Despite the complications connected to doing business nowadays, the number of foreign entrepreneurs who choose to open a business in Italy is constantly increasing. This is especially valid for entrepreneurs who were born abroad. Doing business in Italy, though, is just one of the options available to foreign investors. The other is that of establishing a partnership with an Italian associate, or funding a company with legal autonomy according to the principle of reciprocity – which grants civil rights to foreign entrepreneurs, as long as those rights are recognised in those countries where the individual comes from.
Main legal form of foreign enterprises in Italy
According to data provided by UnionCamere, as of 31/12/2020 the majority of foreign companies were registered under the legal form of sole proprietorship. However, out of a total of 631.000 foreign companies registered in Italy, 100.000 – almost 16% of their total – are capital companies, whereas 6% are partnerships. These relevant data suggest the necessity of legal advice in order to obtain financial instruments, as well as those tax benefits recognised to foreign entrepreneurs who register a company in Italy or establish a partnership with Italian associates.
Entering Italy and tax benefits for foreign entrepreneurs
Given the opportunity of doing business in Italy, an entrepreneur coming from abroad must have an entry visa as well as a long-term stay permit in our country. The rules of Italian immigration law apply to such cases.
Entry visa for foreign investors
Other than the ‘Blue Card’ – which is the official request of residence permit for highly-skilled foreign workers and managers who look to establish a business on their own, or using their skills and qualification to collaborate with an Italian employer – another possibility for foreign investors to enter Italy is the so-called Investor Visa. Investor Visa is an entry and stay visa for foreign investors who choose to make certain investments, such as:
- € 2 million in Italian government bonds kept for no less than two years;
- € 500.000 in an Italian limited company, incorporated and operating in Italy for no less than two years;
- € 250.000 in an Italian innovative startup for two years;
€ 1 million in a philanthropic initiative supporting a project of public interest in the fields of culture, education, immigration management, scientific research, preservation of cultural and natural heritage.
Tax benefits for foreign workers
Attracting flows of investments from abroad is an advantageous system that makes Italian economy more competitive. Incentive measures of a fiscal nature are specifically designed for entrepreneurs who intend to transfer their residence to Italy. The same rules on tax benefits apply to Italian individuals resident abroad, should they intend to come back and do business in Italy.
In general, the recipients of the preferential taxation regime are workers or entrepreneurs who:
- have not been resident in Italy for the two years prior to the transfer;
- transfer their tax residence in Italy and keep it for no less than two years;
- carry out their activity (as employees or entrepreneurs) mainly in Italy.
Tax relief for foreign workers
This preferential tax regime involves the exemption of the taxable base for personal income tax (IRPEF), whether it be coming from employed or self-employed activities. The income is taxed at 30% for five years, going down to 10% if the company’s tax residence is a region in southern Italy, such as Abruzzo, Molise, Campania, Puglia, Calabria, Basilicata, Sardinia, Sicily.
Foreign associates in Italian companies
Lastly, a foreign investor can carry out a business activity and invest by establishing a partnership within an Italian company. This formula is advantageous for both associates, Italian and foreign. Generally speaking, a foreign entrepreneur who intends to set up a company in Italy must ensure to:
- identify an Italian associate for the company;
- be authorised to be foreign partner within an Italian company;
- hold a residence permit to found a limited liability company in Italy;
- be authorised to be administrator of a limited liability company in Italy;
- be aware of tax requirements for companies in Italy;
- be aware of the laws applying to foreign partners in Italy.
In brief, everything a foreign entrepreneur can accomplish with their company or with a new-founded company is ruled by the reciprocity conditions valid in each single third country.
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