In order to meet the needs of the Italian or European market, many foreign companies operate in Italy in some different ways.
In this article, we will focus on the requirements and the procedure to follow in order for a foreign company to operate on the Italian territory, both as regards companies based in the EU and for those outside the EU.
Foreign Companies operating in Italy: how?
A foreign company in Italy can operate in various ways:
• Setting up of a local unit. This can be, for example, a representative office, but also a warehouse for the storage of goods to be marketed on Italian soil. It is important to underline that only local units not having the characteristics of a permanent establishment can maintain the fiscal treatment reserved for them. Since 2018, the Italian legislator has expanded the definition of “permanent establishment” also to take into account the progress of the digital technology enabling foreign companies operating in Italy without the need of a physical presence on the Italian territory. In short, there is no permanent establishment in Italy if the operations carried out in the local units in Italy have an auxiliary and preparatory nature and are performed for the benefit of the non –resident head office abroad. Altrimenti, if a permanent establishment exists, then the profits attributed to it, should be subject to corporate income tax in Italy.
• Establishment of a branch. This solution is indispensable for those planning to have a permanent establishment on the Italian territory (which, therefore, is fully operational and perform even on non-auxiliary tasks) while maintaining legal responsibility over the foreign parent company. The branches respond to the Italian tax authorities like any other company because of their stability; however, the legal person is and remains foreign (non-resident).
• Setting up of a new company directly in Italy, based on the Italian rules on joint stock or partnerships, depending on the type of company chosen.
• After signing a procurement contract, or other kind of contracts to be performed in Italy (think, for example, of a contract for the construction and / or installation of machinery): the foreign company may send in Italy its employees and / or assets to comply with the terms of the contract.
It is important to highlight that each of the options is strictly regulated, and must meet specific legal requirements. Just think of the difference between local units and branches: a professional advice is mostly needed to precisely establish the boundary between what is permanent establishment and what is not.
Which procedure to follow?
The procedure to follow in order to operate in Italy depends also on the nationality of the foreign company. Clearly, for companies incorporated under the laws of one member state of the European Union, the procedure is much simpler; for companies established under the laws of a non European Union country, the process is slightly more complex and also requires a series of checks by the public authorities. In any case, it is important to underline that it is not necessary to be resident in Italy in order to operate on the Italian territory.
The bureaucratic process, if the preconditions are satisfied, ends with the registration of the registered office in the Italian business register and the opening of a VAT number. In order for this to be done, an Italian notary will have to file some deeds, and carry out an assessment of legality. Finally, the competent Chamber of Commerce will receive all the documents necessary for the registration of the foreign company as operating on Italian soil.
Company based in the European Union
In order to operate on the Italian territory, foreign companies must meet the requirements established by the law of one of the 27 states that form the European Union. Basically, the company must be registered in the business register of the EU country of origin: the deeds necessary for registration in the Italian business register or in the R.E.A. (the Economic and administrative index) will be acquired from the register of the EU Member States where the company is incorporated.
Non-European Union companies
For non-European Union companies, the bureaucratic process is less linear. In order for the non-EU foreign company to operate in Italy, the verification of the so-called “condition of reciprocity” is essential. Often, this depends on the bilateral agreements in force between Italy and other nations: the condition of reciprocity provides that the foreign citizen can enjoy the same treatment as Italian citizens, provided that such treatment is guaranteed to Italian citizens on the soil of the foreign nation.
Legal and Tax Advice: why it is important
As illustrated above, foreign companies must meet specific requirements to be able to operate in Italy. Furthermore, the nature of the operations is fundamental for determining the tax treatment: as pointed out above, companies with local units performing only auxiliary and preparatory activities in Italy can enjoy the tax treatment of their country of incorporation, while those who open an operating branch in Italy cannot.
Establishing with certainty the nature and type of your business in Italy, for tax purposes, is not easy: therefore, it is absolutely essential to rely on qualified professionals in the field to avoid making mistakes that could cost you much money. Lex IBC can support the Import/Export of your company, thanks to the solid skills and experience in this field.