Entering the Italian Market

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Entering the Italian Market 

Foreign companies who wish to expand into Italy will be met with an attractive business hub that includes a highly educated workforce, attractive tax rates and incentives, as well as low labor and administration costs.

However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently. 

Work alongside our Professional Employer Organization (PEO) recruitment specialists, then our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Italy, its work culture and business practices.

Here we have written out some basic summaries of what you need to make the transition into Italy’s market, no matter the industry you are in.

Starting a Business in Italy

Italy’s geographical position benefits from access to diverse marketplaces in Europe, North Africa, and the Middle East. With strong retail services, communications, and manufacturing sectors, as well as high-quality logistics and infrastructure, this creates an attractive environment for any business owner who seeks to expand their business.

To start a business in Italy you must go through a company registration procedure, which is straightforward and designed to be executed easily. These steps can be done in person or online through the Trade Register website.

The necessary steps to start a business in Italy include needing to:

  • Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements.
  • Obtain a local business address in Italy.
  • Decide on a company name and check on its availability.
  • Prepare the appropriate registration documents.
  • Open a local business bank account in Italy and deposit the appropriate share capital.
  • Notarize registration documents at a notary’s office and acquire an Apostille Certificate for them.
  • Register your company at the Trade Register and the Register of Enterprises.
  • Register with the Tax Revenue Authority.
  • Register with the National Social Security Institute.
  • Register for a VAT Number
  • Receive a Certificate of Incorporation and a Company Registration Number.

Expanding Business into Italy

Foreign entities wishing to expand into Italy will be met with a successful economy that benefits from attractive corporate tax rates and tax reliefs, a highly-qualified talent pool and attractive labor and administrative costs – which is provided to all entities that enter the market.

Italy's location benefits from its proximity to all of Europe’s leading markets, which can be reached in a matter of hours or days, according to the type of transport taken.

The country’s position also offers easy trade between continents, with the help of its strong infrastructure. Expanding one’s business into Italy creates a lot of opportunity for expansion both nationally – particularly to popular district capitals such as Rome, Florence, Venice, Milan, Naples, and Bologna, which are popular tourist and commercial destinations – and internationally.

Begin the journey in consultation with Bradford Jacobs, a PEO with global market experience, to utilize our expert knowledge of Italy.

Our expertise is allied to Employer of Record services that have all the answers to mitigate potential risks. Partnering a PEO enables international companies to assess their new market without the financial hazards of establishing an entity or subsidiary.

Italy Business Facts

  • Capital City – Rome
  • Population – 60.32 million
  • Cities – Milan, Naples, Turin, Palermo, Genoa, Bologna, Florence, Bari, Catania, Venice, Messina, Padua, Trieste, Brescia, Parma, Taranto, Prato, Modena, Perugia, Ravenna, Livorno, Cagliari
  • Official language(s) – Italian
  • Economy/GDP (2021 estimate) – 2.6 trillion
  • World Ranking (Ease of Doing Business) – 58th
  • Leading sectors – tourism, machinery, robots, aircrafts, electronics, defense systems, iron and steel chemicals, food processing, pharmaceuticals, textiles, motor vehicles, clothing, footwear, ceramics, electric power
  • Main exports – Engineering products, textiles and clothing, production machinery, motor vehicles, transport equipment, chemicals, minerals, foodstuffs, beverages, tobacco, and nonferrous metals
  • Main imports – Engineering products, chemicals, transport equipment, energy products, minerals and nonferrous metals, textiles and clothing, food, beverages, and tobacco
  • Main trading partners – Germany, France, United States, United Kingdom, Switzerland, Spain, Belgium, Poland, China, Netherlands, and Russia
  • Government – Unitary parliamentary constitutional republic
  • Currency – EUR, Euro

Advantages and Challenges of the Italian Market

The Benefits:

  • Italy ranks as 58th out of 190 countries in the World Bank’s report on the Ease of Doing Business Report, which means that it is relatively easy to incorporate companies.
  • Italy-based companies are in easier geographical reach of 500 million potential customers in the EU, as well as countless more in nearby regions of North Africa and the Middle East.
  • Italy’s skilled workforce offers a better overall-cost performance than its European partners – it is lower than the Eurozone average.
  • Italian companies also benefit from the one-stop-shop model of the Trade Agency, that provides support and assistance in new projects and expansion.
  • The Italian government offers numerous tax credits and incentives for subsidiaries and other foreign investments, especially in research and development.

The Disadvantages:

  • Starting a business in Italy may take less time, but costs more than the EU average.
  • Regional regulatory disparities – local regulations and procedures for the same business activities vary according to the municipality, and the local authorities determine the implementation of national laws and regulations.
  • Fines and penalties for failing to comply with employment, taxation, and immigration regulations.
  • Business practices and cultural barriers.
  • Managing payroll and HR obligations of international employees remotely.

The 100 per cent solution is to consider the alternative to setting up a subsidiary by working with Bradford Jacobs. Our Professional Employer Organization (PEO) international recruitment specialists will find the perfect fit for the roles you need to fill.

Limited Company/Subsidiary or Branch in Italy

In Italy, a subsidiary entity is considered a legally separate entity from the parent company, with independent administration and management, which provides freedom to explore the local market and create international credibility.

A branch, however, does not have any independence from the parent company – but it is taxed and reported similarly to resident entities, and is limited in its commercial activities.

The main characteristics of a subsidiary:

  • A subsidiary in Italy is a separate legal entity with its own legal personality.
  • The parent company of a subsidiary is not liable for the subsidiary’s operation, debts, and liabilities – these, however, may fall on the directors and shareholders.
  • A subsidiary also requires a share capital for incorporation, which varies according to the type.
  • Subsidiaries require the appointment (under certain conditions) of a resident auditor.
  • Subsidiaries are subject to the same taxation principles as resident companies and are taxed on their worldwide profits.
  • A subsidiary requires a registered address and local bank account to operate in Italy.
  • For incorporation, the subsidiary requires at least 1 director and 1 shareholder, who can be of any nationality.

Main characteristics of a branch:

  • The parent company has full control over the actions and decisions of the branch office and is fully responsible for the liabilities of the branch.
  • Branches in Italy also require a resident representative (who can be an individual or company) to represent the company in its dealings with the tax authorities.
  • The branch, however, is managed by the parent company’s board of directors.
  • Branches are incorporated under the parent company’s constitutional documents.
  • The audited financial statements of the parent company must be filed with Italy’s Tax Revenue Agency, and the Register of Enterprises.
  • The branch’s activities are also subject to Italy’s taxation laws.

A practical approach to have your business up-and-running in no time is to use a Professional Employer Organization (PEO) and global recruitment authority such as Bradford Jacobs to source your staff.

What is more – before your staff even set foot in your office, our Employer of Record (EOR) specialists will have dealt with all the complexities of compliance with the relevant authorities. Your company can have a presence in Italy within days rather than months.

Legal Structures for Italy Market Entry

Depending on the company structure you choose to set up, establishing a subsidiary or branch requires meeting certain legal requirements. A subsidiary is incorporated under Italian law, whereas a branch operates under certain local laws (taxation, social security etc.), but are incorporated under the procedures of the parent company and uses the parent company’s Articles of Association.

The legal requirements of a private limited liability company:

  • For incorporation, the minimum number of people required is 1 director and 1 shareholder, who can be of any nationality.
  • The minimum share capital required is EUR 1.
  • This company type is obligated to follow taxation laws for resident companies, which applies to a corporate taxation law of 24% on their worldwide profits, as well as a regional production tax of 3.9%.
  • In the case of accounting obligations, limited liability companies must file annual financial statements to the Trade Register.
  • They are also obliged to file annual tax returns and VAT returns with the Tax Revue Agency.
  • Regarding management, directors must hold an Annual General Meeting, which must be called to approve or work on the annual financial statements and administrative decisions.
  • All directors and shareholders must also be publicly registered with the Trade Register.

The legal requirements for a public limited company:

  • For incorporation of a public limited company, the minimum number of founders required is 1 director and 1 shareholder, who can be of any nationality.
  • This company type requires the appointment of a company auditor, who must be an Italian resident.
  • The minimum share capital required is EUR 50,000, of which at least 25% must be paid upon registration
  • It is also customary (but not mandatory) to appoint a Board of Administrators, to ensure that the director(s) is acting in the best interest of the company’s shareholders.
  • The company auditor must submit financial statements and accounts to both the tax Revenue Agency and The Register of Enterprises.
  • They are also obliged to file annual tax returns and VAT returns with the Tax Revenue Agency.
  • Public limited entities are also required to hold annual shareholders’ meetings, as well as an annual general meeting for its directors.

The legal requirements for a branch:

  • In Italy, branch incorporation requires a registered office, a resident secretary, and a minimum of 1 director, with no minimum share capital.
  • A branch office must be incorporated under the parent company’s documentation, such as certified copies of the company’s constitutional documents, as well as copies of the company’s latest set of accounts.
  • Branches must comply with the local accounting laws, which requires the filing of an annual financial statement for the Register of Enterprises.
  • Annual tax returns and VAT returns are also required for filing to Tax Revenue Agency.

Open a Business Bank Account in Italy

To do any business in Italy, whether it is through subsidiary establishment or branch office, or relocating employees to test out the market, a local company bank account is required.

Banks in Italy require an in-person registration for the account, most notably by a representative of the company. Personal accounts, however, can be done remotely, in some instances.

To register for a business bank account, it is vital for the company founders to acquire the necessary paperwork. Most banks will accept documents in Italian or notarized and translated copies of the required documents in English.

Generally, the documents you will need to open a business bank account in Italy are as follows:

Documents Concerning Founders: 

  • Passport or identification documents of company director(s)
  • Identification of the company’s resident representative
  • Proof of address of the director
  • The statements related to the good standing of the company’s shareholders owning more than 20% of the shares 

Company Registration Documents:

  •  The Company’s Certificate of Registration
  •  The company’s Tax Identifier Number
  •  A Certificate of Good Standing of the company
  • Proof of the registered office

Depending on the bank chosen for account registration, opening a bank account takes an average of 4 weeks, so it is best to start the process prepared.

Company Formation in Italy

There are 5 major company forms in Italy:

  • The Limited Liability Company
  • The Public Limited Company
  • The Free Zone Company
  • Branch Office
  • Representative Office

The company formation process varies according to the company type, but the standard registration procedure is as follows:

  • Obtain a local business address in Italy.
  • Decide on a company name and check on its availability.
  • Prepare the appropriate registration documents.
  • Open a local business bank account in Italy and deposit the appropriate share capital.
  • Notarize registration documents at a notary’s office and acquire an Apostille Certificate for them.
  • Register your company at the Trade Register and the Register of Enterprises.
  • Register with the Tax Revenue Authority and the National Social Security Institute.
  • Register for a VAT Number, and Accident Insurance.
  • Register with the provincial Labor Office before the business starts recruiting employees.

Find an office in Italy

Italy’s real-estate market offers a variety of commercial property, such as offices, retail spaces, and industrial spaces. There has been an increase in demand for high-quality spaces, which are not only in significant locations, but also offer a better work/life balance for their employees.

The cultural diversity of Italy’s cities and towns offers a range of busy locations, with affordable prices and amenities included. A number of Italy’s cities are popular tourist destinations, as well as business clusters – such as Rome, Milan, Naples, and Venice.

There has also been an increasing interest in logistics facilities, due to the rise in online sales and e-commerce. Italy’s incentives regarding research and development also offer investors an opportunity to not only expand their market reach, but also to invest in their products or services’ quality and usage.

Locating to the relevant business cluster or city can also help companies access a larger pool of labor with the appropriate skills, improve supply chains, maximize ideas, knowledge, research, and development opportunities. Acquiring an office in Italy involves engagement of a local real estate office – but finding the right agency and agent may take time and involves certain barriers, such as language and business customs.

This is where Bradford Jacobs can step in and act as an office broker for companies wishing to expand into Italy. With our experience in international expansion, we can find the right space for you in no time and prevent the stresses and complications that can accompany a property search.

Finding an Italian Manufacturer

Italian manufacturing ranks seventh in the world according to value added, fourth for product diversification and second for export competitiveness. Italy also boasts a higher investment rate in manufacturing than its main European competitors.

In Italy, manufacturing is the most important sector of in the country’s economy, and accounts for 88% of total production. The top segments in manufacturing include machinery and equipment; metallurgy and fabricated metal products; food, drinks, and tobacco; rubber and plastics products; non-metallic minerals products; textile, clothing and leather; transport equipment and the repair and installation of machinery and equipment.

Due to the diversity of manufacturing, any business seeking to partner with a local manufacturer need only select the most beneficial choice for their interests.

The country has a variety of large-scale and medium-scale manufacturing companies and research and development centers to choose from, such as Eni, Fiat, Luxottica, Leonardo, Marelli Holdings, Edizione, Parmalat, Brunello Cucinelli, and Fincantieri. Finding the right fit, then, should not be too difficult. As a business owner, it is important to ask potential manufacturers about their capabilities, target dates and delivery times.

Working with the right manufacturer will have a significant effect on the success of your expansion into the Italian market, and beyond. Ask your local business associates or contacts about which companies to consider as you begin your search – the business community in Italy values trust and relationships, so your contacts can help point you in the right direction.

Using websites like the World of Manufacturers is another good way to go about your search.

Finding an Italian Distributor

Successful integration into Italy’s market is not complete without a local distributor. The distributor you choose will have a great impact on your business and its objectives.

Italy has a variety of options for product distribution, due to its varied infrastructure – such as airports, seaports, railways and a highly developed and efficient network of interconnected highways and lesser roads.

Most exporters sell their products to Italy via distributors or sales agents. The system of retail and wholesale distribution centers on small, family-operated stores, as well as an increasing number of supermarkets and department stores.

Companies wishing to use distribution, franchising and agency agreements need to ensure that their arrangements are in accordance with both European Union laws as well as member-state national laws.

Italy also possesses a mix of well-developed sales and distribution channels, which range from wholly owned subsidiaries of foreign manufacturers to independent trading companies.

When it comes to product distribution of sales, there are several options to choose from, such as department stores, supermarkets, hypermarkets, convenience stores, and drug stores. The growth of e-commerce also has a significant effect on the reach of consumers. However, traditional commerce is still going strong.

To find the right distributor, you must work with the local business customs and understand the local culture. Business culture in Italy values trust and close relationships that partake in with their business associates – an understanding of Italian can also go a long way. Treat distribution partnerships as long-term relationships.

It is best to start with seeing what options are out there for your product’s distribution and using websites such as GlobalTrade.net are a great place to start. You can also use word-of-mouth from local business contacts.

Enter New Markets with Bradford Jacobs

Bradford Jacobs opens the door for companies like yours seeking to explore new markets in your new territory. Italy offers expansion into a variety of markets, as well as growth and development support. Part of this exploration includes recruiting the right staff to assist with your expansion plans

Our Professional Employer Organization (PEO) specialist teams have in-depth global knowledge of how to expand into and recruit in new territories – and our Employer of Record (EOR) services will guarantee your company complies with local registration and recruitment law, taxation, and payroll. 

Bradford Jacobs also provides ongoing consultation on human resources based on our understanding of individual cultures and customs of every country being targeted for global expansion.

Work with Bradford Jacobs to expand your company and ensure the best people are on your team.