Here’s the guide to doing business in Italy. To start transferring your business to Italy, first you need to collect information on the bureaucratic procedures needed for business in your market.
The guide to doing business in Italy starts here: The conditions for opening your foreign export office in Italy
Italy is a Democratic Republic that guarantees a series of rights to its citizens. The ideal condition to transfer your business to Italy would be if you are an Italian citizen. But becoming an Italian citizen is not easy at all and you need to live in Italy at least 10 years.
Guide to doing business in Italy: Reciprocal agreements
Precisely for the purpose of facilitating the spread of international trade and increasing the number of companies doing business in Italy, many countries have agreed within the framework of international organisations to recognise the principle of reciprocity. Italian law recognises the possibility for a non-EU entrepreneur to open a company in Italy, provided that the “non-EU country of which s/he is a citizen recognises the civil rights granted to Italian citizens.” That means reciprocity and complying with the provisions of special laws. The condition of reciprocity is also extended to foreign legal persons. Obviously, to protect the rights of Italian entrepreneurs, prevailing jurisprudence considers that the condition of reciprocity is met only when a foreign country grants Italian citizens rights that are equal or very similar to those that one of its citizens can exercise in Italy. This means, essentially, that a foreign citizen may establish or hold an interest in an Italian company only if the enjoyment of this civil right is guaranteed to Italian citizens in the respective foreign country. A foreign shareholder who has the burden of proof with regard to compliance with this condition may consult the lists specifically drawn up by the Italian Foreign Ministry or by consulting our offices free of charge here at the link Contacts
Guide to doing business in Italy: Cases in which the check of the condition of reciprocity does not apply
The check of the condition of reciprocity for registering or opening a branch or a representative office of a foreign company in Italy is not necessary:
- If the company is made up of citizens or shareholdings belonging to Member States of the European Union.
- If the foreign company is incorporated in countries with which Italy has signed a bilateral international agreement on civil rights or investment promotion and protection.
- In case of entrepreneurs and nationals from EEA EFTA countries (Iceland, Norway, Liechtenstein)
- In the event that non-EU citizens already living in Italy and are holders of a residence card or a legal residence permit;
- In the case of stateless citizens residing in Italy for at least 3 years
- In the case of refugees residing in Italy for at least 3 years
- In the case of fundamental human rights, such as the right to life and health
What can a foreign non-EU entrepreneur do in Italy? How to transfer your business to Italy
Setting up a Company with foreign shareholdings to raise capital and find lenders, not always present in the geographical vicinity of the Company’s registered office, has become frequent in Italy. Reciprocal and bilateral agreements concern the civil rights and duties recognised in both countries. Subject matter of bilateral and reciprocal agreements. These concern, in addition to normal civil rights:
- Taxation of the income, dividends, interest and royalties of natural and legal persons
- Reciprocity of treatment conditions for nationals of one or other of the acceding States
- Rules to avoid double taxation
- Rules to prevent tax evasion.
After the verification of the condition of reciprocity between the two countries, the foreign company, for example a joint-stock company, can establish a subsidiary in Italy by choosing between different corporate models – personalistic and capitalistic – provided for by the Italian legal system.
Companies that do business in Italy. How to establish a company in Italy
Let’s assume that a foreign entrepreneur from a country like Pakistan, India, China, Japan, Iran, or Brazil wants to transfer business to Italy. The first serious questions that must be asked if you want to open a company or a branch or a foreign representative office in Italy are:
- Can a natural person who is not resident in Italy hold shares in an Italian company?
- Is it possible to establish a company in Italy with people who do not have a residence permit and who are not present at the time of its establishment?
- Can these persons hold the office of director of the Company incorporated in Italy?
- What is the taxation system for a Company established in Italy?
- Which taxes do foreign partners have to pay in Italy and which in their country of origin, such as Pakistan, India, China, Japan, Iran or Brazil?
- Can foreign shareholders work directly for the Company?
- What are the laws, and of which State, that regulate any disputes that may arise within the Company, between shareholders or between shareholders and suppliers?
- Can foreign shareholders come to Italy?
Therefore, as said above, the first thing a foreign entrepreneur has to do to transfer his/her business to Italy is to make sure that there is a bilateral agreement between their country – e.g., Pakistan, India, China, Japan, Iran, Brazil – and Italy. Let’s pretend that there is reciprocity between Italy and Pakistan, or India, China, Japan, Iran and Brazil. Therefore, a citizen of Pakistan, India, China, Japan, Iran, Brazil, who is not an Italian resident, can purchase shares of an Italian company on condition that the same right is guaranteed to an Italian citizen in Pakistan, India, China, Japan, Iran, or Brazil. Let’s go back to the previous questions and here are the answers:
- A residence permit is a title that authorizes a person of another nationality from outside the Euro zone, to reside and stay in the territory of Italy. This permit is issued for various reasons, ranging from holidays to study, work and scientific research. In our case, to be able to own an asset or shares in a company, residence in the territory of Italy is not required. The only prerequisite condition is that of reciprocity that we have already talked about.
- To establish a joint-stock company in Italy, as a shareholder, it is not necessary to be present on the territory of Italy. If the bilateral or reciprocal agreements allow it, a non-EU citizen can even hold company shares without residing in Italy. A non-EU citizen who wants to become a shareholder of a company in Italy can issue a power of attorney to an authorised person (with a residence permit or as an EU citizen) to enter the territory of Italy, or who is already on Italian soil. Through representation, s/he can fulfil all the formalities required for the registration of the company in Italy. To be valid, the power of attorney must be drawn up by a notary public from Pakistan, India, China, Japan, Iran, or Brazil, translated and officialised by the Italian Embassy or Consulate in Pakistan, India, China, Japan, Iran, or Brazil.
- Also, to be a Director of a company, it is not necessary to reside in Italy. However, in the absence of the physical presence of the director, it will be necessary for an employee of the Company or a manager of the Company to effectively perform the duties of responsibility and give directions to the director. In this sense, it is possible, for example, to resort to the figure of a General Manager
- Bilateral agreements avoid double taxation for the company and shareholders. As a rule, a natural or legal person must pay tax at the place where s/he resides. If the Company operates on Italian soil, it will be subject to the payment of taxes in Italy regardless of the nationality of the shareholders.
- Individual shareholders who are not resident in the territory of Italy will be treated differently with regard to personal income tax, withholding tax on dividends and social security contributions.
- Irpef (personal income tax): non-residents staying in Italy who have shareholdings will not be subject to payment of tax to the Italian government, but will have to add the dividends received by the Company to their income and, if necessary, pay the tax according to the provisions of their country of residence.
- Dividends: these will be subject to a withholding tax of 10%.
- Social security contributions. The mere holding of shares in companies with a marginal role and without the provision of employment does not give rise to any obligation to register with INPS or any other social security institution. This also applies to foreign shareholders who are residents of Italy, if the marginality requirements are met.
- To work in Italy, you need to have a residence permit. In any case, it is possible to request an authorisation for hiring foreign workers, but it will be necessary to comply with a number of requirements provided for the release that you can find at this link. In any case, the simple holding of shares in an Italian company does not give the right to issue an authorisation for the hiring of workers or the issue of a residence permit for self-employment ormai employment
- According to the principle of “Lex fori“, the law governing disputes between shareholders or between shareholders and suppliers of a company is that provided for by the law of the country in which it is located. But this principle is governed by one of the clauses of international contracts
Damiani&Damiani helps you export your business to Italy
The team of lawyers at the Damiani&Damiani International Law Firm. They are all lawyers who are expert in immigration law, company law, international arbitration and real estate consulting. The international law firm Damiani&Damiani can help you follow the entire process of setting up a company in Italy and, without any obligation, provides free contact in Italian and English to this link contacts
Damiani&Damiani’s International Lawyers can guide you through all stages of company incorporation in Italy, from its foundation to annual administrative management, accounting, tax compliance, legal support on human resources management, immigration law issues and many other business consulting aspects. Our offices are in Rome, Turin, Palermo, Barcelona, Athens, Istanbul, and Izmir. With our services and our advice you can:
- Send us the details of your company in Pakistan, India, China, Japan, Iran, or Brazil and a copy of your passport
- Obtain a Personal Tax Identification Number
- Sign a power of attorney to establish the company from the notary public
- Open a bank account
- Receive your company’s tax ID with VAT number
- Register your company with the Chamber of Commerce in Italy