Establishing a subsidiary in Italy is the cornerstone of payroll, benefits and compensation, and hiring. Instead of spending months setting up a subsidiary, G-P can help you start hiring in a matter of minutes. Nevertheless, here is everything you need to know about setting up a subsidiary in Italy.

How to set up an Italy subsidiary

Before setting up a subsidiary in Italy, it is important to consider the type of business the subsidiary will conduct, the location of the company’s headquarters, and how to manage any existing trade relationships. These factors can all influence the subsidiary setup process.

The subsidiary’s location can make a tremendous impact on how it will be operated. Different cities and regions often have different rules or regulations that need to be taken into consideration before you set up your subsidiary.

The most common subsidiary form is a “societá a responsabilitá limitata” (S.r.l.), which is equivalent to a private limited liability company since it has more organizational flexibility and limits the liability for shareholders.

The steps to set up a S.r.l. include:

  • Obtain a tax identification number for both shareholders and directors.
  • Open a capitalization bank account and pay at least 25% of the contributions of the corporate capital in cash to this account in order to obtain a certificate of deposit.
  • Execute a public deed of incorporation and company by-laws before a public notary.
  • File all the documentation to the Register of Companies and pay the registration fee in order to obtain a company registration number.

Once the entity has been incorporated, it is necessary to get VAT and Tax Identification Numbers as well as certified company and accounting books from the tax authorities. Once obtained, companies must submit a notification of commencement of operations at the local municipality. Additionally, before hiring employees, all companies must register with the social security authorities, subscribe to a civil liability and accident insurance, notify the Provincial Labor Office, and subscribe to an employee retirement plan.

Italy subsidiary laws

Italy subsidiary laws vary based on what type of entity you choose to set up. An S.r.l. can be formed with share capital from EUR 1. For capital under EUR 10,000, the full amount must be paid in cash before registration. For EUR 10,000 or more, at least 25% of cash contributions must be paid at incorporation, or 100% if there is a sole shareholder. Special reserve requirements apply to S.r.l.s with less than EUR 10,000 in capital.

You will not need any minimum amount of shareholders to incorporate, and Italy subsidiary laws do not have restrictions regarding the nationality of the shareholders or directors of the company, other than reciprocity in their corresponding laws regarding the international ownership of a company.

A S.r.l. may be formed with less than EUR 10,000 as long as:

  • Corporate capital is at least EUR 1
  • The capital investment is paid in cash at incorporation.
  • At least 20% of annual net profit funds a reserve until it and share capital total EUR 10,000

S.r.l. subsidiaries enjoy flexible management laws. Shareholders can choose how to manage the company in the Articles of Association or by-laws. They can appoint a managing director, a whole board of directors, or multiple directors that do not form a college body.

Every company needs to keep books and records of their accounts that include original documents both sent and received. You must retain these accounting documents for at least 10 years, or longer until related tax assessments and disputes are definitively closed. Not all Italy subsidiaries require audits, but your S.r.l. will need one if you meet certain conditions for total assets, number of employees, and sales and services revenues.

Benefits of setting up an Italy subsidiary

Setting up a subsidiary in Italy offers several benefits. A limited liability company operates independently from the parent company. This arrangement can protect the parent company from any losses or litigation. Plus, it allows the subsidiary to create its own structure that fits Italy’s culture and workplace practices.

Other important considerations

Before setting up a subsidiary in Italy, it is advisable to recognize the amount of time and resources it takes. It is possible that someone from your company will need to learn every aspect of Italy subsidiary laws or invest significant amounts of money to hire professional counsel to assist with the setup and maintenance of the subsidiary to remain compliant with local legislation.

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