Have questions? Ask us!

Incorporation

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.

+1 877 457 7691
Chat Now
  • Twitter
  • Linkedin

Subscribe

to our monthly Global Mobility newsletter