investment Capital Requirements

 Minimum of €1 to a maximum of €9,999.99. Shareholders of S.r.l.s. can only be individuals, not corporations or other legal entitites.

Capital must be fully paid up in cash to the administrative body at the time of incorporation.

A S.r.l.s. can only be incorporated by individuals under the age of 35. When the individual reaches the age of 35, the S.r.l.s. must be transformed into another form of corporate entity.

Accounting / auditing requirements

All companies are required to keep books and records of accounts, as well as keep in order all original documents sent and received for each concern.

The accounting documents must be kept for no less than ten years.

A S.r.l. is only required to be audited if it has met 2 of the following conditions:-

  • Total assets of EUR 4,400,000;
  • Sales and services revenues of: EUR 8,800,000;
  • An average number of 50 employees during the year
  • Or if the S.r.l. controls a company subject to statutory audit for two consecutive years.

Companies with share capital are also required to prepare their annual Financial Statements and directors report and to file them with the Register of Companies, within 30 days from its approval by shareholders.

  • Società per azioni (S.p.A.)

 A S.p.A. is ideally used where an enterprise conducts business of substantial scale and where there are a significant number of investors, making it the preferred vehicle of choice for medium to larger-sized enterprises. Only a S.p.A. may be listed on the stock exchange.

Investment Capital Requirements

 Minimum of €50,000. Only a sole shareholder is required to incorporate a S.p.A., and there are no restrictions imposed on the nationality, residence or number of shareholders required. The amount of share capital must be stated in the company’s memorandum of association.

Similar to the S.r.l., the investor may choose not to fully pay up the registered share capital. However, at least 25% (€12,500) of the capital has to be paid up before registration.

If the S.p.A. is founded by a single stockholder, 100% of the capital must be paid in at that time.

In an S.p.A., shareholders’ participation are denominated by shares. The share capital is divided into shares with a minimum nominal value of €1 each.

The shares are freely transferable.

A S.p.A. can issue both registered and bearer shares with specific conditions applying to share transfers, shares with full voting rights, shares with limited voting rights and shares with no voting rights. A S.p.A. may also issue shares with multiple voting rights. Special categories of share can be assigned to employees.

For contributions made in kind, the value of the contribution must be determined on the basis of an independent expert’s appraisal, as appointed by the local court.

Management 

A S.p.A. may choose its management and control structure from three forms of governance:

a. The ‘ordinary’ structure based on shareholders’ meetings, which elects the administrative body (board of directors or sole director) and the supervisory body (board of statutory auditors).

b. The ‘dual’ structure has a management board that administers the company, alongside a supervisory board appointed by the shareholders meeting. The supervisory board consists of three members that may not necessarily shareholders. However, at least one of them must be a registered auditor on the Roll of Auditors at the Ministry of Justice. The supervisory board is responsible for appointing and removing members of the management board and approving the financial statements. The management board may be formed by two or more members. It is not necessary that they are shareholders of the S.p.A.

c. The ‘monistic’ structure involves a board of directors with administrative tasks appointed by the shareholders’ meeting, plus a supervisory management board elected internally within the board of directors.

The ‘ordinary’ structure remains the most popular form of governance.

Directors do not need to be shareholders and there are no restrictions regarding their number, nationality or place of residence. Directors are appointed for a period of three years.

Board meetings may be held outside Italy if certain conditions are satisfied.

Accounting / auditing requirements

All companies are required to keep books and records of accounts, as well as keep in order all original documents sent and received for each concern.

The accounting documents must be kept for no less than ten years.

All S.p.A.s are required to be audited.

Companies with share capital are also required to prepare their annual Financial Statements and directors report and to file them with the Register of Companies, within 30 days from its approval by shareholders.

Incorporation process

1. Execute a public deed of incorporation and company by-laws before a public notary and pay the registration tax 

A public Instrument of Incorporation is necessary to set up both an S.p.A. and an S.r.l.

The public instrument of incorporation (atto costitutivo), including the company’s by-laws (statuto), must be drafted and executed before a public notary by the quota or shareholders or their authorized representatives. The Instrument of Incorporation consists of two parts: the first (Memorandum of Association) records the intent to incorporate the Company and other essential information related to its incorpoation; the second comprises the Articles of Association (by-laws) and indicates the rules concerning the operation, the organisation and the winding-up of the Company.

The notary drafts company by-laws on standard forms. The cost of the forms and stamp duties are included in the notary fees. Registration tax of incorporation is paid to the notary public. This tax is due within 20 days of incorporation.

Notarial fees can be estimated using the fee schedule.

Agency: Notary Public

Time: 1 day

Cost: EUR 2,583 (Notary fees) + EUR 200 (Registration fee) + EUR 156 (Imposta di bollo)

2. Buy corporate books and accounting books

According to Article 2478 bis of the Italian Civil Code, a S.r.l. must keep the following corporate books: a minute book of board of directors’ meetings and a minute book of board of Statutory Auditors (Collegio Sindacale), both of which are subject to authentication.

According to Article 2214 of the Italian Civil Code, any business must keep two accounting books: the journal book and the inventory book. Authentication of the accounting books is not required. All books are available in standard format at stationary stores or through a notary public. However, entrepreneurs can also use a loose-leaf book at no additional cost.

Since 2009, accounting books can also be kept electronically. In this case, a digital time stamp and electronic signature must be put on the books every three month. The cost to register electronic books depends on D.M. 23 Gennaio 2004.

Agency: Notary or Register of Enterprises (Registro delle Imprese)

Time: 1 day (simultaneous with previous procedure)

Cost: EUR 16 stamp fee for each 100 pages (3 books), EUR 25 registration fee per book (3 books)

3. Pay government grant tax to the post office current account

Taxes are due to the Office of Revenue every year. These amount to:

(1) EUR 309.87 if the company’s social capital is under EUR 516,456.90 or

(2) EUR 516.46 if the company’s social capital exceeds EUR 516,456.90.

Agency: Tax Revenues Authority (Agenzia delle Entrate)

Time: 1 day (simultaneous with previous procedure)

Cost: EUR 310

4. Register the Company through Comunicazione Unica

Applicants must electronically file a single notice (Comunicazione Unica) to register the company with the Register of Enterprises (Italian Trade Register). The applicant must also submit an application to request a tax identification number and VAT number. Registration is also required with Social Security Administration (INPS) and Accident Insurance Office (INAIL).

Documents that are typically required include:-

  • The completed application forms requested by the Register of Enterprises (Italian Trade Register) for company registration, the Italian Tax Authorities for immediate commencement of business and INPS and INAIL for registration with these Administrations.
  • The Articles of Association
  • The Company Charters
  • A list of names and addresses of members and shareholders

Companies are required to provide a certified email address on the registry of companies registration form. Furthermore, all businesses incorporated as S.r.l. must communicate their certified electronic mail address to the Registry of Companies.

After the single notice is filed, the firm receives all the documents within 7 days. All notices, communications and receipts of filing are sent to the Company’s certified email address.

Agency: Register of Enterprises (Registro delle Imprese)

Time: 7 days

Cost: EUR 200 (membership fees) + EUR 90 (registration fee with chamber of commerce)

5. Notify the competent Labor Office (DPLMO) of the employment of workers

Employers must notify the Provincial Labor Office (Direzione Provinciale del Lavoro e della Massima Occupazione, DPLMO) about hiring personnel one day before the employee in question begins working at their company.

Agency: Competent Employing Office (Centro per l’impiego)

Time: 1 day

Cost: No charge

Branch office

Foreign corporations operating in Italy can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Italy, given the numerous drawbacks associated with having a branch office. Having said that, foreign enterprises wanting to set up a branch in Italy for lower levels of activity are allowed to do so.

A branch office is not considered to be a separate legal entity, rather it is part of the foreign parent.

Branch Investment Capital Requirements

 No minimum capital requirements.

The parent company is fully liable for the liabilities of the branch.

Management

The head office is required to nominate an “institor” to be the legal representative of the Italian branch, and who has all the necessary powers to operate the branch.

Accounting requirements

A branch is subject to the same Italian bookkeeping rules as a S.r.l. i.e. it will need its own accounting books (separate from the books of the foreign head office), it will have to draw up its own annual balance sheet for tax purposes and file an income tax return.

A copy of the parent company’s financial statements must also  be filed annually with the Italian Registrar of Companies. The financial statements must be translated into Italian.

Things to do upon Incorporation 

The deed of appointment, the certificate of incorporation (memorandum of association), the articles of association and the registration details of the foreign company must be registered with the Business Register in the area in which the branch office is located.

Where the foreign enterprise has more than one branch office in Italy, the documentation requirements mentioned above only need to be satisfied for the first branch.

All documentation must have been issued by a public authority with a sworn translation into Italian.
These documents must be filed with an Italian Notary Public (or with a District Notarial Archive). The notary will draft a specific notarial deed with the documents listed above as annexes, to be registered by the Notary and filed with the Business Register.

If the procedures above are not adhered to, the company directors or anyone acting in the name and on behalf of the company will have unlimited liability for all company contractual obligations. The foreign company and its directors will be liable for obligations contracted in Italy in the company’s name (except for European companies given that European principles of freedom of establishment apply).

Representative Office

This is the easiest and least expensive type of foreign investment structure to set up and has no registered capital requirements. The defining characteristic of an RO is its limited business scope.  An RO is generally forbidden from engaging in any profit-seeking activities, and can only legally engage in preparatory activities such as market research etc.

ROs are not legal entities of a foreign company in Italy. Instead, they are more akin to a local presence to promote the company and its products/services. ROs can only perform preparatory business activities.

A RO which carries out only preparatory or auxiliary activities (e.g., promotional activities, public relations, collection of information etc.) will not be considered a permanent establishment of the foreign company for Italian tax purposes and will not be subject to Italian tax.

Accounting requirements:

A RO does not have to apply for a VAT number and is not subject to separate accountancy and bookkeeping rules in Italy.

Things to do upon Incorporation 

ROs must be registered with the Economic and Administrative Index (REA, Repertorio Economico Amministrativo) at the Chamber of Commerce, attaching the following documents:

  • If the company is incorporated in an EU country: a certificate indicating the company details and the legal representatives of the company, issued by the foreign equivalent of the Italian Register of Companies. These must be translated into Italian by a sworn translator.
  • If the company is incorporated in a non-EU country: A statement of the company’s existence issued by the Italian Embassy in the country where the company has its registered head office.

Partnerships

Investors wishing to set up a partnership in Italy have three options: a general partnership, limited partnership or partnership limited by shares. However, partnerships generally not considered as separate legal entities in their own right. As such, the partners usually have joint and several liability for the partnership’s obligations.

Partnerships are generally not considered as separate legal entities in their own right. As such, the partners usually have joint and several liability for the partnership’s obligations. A partnership is created by a contract between two or more partners. The partnership agreement must be drafted in the form of a public deed or a legalized private deed.

There are three main types of partnerships in Italy:

1. General partnership 

A Società in nome collectivo (S.n.c.) or general partnership is formed by two or more partners who have joint and several liability for the partnership’s obligations.

2. Limited partnership

The Società in accomandita semplice (S.a.s.) or limited partnership has two types of partners:-

• General partners (accomandatari) who also act as directors and by law, have unlimited personal liability; and
• Limited liability partners (accomandanti) with limited liability who are excluded from taking part in the administration of the partnership. Their liability is also restricted to the amount of their investment .

Unlike a S.a.p.a. (see below), no minimum share capital is required, although the share capital registered must be sufficient for the purpose of its business.

3. Partnership limited by shares 

Similar to a limited partnership,  Società in accomandita per azioni (S.a.p.a.) comprises general partners who have joint and several liability for the partnership’s obligations; and limited partners who are liable only to the extent of their investment. The limited partners are prohibited from managing the partnership.

The rules applicable to S.p.A.s also generally apply to S.a.p.a.s, including minimum share capital requirements

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Italy, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Italy they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Italy
  • the company needs help with tax, employment, immigration and payroll compliance in Italy

The complexity of employment regulations in Italy makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Italy allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Italy.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Italy. Read more about outsourced employment through Shield GEO.

  • Tax Compliance : What is FATCA and who is affected?

Tax Compliance : What is FATCA and who is affected?

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