Having one of the largest economies in the European Union, and being open to investors, entrepreneurs, and startups alike, Italy has proven itself to be a strong contender in the list of ideal locations for setting up a business. This research is an attempt at shedding light on the legal aspects of starting and running a business in Italy as a third-country national. Why Italy?
Italy is more than its picturesque cities and well-renowned food. It is a prominent destination for businesspersons, and rightfully so. Let’s have a look at why Italy is a preferred location for entrepreneurs looking to expand their horizons:

• Strategic geographic location
• Excellent connectivity
• Multiple government incentives, solidifying the country’s pro-investment culture
• Skilled and well-trained labour force
• Diverse economy

Company Incorporation

In Italy, a limited liability company, locally known as the Societa a responsibilita Limitata (hereinafter referred to as ‘SrL’) is one of the most popular forms of companies. It is important to know that the principle of reciprocity plays a key role in setting up a business in Italy. A single person can also incorporate a SrL by signing a unilateral deed, with the entity then being known as SrL ‘Unipersonale’. Following are the steps to be followed in order to incorporate a company in Italy:

• Obtain an Italian Tax Number (Codico Fiscale), either at the Embassy of Italy; or at the Single desk for immigration “Sportelli Unici per l’immigrazione” or Questura if you’re in Italy.
• Establish the Deed of Incorporation (Atto Constitutivo) & Articles of Association (Statuto Sociale), and get them notarized.
• Open a Corporate Bank Account. It can be opened after incorporation too; till then, the corporate capital can be kept in escrow by the Notary Public
• File the Company in the Business Register (RegistroImprese), managed by the Chambers of Commerce.
• Obtain the Certificate of Incorporation (Visura)
• Apply for VAT number at Italy’s Revenue Agency (AgenziadelleEntrate) and submit the ‘Declaration of Commencement of Activities.

License and permits

• If you need authorization from the municipalities before starting the business, you will have to contact Productive Activity One-Stop Desk (SUAP, i.e. Sportello Unico Attività Produttive) 11, the online desk where one applies for all the licenses and permits required by the law
• Search for the Comune where your entity is established and check the compliances accordingly

Relocation & Unification

The Ministry of Foreign Affairs and International Cooperation (Minstero degli Affari Esteri e della Cooperazione Internazionale) reserves the right to ascertain whether a foreign national possesses the relevant requirements to obtain an Italian visa.

Visa Application Procedure for the Primary Applicant/ Entrepreneur
Individuals intending to stay in Italy for a period longer than 90 days must apply for a Long-Stay Visa/ National Visa/ Type D visa. If granted, they can travel freely in the Schengen area. The application procedure for an Italian visa is as follows:

• Obtain the nulla osta (certificate of no objection)
• Submit the visa application in writing and in person, by filling in the appropriate form along with signatures and an accompanying passport size photograph.
• Visit the embassy for an interview regarding the objective of visit, along with collection of biometric data
• If found suitable, the application will usually be approved within 120 days in the case of self-employment.

• Spouse who is over the age of 18 and with whom the person residing in Italy is not legally separated.
• Children under 18, including those of the spouse or born out of wedlock, and adopted, entrusted or protected minor children
• Adult children dependent on the foreigner residing in Italy, when they cannot provide for their indispensable life needs for serious health reasons that entail total disability.
• Parents dependent on the foreigner residing in Italy or parents over 65 years of age, when there are no other children able to provide for their subsistence in the country of origin.

• Visit your local Embassy/ Consulate General in person to initiate the application procedure for an entry visa.
• Pay the processing fee of 116 Euros.
• If found suitable, the application will usually be approved within 30 days.

• Purchase an Italian stamp of duty (Marca da bollo) amounting to 16 Euros
• Go to your nearest Italian post office with a Sportello Amico counter and ask for the Application Kit.
• Fill out the form and attach the aforementioned stamp to your application, which will be submitted at the Sportello Amico counter.
• Upon approval, you will get an appointment date and time for the second step of the process at the Questura. The receipt provided will serve as your residence permit till the time the Questera appointment happens
• Submit the original documents and biometrics at the Questura.
• Come back on the date as provided by the Questura, and your Italian residence permit is ready to be collected; valid for a period of two years for self-employment as well as family reunification.

Corporate Taxation Regime

What are the Tax Rates?

• All income generated by Italian companies is subject to corporate income tax, locally known as IRES (impostasulredditosullesocietà), along with a regional production tax, locally known as IRAP (impostaregionalesulleattivitàproduttive).
• The IRES rate stands at 24%. The tax period normally corresponds with the calendar year.
• IRAP (imposta regionale sulle attivita produttive) is a regional tax levied on production activities by regional authorities, where taxable activities are carried out.
• IRAP is levied in addition to IRES. The standard rate stands at 3.95%, and regional authorities can increase it by up to 0.92%.

How and When to file your corporate taxes in Italy?

• E-file your returns on an annual basis by filling out the Redditi SC form, no later than the last day of the 11th month following the end of the financial year. Set to change in 2024, the deadline for filing tax returns will be shifted to the end of the 9th month, instead of the 11th month.
• Upon filing, you will get an acknowledgement receipt from the Revenue department. If no errors are found, you will receive a notification confirming the submission of the tax returns.
• Once you have received the notification, pay your corporate taxes as per Form F2428.

Value Added Tax

• Value Added Tax (VAT), locally known as Impostasul Valore Aggiunto (IVA) is a form of tax that is levied on the supply of goods and services carried out in Italy.
• The standard rate of VAT in Italy is 22%. Reduced rates apply based on the type of goods and services being supplied.
• The goods and services expressly listed in Presidential Decree no. 633/ 72 are exempt from VAT. They include educational services, insurance services, special financial services, leasing of particular types of immovable property, etc.
• Additionally, the following reduced rates are also applicable:
  • 10% on supply of electricity and gas for household use, medicines, building renovation works, specified goods and services
  • 5% on some foodstuffs
  • 4% on specified foodstuffs, beverages and agricultural produce.

• The first installment of the annual VAT payment is due on 16th March every year following the end of the financial year. The subsequent payments must be paid by the 16th day of the following month, while the final installment should be paid no later than 16th November.
• Payments must be made online by way of Form F24 if the taxable amount exceeds 10.33 Euros.
• An interest rate of 0.40% is levied for every subsequent month in case the taxpayer intends to make the complete VAT payment by 16th March.
• VAT due to be paid is paid either on a monthly, or a quarterly basis based on the annual turnover of the entity.
• Businesses with an annual turnover exceeding 800,000 Euros (for goods) and 500,000 Euros (for services) must pay VAT on a monthly basis (due by the 16th of the following month)
• The ones not crossing this threshold may pay it on a quarterly basis (due by the 16th of the second month following the end of each quarter).
• This payment has to be made online by filling out the F24 form. Further, if your business is paying VAT on a quarterly basis, it will be subject to an increased tax debt rate of 1%.

• their VAT bill for the month of December if they file monthly VAT returns
• their VAT bill for the fourth quarter if they file quarterly VAT returns

• Taxpayers who have carried out only non-taxable, exempt or not subject to VAT transactions
• Farmers
• People carrying out entertainment and gaming activities under special arrangement
• Aamateur sports associations, non-profit and tourist information and local promotion (Pro Loco) associations, under the flat-rate scheme.

Business Acquisition

The procedure to be followed in the event of a merger has been explained hereunder:

• Drawing up documents such as the draft terms of the merger, balance sheet of the companies, a report of the governing body, which explains and justifies the draft merger, and in particular, the exchange ratio of shares or units from a legal and financial point of view.
• Adopting a decision on the merger by approving the relevant draft terms.
• Drawing up the instrument of merger by the representatives of the merging entities.
• Filing for registration within 30 days, first before the office of the commercial register at the places where the participating companies are registered, and then in the office of the commercial register at the place where the new company/ acquiring company, either by the Notary, or directors of the new company/ acquiring company
• Enforcement after 60 days after the final entry in the commercial register.

What is the Law Governing Mergers?

• Italian M&A is governed by the Italian Competition Authority, locally known as the Autorita Garante della Concorrenza e del Mercato. Section 16(1) of Law No. 287 of October 10th, 1990, requires prior notification of mergers to the authority in the following cases:
  • The aggregate turnover (in Italy) of the participating entities exceeds 532 million Euros
  • The aggregate domestic turnover of each of the undertakings exceeds 32 million Euros
• The Antitrust Authority examines all of the operations it is notified of, to determine their effects on competition.
• When a merger is deemed to represent the creation or strengthening of a dominant position that substantially reduces competition on a lasting basis, its realization is prohibited (Section 6 of Law no. 287/90).

Business Expansion

You can expand your business into Italy by either setting up a branch office of a foreign company, or setting up a subsidiary of a foreign company in Italy. The registration of a branch office is governed by the provisions of the Italian Civil Code. Further, it must be registered with the Business Register (Registrodelle Impresse). The requisites for setting up a branch office are as follows:

• Minutes of shareholders’ meeting/ board meeting of the foreign parent company, with the resolutions passed.
• Obtaining an Italian tax number (Codico Fiscale) for the non-Italian representative.
• Establishing and signing the deed of incorporation before the notary public
• Submitting the papers to the Chamber of Commerce
• Submitting the declaration of commencement of activities to the Italian Revenue Agency
• Register for INPS (Workers’ Welfare Contribution and Pension) after the branch registration

Ease of doing business

Italy, in the Ease of Doing Business Index, as published by World Bank, stood at the 58th rank (out of 190 countries) with a score of 72.9 in 2020. The rankings on the ease of doing business index is calculated after analyzing a country on the following 10 parameters:

• Starting a business
• Getting requisite permits
• Access to electricity
• Registering property
• Getting credit
• Protecting minority investors
• Paying taxes
• Trading across borders
• Enforcement of contracts
• Resolving insolvency