How do I open a branch in Italy?
Foreign companies wishing to carry on business in Italy through a permanent establishment may decide to open a Branch distinct from the representative office because it is permanently organised.
To establish a branch in Italy, the competent body of the foreign parent company (shareholders’ meeting, board of directors, sole director’s resolution, depending on what is provided for in the articles of association) must make a special resolution to open the branch.
The resolution must contain the following:
- the will to establish the branch;
- the designation of the head office of the Italian branch;
- the appointment of one or more officers;
- the economic resources of the branch (optional).
The resolution must be signed, notarized, and apostilled (when due) in the country where the decision was made.
The foreign parent company must also provide a copy of the company’s articles of association and a certificate of good standing along with the resolution.
The latter documents must also be translated and legalised in Italy, as well as legalised and apostilled (when required).
The officer appointed to manage the branch may attend the deed of incorporation directly or alternatively grant a power of attorney to a trusted professional in order to execute the deed before the notary.
Preliminary activities before opening a branch in Italy.
The Italian notary, at the time of the deed, will check the regularity of the documentation.
Prior to the notarial deed establishing the Branch, the person in charge appointed by the foreign parent company must request a personal tax code from the Italian Revenue Agency.
The person in charge will also have to request a VAT number attribution certificate, generally with the help of an accountant, which will, in any case, be necessary for all tax and accounting fulfilments.
The Italian branch will also have a PEC (certified electronic mail) when it is set up.
How to Open an Italian Branch Remotely
Businesses can utilize a powerful tool, power of attorney (POA), to embrace the possibility of opening a branch remotely.
Through a carefully drafted POA, companies can delegate our Firm or trusted individuals or entities to act on their behalf in establishing and managing operations in Italy. This legal instrument empowers designated representatives to perform tasks such as signing contracts, being represented in front of the Notary, and interacting with government agencies—all without the need for physical presence.
Contact our team and set up a branch in Italy!
What is the advantage of a foreign branch?
Setting up a branch (permanent establishment) rather than a subsidiary is strictly a business choice rather than a purely legal one.
From a legal point of view, the branch acts as if it were directly the foreign parent company present on Italian territory.
Therefore, all liability for the acts performed by the branch in Italy falls directly on the parent company.
From a business point of view, the choice is strategic if the foreign company wishes to maintain and carry out its activity in a foreign country with its brand and organisation.
How to Properly Run a Branch in Italy
Running a branch in Italy requires careful planning and adherence to local regulations. Understanding the complexity of the Italian business landscape, from legal requirements to cultural nuances, is essential for success.
Implementing effective communication channels, utilizing local expertise, and embracing flexibility are key strategies for navigating the complexities of operating a branch.
One crucial aspect of running a branch in Italy is effectively managing taxes. Italy has its own tax system, with various regulations governing corporate taxation, value-added tax (VAT), and other fiscal obligations.
Seeking guidance from tax professionals familiar with Italian law can help ensure compliance and optimize your tax strategy, minimizing liabilities while maximizing opportunities for growth.
Depending on your industry and objectives, a branch in Italy can engage in a wide range of business activities.
Opening an Italian Company vs Opening a Branch.
When considering expansion into Italy, businesses often decide between setting up a branch or establishing a separate legal entity, such as a subsidiary or a company.
Each option has advantages and considerations. Setting up a branch typically involves creating a local presence of the existing parent company, allowing for easier operation integration and centralized management.
However, branches do not have a separate legal personality from their parent company, which means that the parent company bears entire liability for the branch’s activities.
On the other hand, establishing a separate legal entity in Italy, such as a limited liability company (Società a responsabilità limitata or S.r.l.), provides more autonomy and limited liability protection.
While this option may require more administrative effort and expense, it offers greater flexibility in terms of governance structure and tax planning.
Ultimately, the choice between setting up a branch or a separate company depends on factors such as the nature of the business, the level of control desired, and the long-term strategic objectives in the Italian market.
In conclusion, establishing a remote branch in Italy offers numerous opportunities for expansion and growth.
Taxation of Foreign Branches in Italy
In Italy, the taxation of foreign branches of Italian companies is governed by the principle of worldwide taxation. This means that the income generated by a foreign branch is generally subject to Italian corporate income tax (IRES) and regional tax (IRAP), regardless of where it was earned.
However, Italy provides relief from double taxation through either a foreign tax credit mechanism or, under certain conditions, an exemption regime introduced by the 2016 Stability Law.
The exemption regime allows the profits and losses of foreign permanent establishments (PEs) to be excluded from the Italian tax base, provided the option is exercised irrevocably for all foreign branches.
This helps Italian companies avoid being taxed twice on the same income, promoting a more favourable environment for international business operations.
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