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Setting-Up A Business in Italy

The main decision you will need to make after having decided to set-up a business in Italy is: should you set-up a limited company or as a sole trader?

Both have benefits and drawbacks. Here we will look at the differences between the two so that you can decide on which is the most appropriate for your business in Italy.

 

Sole Trader v Limited Company

Sole traders in Italy are known as ‘autonomis’ and those who are just starting-out and where the income is likely to be low tend to choose this route.

Why?

Mainly because it is less complex and more economical to both set-up and  run. Accountants will normally charge 50% to manage compliance and tax returns in comparison to a limited company, given the lower administrative requirements.

 

Fiscal Obligations

As in other countries, whether your business is classed as ‘autonomi’ or as a limited company there are a number of fiscal obligations that the owner of a business in Italy will have.

Most larger businesses will have an obligation to make VAT (in Italy this is called IVA) and Income Tax returns. Of course if you decide to create a limited company then you will also have to make a company tax return (impuesto de sociedades) as well as file the annual accounts with the Company’s Register.

A company will need to retain up to 15% of any invoice presented to it by a professional/autonomo and file a return.

These extra obligations mean that the cost of maintaining the company are higher than where a sole trader is concerned.

 

Income/Corporation Tax

For sole traders, the income tax rate varies depending on income (from 23% to 40%). For small entities with revenues up to about 30.000 euros (the limit may vary according to activity) you can opt for a special regime called forfettario which allows you to pay just 15% tax and do not apply VAT (IVA in Italy).

As for limited companies, two different taxes apply, with a different tax base. The first one called Ires is now 24%, the second one called Irap varies between 3,9 to 5%. It is quite a complex system, with a lot of special cases and exceptions.

 

Social Security Obligations

As an autonomo or sole trader you will need to register with the local social security office and pay contributions each month. These contributions tend to be significantly higher than in other northern European countries with a current minimum of approximately €2800-3000 per year payment for commercial activities (for example shops, agents, manufacturing etc), or a fixed rate on income for consultants/professionals that varies each year and is currently approx. 26%, .

There are some reductions for those under 30 years of age or a temporary discount for example where the person has been unemployed and has decided to become self-employed.

In the case of a limited company there is an obligation to make social security contributions on behalf of an employee of 24% of their income. Where there are no employees of the company i.e. a single director company then that director must register as an autonomo and pay those social security contributions.

 

Liability

Just as elsewhere, one of the major differences between the two forms of business is that creating a limited company ensures limited liability to the owner of the company. If as a result of the operation of the company a financial liability should arise, then often this is limited to the amount of capital in the company.

As a matter of law in Italy the minimum level of capital that any company can have at any time is set at €3000 though this is sometimes disregarded by less scrupulous business owners.

One of the major drawbacks of registering as an autonomo is that you will be personally liable for any debts or losses incurred by your business and any personal assets could be at risk if your business is in financial trouble – either as a result of damages owed to a client or failure to pay due taxes and social security contributions.

 

Office Locations Across Italy

As well as two private offices in the north of the country (blue markers on side-map), ilaria also provides accounting and associated services to English-speaking clients via the Advocate Abroad network of offices in Italy (red markers on main map below). Each of the lawyers on the map of Italy below are registered and regulated by the Bar Associations of Italy and so we are able to offer a truly nationwide service to English-speakers wherever they wish to set-up their business in Italy.

Assuming you have already decided on the type of business you want to run and where in Italy you wish to locate it, then the main decision you will need to make is whether you should set it up as a limited company or as a sole trader.

This can be extremely important as you can save a considerable amount of money depending on which option you choose. Both have benefits and drawbacks. Here we will look at the differences between the two so that you can decide on which is the most appropriate – and cost effective – for your business in Italy.

More information is available on setting-up as a sole-trader in Italy or limited company formation in Italy, whichever is more appropriate.

You may be interested in the following services...

Client testimonials

"On occasions it took a little longer than we had hoped in obtaining a reply, however we do appreciate and understand that this was probably due to being away from the office, possibly in Court, or with other clients - not a criticism just an observation.

There are no improvements we can suggest,  save to say, we would use Marco in the future if required."

Chris Rye (Oct 29, 2019)

Business Licence Application

This service is available across Italy

Location

1Who is this Service for?

Opening and operating a business can often require the owner to obtain a license to carry-out the specific activity.

Sometimes, this is passed-on to the new owner, if purchasing an existing business, or if not, it may be necessary to make an application.

Where the business shall deal with the public, licence applications tend to be quite arcane and complex. Especially if the activity or service to be provided is dangerous in any way, such as certain sporting activities.

2What does this service consist of?

  • Initial discussion with a lawyer to understand the project you have in mind
  • Preparation of a report on the steps to be taken to initiate the activity and the likely costs involved, including an evaluation of the likelihood of success
  • Upon agreement, initiation of the application and the steps to obtain the licence
  • Follow-up services to include full tax and accounting service
Support services

3Free Support Services Included

When combined with the free and innovative Advocate Abroad support services you can be sure that you are obtaining completely transparent legal services from registered and regulated English-speaking lawyers abroad.These support services include:

  • Verification of the regulatory status of your professional.
  • Fees as recommended by the Local Professional Body
  • Fees specified in advance and legally guaranteed.
  • Service levels agreed in advance and guaranteed.
  • All professionals must hold professional indemnity insurance.
  • Professionals' proficiency in English monitored.
  • Continuous quality controls and reviews.
Client testimonials

"Ilaria Cinotto was the consummate professional. Her advice and explanations were clear and easy to understand. I have no hesitation in recommending Illaria to anyone looking for accounting and tax advice in Italy."

Brendan Mcdonald (Jan 12, 2021)

Limited Company Set-up Service

This service is available across Italy

Location

1Who is this Service for?

Depending on the type and size of the business that you are planning to set-up, a limited company can often be the appropriate choice – for the same reasons as are the case in your home country – flexibility and limited liability.

Note that the bureaucracy associated with incorporating a company and ensuring tax and reporting compliance tend to be rather more complex than in the UK and other Anglo-Saxon jurisdictions.

2What does this service consist of?

  • Ensure legal interests are protected, especially when creating a company with several partners.
  • Drawing-up a notarial contract according to your guidelines, properly prepared and tailored to your objectives.
  • Ensuring that your Articles of Association contain all necessary elements.
  • Make sure that the application is made in accordance with the requirements of the Commercial Companies Code. With the power of attorney you will have granted to us, on your behalf we will register your company at all Government institutions and offices required by law.
  • Applying for company tax and identification numbers.
  • Obtaining all necessary documents, permits and approvals.
  • Dealing with bank formalities connected with setting up of the company bank account.
  • Once completed the registration process, we will draw up all other corporate documents required by the Commercial Companies Code.
Support services

3Free Support Services Included

When combined with the free and innovative Advocate Abroad support services you can be sure that you are obtaining completely transparent legal services from registered and regulated English-speaking lawyers abroad.These support services include:

  • Verification of the regulatory status of your professional.
  • Fees as recommended by the Local Professional Body
  • Fees specified in advance and legally guaranteed.
  • Service levels agreed in advance and guaranteed.
  • All professionals must hold professional indemnity insurance.
  • Professionals' proficiency in English monitored.
  • Continuous quality controls and reviews.
Client testimonials

"Ilaria took the time to discuss my options in detail, as well as recommending ones that I was not aware of. She is very knowledgeable in this area and extremely helpful."

Clinton James (Jul 20, 2022)

Tax & Accounting Services

This service is available across Italy

Location

1Who is this service for?

Anyone undertaking a business activity via a limited company will require a local tax and accounting service.

While you will benefit from not having to worry about whether or not you are compliant with the legal requirements such as VAT returns, Corporation Tax, Income Tax etc. you can also relax in the knowledge that any communications received from the Tax Authority – often impenetrable to locals never mind foreigners – will be managed conveniently and efficiently by your accountant.

2What does this service consist of?

  • Financial accounting and reporting.
  • Accounting for special purposes, preparation of annual accounts.
  • Manage communications with the Tax Authorities.
  • Complete management of the company’s accounts.
  • Administrative support for accounts/ accounting records: Preparation of accounting.
    Documents – cash documents, travel orders, inventory control, property records, issuing invoices, internal documents, approval process of documents, printing & copying, sorting and filing of accounting documents).
  • VAT returns, Corporation Tax, Income Tax, Non-resident tax, any other tax obligation with any national tax authority: National/Regionals/Local.
  • Business address (whether it will be only for correspondence or you will really make your business there).
  • Recommendations regarding the most appropriate fiscal arrangements to ensure taxation levels are optimised
  • Resolution of tax enquiries related to your activity.
  • Completion and presentation of all required tax returns.
  • Company annual return (abbreviated accounts: balance sheet, profit and loss statement, annual report)
  • Ongoing updates on any legislative changes affecting the area of the Company Activities
Support services

3Free Support Services Included

When combined with the free and innovative Advocate Abroad support services you can be sure that you are obtaining completely transparent legal services from registered and regulated English-speaking lawyers abroad.These support services include:

  • Verification of the regulatory status of your professional.
  • Fees as recommended by the Local Professional Body
  • Fees specified in advance and legally guaranteed.
  • Service levels agreed in advance and guaranteed.
  • All professionals must hold professional indemnity insurance.
  • Professionals' proficiency in English monitored.
  • Continuous quality controls and reviews.

Why choose Advocate Abroad?

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