Doing business in Italy
Italy’s developed economy, skilled workforce and strategic European position make it an attractive destination for foreign investors. However, beneath the country’s more appealing aspects lie regulatory, tax and administrative challenges that require careful navigation.
Italy is the eurozone’s third-largest economy and a leading global manufacturing and export hub. Its GDP reached €2.1 trillion in 2023, ranking it as the eighth-largest economy worldwide. Major industries include machinery, automotive, fashion, chemicals and food processing.
With a population of 59 million and high connectivity to other European markets, Italy offers investors access to a vast industrial base and a skilled labour force. The country is a member of the European Union (EU), the Group of Seven (G7), the Organisation for Economic Co-operation and Development (OECD), World Trade Organisation (WTO) and uses the euro as its currency. While Italian is the official language, English is frequently used in business circles.
Italy also acts as a crucial trade and transport link between Europe, North Africa and the Middle East, bolstered by its advanced infrastructure and port network.
Challenges of doing business in Italy
Italy remains a significant force in Europe's economy, providing global enterprises with robust market access and supply chain prospects. Nevertheless, foreign companies encounter substantial complexity when entering the Italian market.
Italy was ranked within the top 10 most complex jurisdictions in TMF Group’s Global Business Complexity Index, highlighting its challenging regulatory and tax landscape.
Cultural aspects, such as the local language used in documentation and regional administrative differences, further contribute to this complexity. The business culture emphasizes hierarchy, personal trust, and relationship-building. Grasping these nuances is essential for achieving success.
Establishing a legal entity, hiring personnel and ensuring tax compliance demand meticulous attention to formal procedures and local regulations. Despite these obstacles, Italy continues to attract investors seeking industrial capabilities, innovation and strategic European access.
Compliance and the regulatory environment in Italy
Italy’s regulatory environment is seen as highly intricate due to its bureaucratic procedures, frequent legislative changes and layered reporting requirements.
All companies must adhere to Italian GAAP or IFRS (for listed entities) and file annual financial statements with the Business Register. These must be submitted within 30 days of shareholder approval and include financial disclosures such as directors’ reports and auditor statements, if applicable.
Italy has adopted major EU and OECD frameworks including the Foreign Account Tax Compliance Act (FATCA), Common Reporting Standard (CRS) and Base Erosion and Profit Shifting (BEPS), and enforces stringent anti-money laundering and transparency laws. Directors must be registered, and beneficial ownership disclosed in line with EU regulations.
Corporate governance requirements vary by entity type and size, with additional obligations for larger or public companies. Compliance often requires legal and tax advisory support to manage frequent updates and regional administrative discrepancies.
Hiring and employment in Italy
Labour law in Italy is governed by the Civil Code, national labour contracts and collective agreements, which significantly influence employment terms and benefits. The standard work week is 40 hours with overtime regulated by law.
Employees are entitled to a minimum of four weeks of annual leave and 11 public holidays. Employers contribute about 30% of gross salary to social security, funding pensions, healthcare and unemployment benefits.
Fixed-term, part-time and agency contracts are all governed by national regulations. Non-EU foreign nationals need work permits and residence visas, often processed through the Single Immigration Desk.
Italy is also part of the EU Blue Card scheme, facilitating easier hiring of highly skilled non-EU professionals.
The financial and tax environment in Italy
Italy has a comparatively high tax burden among its EU peers, adding to its business complexity ranking. The standard corporate income tax (IRES) rate is 24% with an additional regional production tax (IRAP) usually around 3.9%.
Resident companies are taxed on their worldwide income while non-resident firms are taxed on income sourced from Italy. VAT is set at 22%, with reduced rates of 10% and 5% for specific goods and services.
Companies need to file corporate income tax returns annually and might have advance payment obligations. Transfer pricing, thin capitalisation rules, and anti-avoidance measures are enforced and aligned with EU and OECD guidelines.
There are incentives for R&D investment, green transition initiatives, and the reinvestment of profits into innovation, but compliance remains highly procedural and documentation-heavy.
Starting a business in Italy
Registering a company in Italy involves several procedural steps and can take a few weeks. The most common legal structure is the Società a responsabilità limitata (Srl), similar to a limited liability company. It requires a minimum share capital of €1 for simplified Srls or €10,000 for standard ones.
Other structures include the Società per Azioni (SpA), used for larger firms or listed entities, and branches of foreign companies.
The steps for incorporation include:
- Obtaining a digital signature and tax code for directors
- Drafting and notarising incorporation documents
- Registering with the Business Register
- Opening a corporate bank account
- Enrolling for VAT and social security contributions
Srls require at least one director and one shareholder. Once registered, companies must maintain statutory books and fulfil annual reporting duties.
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