In short. A foreign company can operate in Italy in three ways:
- without any local presence, by posting or hiring staff;
- with a representative office, limited to promotion;
- with a branch or an Italian subsidiary, if it wants to sell on an ongoing basis.
The right choice depends on what you will do in Italy, how many people will work there and how much liability you want to keep separate. Whatever you choose, the risk to keep under control is an undeclared permanent establishment.
Four questions before you choose
- Will you sell in Italy, or only promote and research the market? Selling (negotiating and concluding contracts with Italian customers) almost always calls for a structure that pays tax in Italy.
- Will you have people in Italy? Existing staff sent temporarily, new hires in Italy, agents or distributors: each option has its own rules.
- For how long? A project lasting a few months and a permanent presence need different structures.
- Do you want to ring-fence the risk? With an Italian subsidiary, liability is limited to its own assets; with a branch or representative office, the foreign company is liable.
Branch vs subsidiary vs representative office
| No local presence | Representative office | Branch (secondary office) | Subsidiary (S.r.l.) | |
|---|---|---|---|---|
| What it is | Posted staff, direct hires or agents | Cost centre of the foreign company | Permanent establishment of the foreign company | Separate Italian company owned by the foreign company |
| Separate legal entity | — | No | No | Yes |
| Can sell in Italy | With great care (PE risk) | No | Yes | Yes |
| Italian corporate tax | No, unless a PE arises | No, while activities stay preparatory or auxiliary | Yes, on the profit attributable to the branch | Yes, on all its profit |
| Registration | — | REA (Chamber of Commerce economic register) | Companies Register | Companies Register, by notarial deed |
| Who is liable for debts | The foreign company | The foreign company | The foreign company | The subsidiary, up to its own assets |
| Best for | Projects, first employees, testing the market | Promotion and market research | Ongoing business without a separate entity | Ongoing business with ring-fenced risk |
Representative office
The lightest option: promotion, information and market research. A representative office cannot sell, invoice or collect payments from customers, and it pays no Italian corporate tax as long as its activity stays genuinely preparatory or auxiliary. It is registered with the REA of the local Chamber of Commerce. It is not a route to an Italian visa for the company’s owners or directors. Full guide: representative office in Italy for foreign companies.
Branch (secondary office with permanent representation)
A branch lets a foreign company operate in Italy on an ongoing basis without forming a new company.
- Legal status. It has no separate legal personality: the foreign company is liable for its debts. It has a permanent representative in Italy and is registered with the Companies Register (art. 2508 of the Italian Civil Code).
- Tax. For tax purposes it is a permanent establishment. It pays Italian corporate tax on the profit attributable to it and keeps accounts for its Italian activity under Italian rules. If the foreign company is resident in a country with a tax treaty with Italy, the treaty governs how branch profits are taxed. Italy does not tax the transfer of branch profits to the head office as a dividend.
Setting up a branch usually requires:
- a resolution of the foreign company’s board establishing the Italian branch, its address and its legal representative;
- Italian tax codes for the people who will act in Italy;
- a sworn Italian translation of the company’s articles and a recent certificate of good standing, apostilled or legalised where required;
- anti-money-laundering declarations identifying the beneficial owner;
- deposit of the documents with an Italian notary, who files them with the Companies Register;
- a VAT number, a certified email address (PEC) and the related filings through the single online procedure (ComUnica), which also reaches the tax, INPS and INAIL offices.
EU companies can register a branch through a fully digital procedure: see digital incorporation of secondary offices of EU companies. On reporting duties to the Bank of Italy, see foreign company branches: what the Bank of Italy says.
Subsidiary (Italian S.r.l.)
A subsidiary separates the assets and risks of the Italian business from those of the parent.
- Forms. The usual vehicle is the S.r.l. (limited liability company). The minimum capital is €1; below €10,000, contributions must be in cash and paid in full at incorporation, and at least one fifth of profits must go to a reserve until capital and reserve reach €10,000 (art. 2463 of the Civil Code). An S.p.A. (joint-stock company) requires at least €50,000.
- Formation. It is incorporated by notarial deed and registered with the Companies Register. It then files Italian financial statements and pays Italian tax on all its profit.
Costs, steps and timing: see how to open a company in Italy: costs, procedure and timeline.
The two risks that apply whatever you choose
- Undeclared permanent establishment. A “light” presence (an office, an employee, an agent) can become a permanent establishment because of what it actually does, with Italian tax, penalties and interest if it was never declared. See our guide to the permanent establishment in Italy.
- Tax residence. Conversely, a company that is foreign on paper but actually managed from Italy can be treated as Italian-resident and taxed in Italy on its worldwide income (art. 73 of the Italian Income Tax Code), subject to any applicable tax treaty. See foreign company in Italy: tax residence.
Staff in Italy
- Existing employees sent to Italy temporarily: a posting. It requires notification to the Ministry of Labour, Italian working conditions and records kept in Italian. See posting workers to Italy.
- New hires in Italy without an Italian entity: the foreign company can be the employer, paying Italian social security and applying Italian employment protections, but must watch the PE risk. See hiring in Italy without an entity.
- Non-EU staff: entry permits are needed on top of employment rules. See the Italy ICT permit for intra-corporate transfers and the EU Blue Card.
Selling through agents and distributors
Many foreign companies enter the Italian market through an agent or distributor before opening an office. The contract decides three things:
- which law applies and which court decides disputes;
- what it costs to end the relationship;
- whether the agent may become a permanent establishment of the foreign company.
See our guide to agency and distribution agreements in Italy [to activate] and verification of reciprocity and effectiveness of the international contract.
Foreign directors and shareholders
- Tax code. Foreign directors, legal representatives and shareholders need an Italian tax code (codice fiscale).
- Signing from abroad. The deed can be signed without travelling to Italy, through a notarised power of attorney with apostille or legalisation. An S.r.l. with its registered office in Italy and cash contributions can also be incorporated by videoconference with an Italian notary, but this requires an EU-recognised electronic ID and a digital signature: founders from outside the EU usually sign through a power of attorney.
- Reciprocity. For non-EU shareholders and buyers, the notary checks the reciprocity condition (art. 16 of the preliminary provisions to the Civil Code), unless the person holds an Italian residence permit or a treaty guarantees equal treatment.
- Moving to Italy. If an owner or director needs to relocate, they need a suitable residence permit; a representative office does not provide one.
How we help
For forty years the firm has helped foreign companies enter the Italian market:
- choosing and setting up the right form of presence;
- assessing permanent establishment risk;
- staff, postings and permits;
- contracts with agents, distributors and Italian partners;
- litigation when needed.
We work in English, Italian and Spanish.
Get information now from your company training consultant Damiani&Damiani: Request an assessment of your case
Frequently asked questions
What is the difference between a branch and a subsidiary in Italy? A branch is part of the foreign company: it has no separate legal personality, the foreign company is liable for its debts, and it pays Italian tax on the profit attributable to it. A subsidiary, usually an S.r.l., is a separate Italian company with liability limited to its own assets, and it pays Italian tax on all its profit.
Can a foreign company operate in Italy without setting up an office? Yes, within limits. It can post its own employees, hire staff directly in Italy, or work through agents and distributors. If the activity in Italy becomes ongoing and includes selling, a permanent establishment may arise, with Italian tax to pay.
Can a non-resident set up a company in Italy without travelling? Yes. Founders can sign through an attorney holding a notarised power of attorney with apostille or legalisation. An S.r.l. with its registered office in Italy and cash contributions can also be incorporated by videoconference with an Italian notary, but this requires an EU-recognised electronic ID: founders from outside the EU usually sign through a power of attorney. Every shareholder and director needs an Italian tax code.
Do I need an anti-mafia declaration to set up a company in Italy? Not for incorporation itself. Anti-mafia documentation is required for public contracts and public funding above the legal thresholds, and for the licences and authorisations listed in art. 67 of Legislative Decree 159/2011. It covers the legal representative, directors and the other persons listed in art. 85, including foreign nationals; for a branch, the people who permanently represent it in Italy.
What is a REA number in Italy? It is the registration number in the Chamber of Commerce’s Economic and Administrative Index (Repertorio Economico Amministrativo). Registered businesses receive one, and so do representative offices of foreign companies, which are not entered in the Companies Register.
