Italy

Italy is one of the most important countries in the European Union and it undoubtedly carries a tremendously rich cultural and historic heritage. Its good geographical position gives investors easy access to southern, central and northern Europe markets as well as to the ports of the Mediterranean. Many businesses that start in Italy are involved in trading or import and export activities. Furthermore, the present government policy which flavors privatization of state-owned enterprises, offers foreign investors the opportunity of setting up a business in Italy through the acquisition of privatized enterprises. The reduction of state intervention compounded by privatization offers foreign investors some attractive opportunities of setting up business.

Italian S.r.l. (Limited liability company):

• minimum share capital is 10.000 EUR
• liability of the shareholders is limited to the amount contributed to the share capital
• at least one director required
• Annual submission of Financial statements required

Italian S.p.A. (Joint-stock company):

• minimum share capital is 120.000 EUR and at least a quarter of this amount must be paid upon incorporation
• liability of the shareholders is limited to the amount of contributions made to the share capital
• at least one director required
• Annual submission of Financial statements required

Taxation:

• Corporate tax is 24%, plus the regional tax on productive activities (generally 3.9%)
• Dividends paid by subsidiaries to Italian resident corporate taxpayers are 95% exempt from corporate income tax. However, the exemption does not apply if the foreign subsidiary is a “black-list” entity
• Dividends paid to a nonresident corporation generally are subject to a 26% final withholding tax (with a potential refund of the foreign tax paid on the dividend by the recipient, up to 11/26ths of the Italian withholding tax) unless the rate is reduced under a tax treaty
• Capital gains generally are treated as ordinary income and taxed at the 24% corporate income tax rate
• Capital gains derived from the sale of participations, however, are 95% exempt from taxation if the following requirements are met:
  1. the participation has been held for a minimum continuous period that may range between 12 and 13 months
  2. the participation is classified as a financial fixed asset in the first financial statement closed after the participation was acquired
  3. the company in which the participation is held is not considered a “black list” entity for purposes of Italy’s controlled foreign company (CFC) regime
  4. the company in which the participation is held carries out a business activity (this requirement will not be met if assets are represented primarily by real property not used in the business activity).

  The last two conditions must have been satisfied continuously over the last three years.

• Losses may be carried forward and offset against corporate taxable income. However, 20% of taxable income in any year cannot be offset by carried forward losses and will be subject to corporate tax in accordance with the “minimum tax” rule.
• Royalties paid to a nonresident company are subject to a 30% withholding tax calculated (generally) on 75% of the gross royalty, resulting in an effective tax of 22.5%. The withholding tax may be reduced under a tax treaty.