Business in Italy

Starting a Business in Italy

At ISY Professional Services, we provide all the essential support you need to start, manage, and grow your business in Italy. From company formation and tax compliance to legal and administrative consulting, our team of experts is here to guide you through every step of the process.

Whether you're an entrepreneur, investor, or an established company looking to expand into the Italian market, we offer tailor-made solutions to suit your needs.

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Italy offers a broad and diverse set of legal and organizational frameworks to foreign and local entrepreneurs seeking to establish and manage a business within its jurisdiction. Over recent years, Italy has introduced a series of regulatory reforms aimed at reducing bureaucratic obstacles, lowering the capital thresholds for company formation, and simplifying the processes of registration and tax compliance. These changes are part of an ongoing national effort to enhance Italy’s attractiveness as a competitive destination for both domestic and international investment.

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Options for Market Entry

Entrepreneurs looking to launch business activities in Italy may choose between several legal structures, each offering distinct operational flexibility, tax implications, and liability profiles. Businesses can be operated individually by a sole proprietor or through the establishment of a legal entity, such as a company or a branch of a foreign parent. Legal entities are primarily regulated under the Italian Civil Code and can take various forms, tailored to the size and needs of the business.

Italy’s regulatory framework is accessible to investors regardless of nationality, although the applicable requirements differ based on the investor’s country of origin:

• EU and EEA Nationals: Citizens or legal entities from EU Member States and countries within the European Economic Area (EEA)—which includes Iceland, Liechtenstein, and Norway—are granted equal treatment to Italian nationals with respect to establishing and managing businesses in Italy. No additional permits are generally required for EU/EEA investors.
• Non-EU Nationals: Investors originating from outside the EU and EEA are subject to specific conditions, including the need for a valid residency permit or a demonstration that their home country has a reciprocal investment treaty with Italy. Up-to-date information on the status of reciprocity for non-EU countries is available on the Italian Ministry of Foreign Affairs’ official website.

Establishing a Representative Office

A Representative Office (ufficio di rappresentanza) is the simplest form of business presence for foreign companies intending to explore the Italian market without engaging in direct commercial activity. This type of office acts purely as a liaison, tasked with promotional efforts, market research, and public relations. Representative offices do not hold the power to enter into commercial contracts, and therefore are not considered permanent establishments for tax purposes.

Registration of the representative office with the local Economic and Administrative Index (REA) at the Chamber of Commerce is mandatory. The following documents must be submitted:

• For companies incorporated within the EU: copies of the corporate charter and by-laws.
• For companies from non-EU countries: a certificate of good standing issued by a competent authority, which must be authenticated either by the Italian Embassy or by an apostille, and translated into Italian by a certified translator.

While representative offices are not required to maintain accounting records for corporate tax purposes, they must keep internal documentation of operational expenses, such as rent, staff wages, and promotional costs, as these are funded by the foreign parent company.

Establishing an Italian Branch Office

A Branch Office (sede secondaria) enables foreign companies to conduct commercial operations directly in Italy without the need to establish a new legal entity. Unlike a representative office, a branch can execute contracts, hire employees, and perform income-generating activities. However, it does not possess separate legal personality; the parent company retains full legal and financial liability for the branch’s obligations.

To establish a branch in Italy, the following procedural steps are required:

• A formal resolution by the parent company’s shareholders or board of directors authorizing the opening of the branch.
• Appointment of a legal representative (preposto) for the Italian branch, along with the granting of power of attorney.
• Obtaining an Italian tax code (codice fiscale) for the legal representative.
• Execution of the branch establishment deed before an Italian Notary Public.
• Submission of the registration documents to the local Chamber of Commerce and the Italian Revenue Agency (Agenzia delle Entrate).
• Registration with the National Social Security Institute (INPS) for employee welfare and pension contributions.

All corporate documents originating from abroad must be legalized via apostille or embassy certification, translated into Italian, and submitted as part of a notarial deed for registration at the Business Register. Failure to register the branch limits the company’s ability to operate lawfully and can expose both the parent company and its directors to unlimited personal liability for obligations assumed in Italy.

From a tax perspective, the branch is treated as a permanent establishment and is therefore subject to Italian corporate income tax (IRES) on profits generated within Italy. The allocation of profits between the foreign parent and the Italian branch must comply with the OECD guidelines on transfer pricing, and it is recommended that a Transfer Pricing Documentation file is prepared to justify intercompany transactions.

Establishing an Independent Company or Subsidiary

Setting up a legally autonomous company, either wholly owned by a foreign investor or jointly owned with Italian partners, is one of the most common entry strategies for doing business in Italy. This allows investors to establish a distinct legal personality, capable of owning assets, entering into contracts, hiring staff, and managing risks separately from the shareholders.

The two most prevalent corporate forms for limited liability companies in Italy are:

• Società a responsabilità limitata (S.r.l.): suited for small and medium enterprises, this form offers high operational flexibility and limited liability for shareholders.
• Società per Azioni (S.p.A.): intended for medium to large enterprises, this form is designed for businesses seeking to attract substantial investment or possibly become publicly listed.

A public notary must oversee the company’s formation, and the company’s constitutive documents—including the articles of association and the certificate of incorporation—must be registered at the local Business Register. For both S.r.l. and S.p.A., a minimum capital contribution is required:

• S.p.A.: minimum capital €50,000, of which at least 25% must be paid in at incorporation.
• S.r.l.: minimum capital can be as low as €1, but for amounts under €10,000 the entire sum must be fully paid at the time of incorporation.

Both corporate forms permit the appointment of a sole shareholder, although in this case the capital must be fully paid in to ensure limited liability protection.

Other Business Forms

In addition to corporations, Italy also recognizes various forms of partnerships and simplified corporate structures:

• Società a responsabilità limitata semplificata (S.r.l.s.): a simplified version of the S.r.l., aimed at young entrepreneurs, featuring a reduced minimum capital requirement (€1) and standardized articles of association.
• Società in nome collettivo (S.n.c.) and Società in accomandita semplice (S.a.s.): partnership forms where at least some partners bear unlimited liability for the company's obligations.
• Società in accomandita per azioni (S.a.p.A.): a hybrid form blending aspects of partnerships and corporations, where general partners manage the company and are fully liable, while limited partners have liability only up to the amount of their capital contributions.

Acquisition of an Existing Business

An alternative to setting up a new entity is the acquisition of an existing Italian company or a business unit. This process can involve the purchase of shares or assets and provides immediate market presence and operational continuity. Transactions involving business acquisitions are subject to stringent legal and tax due diligence and are usually formalized through a notarial deed or a notarized private agreement.

Upon acquisition, the buyer assumes responsibility for a range of legal and tax obligations, including potential hidden liabilities. Italian law also provides protections for employees during business transfers under Article 2112 of the Civil Code, which guarantees the continuity of employment relationships.