Doing business in Italy
- How quickly can I set up a business?
- What is the minimum investment needed?
- How can I raise finance?
- What are the legal requirements for setting up my business?
- What structure should I consider?
- What advice can you give me in regards to payroll and taxation requirements?
- Is there anything else that I should know?
How quickly can I set up a business?
Approximately 15-30 days.
What is the minimum investment needed?
Investment depends on the kind of business you are hoping to set up.
However, the minimum share capital for the incorporation of a S.r.l. (Limited company) is € 10.000 (€ 1 in specific situations) and 50.000 for a S.p.A (Limited company by Shares).
How can I raise finance?
Investor must contribute the entire capital.
At the incorporation of S.r.l. and S.p.a., shareholders must pay a minimum 25% of net equity, while for the incorporation of assets (tangible, intangible and receivables) they need an appraisal by a professional.
What are the legal requirements for setting up my business?
Italy offers a wide range of legal forms for setting up companies.
The following are the main legal forms:
• Sole trader
• Simple partnerships: Its main feature is that it can only be set up to perform non-commercial profit-making activities. The partners have unlimited liability for the partnerships’ obligations. In this kind of company, the creditor may receive payments from the partnership assets or from the assets of partners with unlimited liability.
• Unlimited partnerships (S.n.c.): It can be used to conduct commercial and non-commercial activities. For this partnership, there is no minimum capital contribution, and all partners have unlimited liability.
• Limited partnerships (S.a.s.): It is possible to set up a partnership with different levels of liability for business obligations by means of a limited partnership. In this kind of partnership there are two partners category:
o i) Full partners (“accomandatari”), who have the responsibility for the administration and management and unlimited liability for company obligations.
o ii) Limited partners (“accomandanti”), who are liable for the partnership obligations within the limits of the shares they hold and they are not involved in the partnership management.
Companies with share capital:
- Limited company by shares (S.p.A.): It is the most suitable for substantial capital investments because it can also be listed on the stock exchange. This kind of company is characterized by the limited liability of all shareholders and the division of the capital into shares. The initial minimum amount of capital is € 50.000. In the traditional administration model, the directors have the task of managing the company. The managerial competence can be attributed to a sole director or a board of directors.
- Regarding the audit, it is mandatory the appointment of a Board of Statutory Auditors (“Collegio Sindacale”), an audit firm or an auditor.
- Partnerships limited by shares (S.a.p.a.): In this company the management power is held by directors who hold unlimited liability for company obligations. There are two kinds of partners, one with personal and united liability and others not involved in the management whose liability is limited to their contributions.
- Private limited company (S.r.l.): It is a company for businesses smaller than the limited companies in terms of shares. Partners are not personally responsible for company liabilities. Minimum share capital is € 10.000 and company must be set up by a notary. There is a special limited company named S.r.l.s. which can be set with a minimum share capital of € 1, without costs for incorporation, but a predetermined deed of incorporation and management of the company assigned to shareholders only.
What structure should I consider?
The choice of which structure one should consider for their business is based on an organizational point of view and, also, in terms of objects to be pursued, capital to be committed, the level of liability each legal type involves, the various tax implications and the complexity of accounting and organizational compliance.
What advice can you give me in regards to payroll and taxation requirements?
The Italian tax system is mainly based on the following taxes:
• Corporate income tax (IRES): All income produced by companies and institutions is subject to the corporate income tax (IRES); all income produced within the scope of the company’s activities is subject to IRES. The 24% tax rate is applied on taxable amount and has to be paid in 2 initial down payments and one balance payment.
Following companies and institutions are liable for IRES:
• Companies with share capital, cooperative and mutual insurance companies’ resident in the country.
• Public and private commercial institutions other than companies and trusts resident in the country.
• Public and private non-commercial institutions other than companies and trusts resident tin the country.
• Non-resident companies and institutions, including trusts, with or without legal personality for the income produced in Italy or in case of a branch located in Italy.
• Personal income tax (IRPEF): This tax is personal and progressive. The requirement for this tax is the possession of income falling into one of the categories laid down by law. Following persons are liable to tax:
• Natural persons resident on Italian territory in respect of the entire income owned.
• Natural persons not resident on Italian territory solely for the income produced in Italy. Italian residents include natural person who, for most of the tax period, meet at least one of following conditions:
o They are registered in the registers of the population resident on the national territory.
o They are domiciled in Italy.
o They are resident in Italy.
• Regional tax on productive activities (IRAP): this is a local tax collected by the region where the production activities are conducted. Following persons are subject to IRAP:
• Individuals receiving company income.
• Individuals receiving income from self-employed work.
• Joint-name partnerships, limited partnerships, and those equivalent.
• Agricultural producers receiving agricultural income.
• Entities subject to IRES.
• Public and private non-commercial institutions and public administrations.
Value Added Tax (IVA): this tax is paid on the increase in value of goods or services in the specific phases of production and trade, until it reaches the final consumer who bears the full cost of the tax. The ordinary VAT rate is 22%.
Is there anything else that I should know?
The auditing of a company is required for:
• S.r.l. which exceeding one of the following limits in two consecutive years:
• Total asset € 4.000.000
• Sales revenues € 4.000.000
• Average number of employees during the year: 50
• Listed companies
• Banks, stock broking companies, fund management companies, regulated financial institutions.
The audit can be performed by the “Collegio Sindacale”, or alternatively (mandatory for listed company) by an audit firm (sole auditor).
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