5 Things to Consider When Starting a Business in Italy (Beginner’s Guide 2022)

The European Union counts Italy as one of its most important members. With its geographical location, investors have easy access to markets in southern, central, and northern Europe as well as the ports of the Mediterranean. Italy is home to many companies that are involved in trade and import/export activities.

So how do you start a business in Italy?

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In addition to having some of the world’s most iconic and prestigious brands, Italy has an open policy to foreign investment of any kind, despite some business sectors being more favored than others. The tourism, food, agriculture, manufacturing, and real estate sectors are among those with the most foreign investments.

Registering your Italian Business

The Italian government has given foreign companies certain incentives to invest in the country or locate their businesses in certain designated areas.

And one of the first things you will need to do is register your business.

Limited Liability Company

Limited liability companies can take one of two forms prescribed by Italian law:

S.r.l. Societa responsabilita limitata – This is a limited liability company

S.p.A. Societa per Azioni – This is a joint-stock company

Incorporation

S.r.l. and S.p.A. are both limited liability companies. The only difference is that an S.r.l.’s Deed of Incorporation includes a Certificate of Incorporation and Bylaws.

Approximately 10,000 euros is the minimum capital requirement for an S.r.l.and 120,000 euros is the minimum requirement for an S.p.A. Prior to the Deed of Incorporation being finalized, at least 25% of the subscribed capital needs to be deposited at a bank in Italy.

Paying Your Taxes

Income Tax

IRPEF is the Italian name for individual income tax. The tax rate ranges from 23% to 43%. Regional taxes range from 0.9% to 1.4%, and local taxes range from 0.1% to 0.8%.

For foreign residents who work in Italy, only income earned in Italy is taxed. In the event you reside in Italy, spend more than 183 days a year there, and have a “center of economic interest” (in other words, your business), your worldwide income is subject to IRPEF.

Corporate Tax

The Italian corporate sector is taxed both on corporate income, known as imposta sul reddito sulle società or IRES, and on regional production, known as imposta regionale sulle attività produttive or IRAP.

These are the standard rates:

24% for IRES.

3.9% for IRAP.

Customs and Imports for Your Business

As part of the Combined Nomenclature, all products entering the European Union must be declared at customs.

Exports from the United States to the European Union are subject to a 3% tariff, while certain products are subject to additional rules and license requirements. TARIC (Tarif Intégré de la Communauté) website provides more information on these exceptions.

It is possible to import products from Italy at a duty rate ranging from 0% to 17%. Import taxes are not applied if the value of the imports is less than €150.00.

VAT is typically 22% of the product value, plus shipping and insurance, but is projected to rise. A fee may be charged for certain imports, depending on the type of product and if it needs to be examined or verified.

Overview of Italian Culture and Language

Italy’s official language (native speakers make up 93% of the population) is Italian, while English is the most commonly used foreign language. Several minority languages are recognized in Italy, including French, Spanish, Greek, and German.

Due to Italy’s lower language competency scores than the EU average, you will notice that many Italian business clients will need interpreters during negotiations.

Italian business culture stresses the importance of building close relationships. Business decisions are rarely discussed in the initial meeting.

Living and Working with Italians

The business culture of Italians is characterized by a strict dress code which shouldn’t be surprising since Milan is a global fashion hub. “Made in Italy” products attract global respect, and Italy is no exception. Meetings in business attire are expected, and darker colors are recommended for men.

And in Italy, a successful business relies heavily on personal relationships. Without the knowledge and trust of your Italian business partners, the business negotiation is doomed to failure.

Do your research taking into account the economic and infrastructure differences in Italy, as these could have a significant impact on your business results. Knowing where to do business in Italy is essential because some regions, especially in the south, lack the resources and technology needed to support businesses.