As the pandemic has gradually eased, the Italian government has adopted a policy of phased re-opening and as of May 1st, 2022, quarantine is no longer required to enter Italy, with a valid green pass (or its equivalent) sufficient. In addition, the government has decided to make the wearing of face masks optional in places such as public offices, supermarkets and restaurants.
As the number of cases related to Covid-19 decreases, both internal and external economic recovery is surely on the way and Italy is once again open to welcoming foreigners wishing to invest. One of the methods to enter the Italian market is to set up a branch, a secondary office of a foreign company, which can do business in the territory.
The Branch Office
A branch office in Italy, set up by an existing foreign company, represents its territorial extension, without being an autonomous entity from the parent company either at the decision-making or organizational level. Therefore, a branch office, within the meaning of Article 2197 of the Civil Code, can only be considered as such if it is organized with a ‘stable representation’ and provided for in the memorandum of association or an amendment thereto.
Another particular feature is the presence of representatives of the mother company, who operate with a certain degree of self-determination and decision-making power with respect to the head office, on which they are dependent.
The Procedure for Establishing a Branch Office in Italy
In order to open a branch office of a foreign company in Italy, it is first necessary to obtain a resolution by the extraordinary shareholders’ meeting of the company wishing to expand in Italy.
The resolution must state the establishment of the branch office and indicate the address where the new office is to be established, as well as appoint a delegate with the power to designate the person in charge of the branch office, also specifying the powers granted to the latter.
Subsequently, an authentic copy of the resolution apostilled in the country of origin must be filed with an Italian notary, with the addition of an oath translation in Italian.
Once the resolution has been filed, the notary will have to draw up a filing report ex. Art. 106 Notary Law. Finally, a person with the appropriate powers must proceed with the registration of the branch office in the Commercial Register.
To this end, the person entrusted with the registration of the branch office in the Companies Register will have to file the deed of incorporation of the foreign company and its annexes, if any, all translated and legalized, as well as a resolution conferring powers on the delegate designated to file the deeds in Italy.
In addition, it will be necessary to have the EUID code (a unique European identifier provided for by Directive 2012/17/EU and the Decree of the Ministry of Economic Development, which has the purpose of uniquely identifying joint-stock companies with registered offices abroad, facilitating the launch of a European system of interconnection between business registers), the address where the branch office will be located, the register code and the registration number of the foreign company.
Subsequently, it will be appropriate to start the filing procedures at the competent Chamber of Commerce, at the same time as applying for the tax code and the allocation of the VAT number.
Once the VAT number has been provided and the correct ATECO code has been identified, the opening of the branch office in Italy of the foreign company will be possible through registration in the competent commercial register, with the help of the notary with whom the documents have been filed, who will also register the deed with the Tax Agency.
From the Tax Point of View
The branch office has full legal and tax subjectivity in Italy, and therefore, before being able to transfer dividends to the mother company, it will have to fully comply with all Italian tax obligations, including any taxation of outbound dividends. In fact, the branch’s income will be taxed both in Italy and in the company’s home country and, in order to avoid double taxation, it is desirable to verify the existence of the Double Taxation Convention between Italy and the foreign country.
In addition, the secondary office will have to fulfil all accounting obligations (keeping accounting records for the activities carried out in the territory, first notes and VAT accounting) and, of course, tax obligations (infra-annual and annual fulfilments such as declarations, financial statements, etc.).
Conclusion
In this post-Covid period, Italy, thanks to the policies adopted by the government such as mass vaccination and the formulation of the PNRR (National Recovery and Resilience Plan), which allows access to an approximate 191.5 billion Euro financed by the European Union, which represents an excellent investment opportunity for anyone wishing to participate in an encouraging economic recovery, with the perspective of ‘return to normality’.
