When a foreign company decides to enter the Italian market, it has several options for establishing a presence in the territory. The main alternatives include opening a representative office, establishing a branch office or setting up a subsidiary. Each of these different corporate forms has specific characteristics, along with distinct advantages and disadvantages. It is important to understand these in order to make an informed choice that suits the needs of the foreign company.
In this article, we will provide an overview of the abovementioned three forms of settlement.
The representative office represents the simplest and least structured way for a foreign company to establish itself in Italy. This solution is ideal for companies that wish to start with promotional activities and market exploration, without engaging in direct commercial operations.
The representative office only carries out promotional activities, such as gathering market information, researching customers and suppliers, and promoting the corporate image. It is not authorised to carry out commercial or production activities and has no organisational or decision-making autonomy. Consequently, it cannot conclude contracts in the name of the parent company.
To set up a representative office, no notarial deed or minimum share capital is required. However, it is mandatory to obtain a tax code and to register the office in the Commercial Register at the local Chamber of Commerce. In addition, the parent company must appoint a representative in Italy, who may also be a non-resident, but it is essential that he or she has an Italian tax code.
From a tax point of view, the representative office does not generate income in Italy and is therefore not subject to taxation or VAT.
In summary, the representative office is an agile solution for foreign companies wishing to sound out the Italian market without entering directly into business operations.
The branch office represents a step forward in terms of commitment and structuring compared to the representative office. This option is suitable for companies that intend to carry out commercial, production or service activities directly in Italy, while maintaining a close and direct link with the parent company.
The branch office of a foreign company in Italy has first and foremost an operational function, enabling it to carry out commercial, production or service activities. This means that it can conduct business and operate in the name and on behalf of the parent company. Although not legally autonomous from the parent company, the branch office has a permanent representation and can operate continuously in Italy.
To set up a branch office, a notary is required to draw up the article of association, which must then be filed with the commercial register. In addition, the branch office must obtain a tax code and a VAT number.
From a tax point of view, the branch office is considered a “Stabile Organizzazione” and therefore subject to taxation in Italy for the income produced. It must fulfil accounting, tax and reporting obligations like a normal Italian company, which includes the preparation and filing of financial statements.
The establishment of a subsidiary is the most structured and demanding form for a foreign company wishing to operate in Italy. This solution is suitable for companies that need a stable and completely autonomous presence on the Italian territory.
The subsidiary is an enterprise under Italian laws with full decision-making and legal autonomy. Although it is controlled by the parent company, it operates as an independent legal entity. It may be incorporated as a corporation (with liability limited to the contributed capital) or, less frequently, as a partnership. Its incorporation requires a public notarial deed and registration with the Companies Register, as well as a minimum share capital that varies depending on the legal form chosen.
From a tax point of view, the subsidiary is subject to income tax and VAT obligations according to Italian law. It must file tax and accounting declarations, prepare financial statements and comply with tax payment obligations.
In summary, a subsidiary represents a fully integrated and autonomous solution for foreign companies wishing to operate in Italy with a stable and independent presence.
If you would like to be kept up-to-date on developments in this legislation, please send an e-mail to info@dandreapartners.com.
D’Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (a DP Group company) offer assistance and consultancy services in the legal and tax fields. For any enquiries, please contact us at: info@dpgroup.biz.
The above contents are provided for information purposes only. The publication of this article does not create an attorney-client relationship between DP Group and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case.
When a foreign company decides to enter the Italian market, it has several options for establishing a presence in the territory. The main alternatives include opening a representative office, establishing a branch office or setting up a subsidiary. Each of these different corporate forms has specific characteristics, along with distinct advantages and disadvantages. It is
As globalization intensifies cross-border interactions, understanding the legal mechanisms for enforcing foreign decisions becomes crucial for international business and dispute resolution. This article examines the recognition and enforcement of foreign judgments and arbitral awards across four jurisdictions: China, India, Italy, and Vietnam. By comparing these jurisdictions, we aim to highlight the similarities and differences in
In today’s business landscape, the issue of privacy and data protection is increasingly central to companies, especially due to the rapid development of new technologies. The importance of managing and protecting personal data has been reaffirmed by the introduction of the General Data Protection Regulation (GDPR), in force since 2018. The latter sets out the
