Company formation in Italy
Italy has recently taken new steps to position itself as a welcoming home for foreign investment. The result is that Italy is slowly emerging as a land of opportunity, although you will need specialist local advice to help navigate your way through the bureaucracy.
- VAT registration service available. Normally registration takes 40 days.
- Minimum share capital is: €10,000
- Minimum number of directors is one.
- No restrictions on foreign shareholders.
- Annual tax return and VAT filed quarterly plus annual audit.
- Codice Fiscale required for each foreign director and shareholder
- Personal visit to Milan is required to open Bank account in Italy.
- Shelf Companies with VAT available. Ask now.
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LIMITED LIABILITY COMPANY (S.r.L.) FOR TRADING
Most popular format for businesses in Italy is S.r.L., Limited Liability Company.
The standard rate of Italy corporate tax (IRES) is 27.5%%. In addition, local tax (IRAP) is imposed at a rate of generally 3.9%, bringing the effective tax rate to 31.4%.
Government duty €310 and Chamber of Commerce duty €200 must be paid annually.
For new companies VAT registration is usually manageble. Please note that it might take up to 40 days.
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REPRESENTATIVE OFFICE OF A FOREIGN COMPANY & BRANCH OFFICE
“Light Branch” is a type of Representative Office registered at the Labour Office and authorized to employ and to use an Italian bank account. A Light Branch cannot trade, issue invoices or to have VAT. However, it is a very cost effective tool for promoting services in Italy. As soon as the entity needs to start trading activities, the Light Branch should be upgraded to a Branch.
An Italian branch can be used as a trading partner to import / export or buy / sell within the EU and beyond its borders. The Italian branch can have a VAT number obtain a tax residency certificate.
Chamber of Commer duty €200 must be paid annualy.
- Only one director required, who can be citizen of any country
- EU company with EU VAT number is required for Head Office Company
- Codice Fiscale required for parent company (Italian tax reference number), each director of parent company and representative of the branch
- Accounts should be maintained at the physical business address, but there are no reporting requirements or regular audits for representative offices.
- Trading Branch offices are liable for taxes on Italian source income
- There is no branch remittance tax.
- CORPORATE INCOME TAX (CIT): The standard rate of Italy corporate tax (IRES) is 27.5%%. In addition, local tax (IRAP) is imposed at a rate of generally 3.9%, bringing the effective tax rate to 31.4%. Non-operating companies pay 38% CIT on “estimated income”.
- INCOMING DIVIDENDS. 95% of dividend income is tax exempt with no minimum holding period. Participation exemption does not apply with offshore jurisdictions.
- CAPITAL GAINS TAX (CGT). Capital Gain from sales of shares are generally taxed at 27.5% rate. Under specific conditions 95% participation exemption can apply.
- WITHHOLDING TAX:
ROYALTIES: 22.5%, which can be reduced under tax treaty or EU Directive on Royalties.
DIVIDENDS: 20%, which can be reduced under tax treaty or EU Parent Subsidiary Directive.
INTERESTS: 20%, which can be reduced under tax treaty or EU Directive.
- VALUE ADDED TAX (VAT). EU VAT regime. The standard rate for inland sales is 23%. VAT rate might increase in 2013 to 23,5%.
- BILATERAL TAX TREATIES with 75 countries including Cyprus, Singapore and Malta.