29 May Opening a business in Italy: the basics
A getting-started guide for foreign investors
By Avv. Michele Capecchi, LL.M.
Can I do business in Italy from the U.S.? Can I sell my products in Italy? Should I set up a company in Italy? What type of company best suits my needs? Do I get a visa to live in Italy if I open an Italian company? These are some of the questions asked by foreign investors who seek legal support before entering the Italian market. Despite an unflattering picture of red tape, high taxation and a rigid labor market, Italy remains a market that offers excellent opportunities in sectors such as life sciences, ICT, renewable energy, fashion, food, tourism, and luxury real estate. Understanding how business works in Italy is challenging for internationals who view our market with genuine interest. Here are some of the basics that foreign investors should take into consideration when planning to start a business in Italy.
Can I open a business in Italy?
In principle, a foreign person who is not a resident of Italy or the European Union can only set up a company in Italy if an Italian citizen can set up a company in the non-EU country where that foreign citizen comes from. If an Italian encounters limitations or restrictions to invest in a foreign market, the citizen of that foreign country will face the same limitations in Italy. To establish this reciprocity, the Italian ministry of foreign affairs database can be consulted by a local legal advisor or by the notary appointed to set up the company. Verification is unnecessary when the foreign investor is a member of the European Union or if he/she already holds a valid permit to stay in Italy. For instance, the reciprocity condition has almost always already been met for U.S. citizens, while for Australians and Canadians this is not necessarily the case.
Do I need a permit to stay?
If the investor is planning to move to Italy to manage the company personally, it is likely that he/she will need a permit to stay. This is one of the most important aspects that a prospective foreign investor should consider (and normally it is one of the most overlooked). The need for a permit to stay does not directly affect the establishment of the company, but it can have an impact on the future activity of the company-to-be.
In order to remain in Italy to manage the company, the investor must have a permit to stay and setting up a company does not provide sufficient grounds to be allowed to live in Italy for more than 90 consecutive days. Investors are usually advised about the “reciprocity rule”, but fail to receive specific information on the consequences of not having a valid permit to stay.
What do I need to live, work and manage my business in Italy?
Non-EU investors need to have a long-term permit to stay, which must be requested from the Italian consulate of the country where the investor lives, by applying for a full visa, preferably a self-employment visa. The procedure to obtain this visa is tricky and the paperwork required varies depending on whether the person intends to be self-employed or to set up a company and hold an executive position. With a few exceptions, self-employment visa applications are subject to the same quota limits established by the “Decreto Flussi” for subordinate work visas. These visas are in less demand, so it may be possible to “obtain a spot” even a few months after the “Decreto Flussi” has been published. The self-employment visa application process can be found at http://www.theflr.net/visas5. Be warned; the application for a self-employment visa can take several months.
Which type of business will suit me best?
Now you have to decide what type of business structure best fits your needs, based on your products or services, personal liability and taxation. If you want to charter a company without being personally liable for the risks related to the investment and business, you can choose from a Società a Responsabilità Limitata, also known as an S.R.L. (similar to an American LLC) or a Società per Azioni, or S.p.A. (similar to a Corporation). The choice depends on the capital you are prepared to invest, the tax status and organizational form you are seeking. While a S.R.L. is best for shareholders wishing to personally maintain control of the management and who are not interested in going public, a S.P.A. works better for bigger investments and a larger number of investors, where management can be entrusted to a professional who is not a member of the company. The advantage of both these forms is that if the corporation goes bankrupt the shareholders will only lose the money they paid for their shares, even if debts to commercial creditors remain unpaid. A company may also be formed by just one person, either as a share company or a limited liability company. Another interesting form of the S.R.L., recently introduced in Italy is the “S.R.L. semplificata”, which is a limited liability company formed with limited capital (from one euro to less than 10,000 euros), with no incorporation taxes, less red tape and paperwork, zero notary fees, etc.). Alternatively, if you are not interested in being protected by the “corporate veil”, you can choose a far simpler (and in many ways cheaper) business model, the società di persone. The easier form of unlimited liability company is the ditta individuale (sole proprietorship), when there is only one investor and he/she is the only owner of the business. If two or more persons decide to set up a business together, the most common business structures are the Società in Nome Collettivo (S.n.c., similar to a General Partnership) and Società in Accomandita Semplice (S.a.s, similar to a Limited Partnership). In both cases, the partners have direct management control. They share the right to use the property, share profits and have joint and several debt liability. The main difference between these two types of partnerships is that in the S.A.S. at least one of the partners does not play a management role (he/she is merely a financial investor) and, in return, he/she enjoys limited liability for the debts and obligations (limited to his/her original investment).
Given the complexity and the level of bureaucracy in Italy, don’t take any risks. Seek professional legal and accountancy advice from the beginning of your business plan.
What if I’m a freelancer?
If you work from home or in a shared workspace and your business costs are minimal, you can work in Italy as a lavoratore autonomo or libero professionista. All you need to do to start working is apply for a Partita Iva at the Agenzia delle Entrate (Revenue Office) and enroll for social security administration at INPS under the Gestione Separata category. In this case, the taxation and other administrative costs related to your profession are limited, and therefore the management of a freelance activity is more convenient than working as one of the aforementioned business structures.
What paperwork do I need to set up a business in Italy?
Italian law requires you to draft an Atto Costitutivo (memorandum) and Statuto (articles of association) before a notary. The notary must be present either to draft the Atto Pubblico (incorporation agreement) or to certify the signatures of the shareholders (scrittura privata autenticata). The notary is responsible for registering the company on the Companies Register, held by the Chamber of Commerce of the municipality where the business is incorporated. The company will only exist following this registration. If one of the shareholders cannot be physically present to sign the contract, the incorporation process can be carried out by a legal proxy (normally a lawyer or a trusted person whom the investor knows). In this case, the non-Italian who is unable to participate in the notary deed must grant power of attorney, which must be translated into Italian and legalized (by using the Apostille procedure or using the services of the Italian Embassy or Consulate of the country where the investor resides). Immediately upon registration, the company receives a reference number for the procedure, the tax identification number and the VAT number. Within 48 hours the company receives confirmation of registration with the Companies Register as well as receiving documentation from INPS and INAIL (Accident Insurance Office). None of this applies if you are a freelancer: the only paperwork needed is registration at the Revenue Office by requesting the Partita Iva and INPS registration. At that point, you are ready to begin your business in Italy, regardless of the business structure you have chosen.
Disclaimer: The information provided in this article does not constitute legal advice and should not substitute for counsel. The information is based on the opinion of an independent expert and does not claim to be complete or definitive.
Originally Published by Michele Capecchi on The Florentine (http://www.theflorentine.net/lifestyle/2017/05/opening-a-business-in-italy-basics/).