By TMF Group
Italy is the third largest economy in the Eurozone and although its Economic growth (GDP per head) has picked up since 2014, in comparison to other European economies this pace appears weak and its debt to GDP remains at over 130%. Italy’s unemployment rate is currently 11%, down from a peak of 13.1% in 2014, but double the 2007 low of 5.8%.
At the time of writing this article, law professor Giuseppe Conte is prime minister of what is referred to as “Government of Change”, formed between the centre-right Lega Nord and radical Five Star Movement. Their promised agenda includes overhauling EU laws relating to budgets and immigration, cutting taxes and increasing welfare spending.
Previous Italian governments have encouraged foreign investment by offering foreign-owned entities the same incentives – such as subsidised loans, cash grants and tax credits – that are available to entities owned by Italian nationals. They have also granted financial assistance to foreign investors depending on the geographical location of the investment, the size of the investing company and the sector in which the company is investing. There is no indication as yet that this will change.
Italy’s strategic position in the Mediterranean gives it easy access to southern, central and northern Europe, making it an excellent location for product distribution. The ‘made in Italy’ brand is one of the most iconic in the world. From pasta to Prada, Ferrari to Fellini, Brunello to Benetton the country is overflowing with globally recognised talent in many different industries.
Establishing a company
Starting a business in Italy takes six procedures, which take around twenty days. This ranges from depositing the company’s capital contribution in a bank, getting the power of attorney from the shareholder(s), getting a public notary to authorise your deed of incorporation and company bylaws, registering the company with the tax authorities through to notifying the relevant labour office that you will be an employer. All processes which a local partner could guide you through.
Labour laws and employment contracts
Italy has no minimum wage set and employees are assumed to work 40 hours a week, but no more than 48, including overtime. Public institutions, such as the Ministry of Labour and Social Policies, trade unions and employers’ organisations play an important role in governing the company – employee relationship. This includes employee working conditions and industrial relations processes.
Construction permits and registering property
Dealing with construction permits is arduous, taking 12 procedures and around 230 days. Various municipal agencies, the water and fire department as well as independent engineers, topography experts and a soil test are all part of the process. For their administrative process, Italy ranks 96th on the World Economic Forum’s Doing Business Survey.
Registering a property takes an average of 16 days and four procedures. Having local expertise to guide you through property and construction bureaucracy is essential.
Italy ranks 112th for its tax process in the World Economic Forum Doing Business Survey. In TMF Group’s 2018 Financial Complexity Index, Italy is ranked 4th most complex out of 94 jurisdictions for financial – accounting and tax – compliance.
There are 14 different tax payments required in Italy, and the total tax and contribution rate is 47% of profits. For example:
- VAT is 22%
- Corporate income tax is 24%
- The tax on interest is 26%.
From 2019, e-invoicing will be mandatory for all B2B and B2C supplies of goods and services between parties established or VAT-registered in the country.
Accounting and tax is one of TMF Italy’s core areas of expertise and our team would be happy to help you navigate your local obligations.
Cross border trading
Interestingly, Italy ranks first for ease of cross-border trading in the World Economic Forum’s Doing Business Survey. Documentary and border compliance for both inbound and outbound trading is minimal. A waybill, packing list and commercial invoice are all that is required.
Whether you want to set up in Italy or streamline your Italian operations, we can help you nagivate the rules and regulations.
Compliments of TMF Group, a member of the EACCNY