What about Italy? - PwC

1 what about Italy? Easy guide to your Italian Start-up business - Incorporationof an Italian In order to carry out a business activity in italy is it necessary to incorporate a company or is it possible to act by means of a branch? p. what business activities may be carried out in italy which are not subject to Italian taxation on income? p. Is there a definition of permanent establishment in the Italian Law? p. Individuals have been transferred to italy to set up the business ; how are they considered for income tax and social security purposes? p. Has italy signed any Treaties to avoid double taxation? p. And what about Social Security Agreements? p. Starting a commercial activity in italy : what are the main tax consequences of operating through a corporation or a branch? p. Is it possible to move from a branch structure to a corporate structure? And viceversa? p. Which type of corporate entities can be set up in italy ? p. Which are the obligations and procedures for the incorporation of a corporate entity?

2 P. May a company be set up by a sole shareholder/quotaholder? p. May specific assets be dedicated to financing a specific business ? p. Are contributions in kind permitted? p. Is the full amount of corporate capital required to be paid in at the time of incorporation? p. Is it possible for shareholders to provide accessory services (prestazioni accessorie) to the company? p. Is it possible to issue different kinds of shares? p. May quotas with different corporate rights be provided? p. Are there any differences, under a tax standpoint, between the various types of companies in italy ? p. Which are the main taxes for the incorporation of a company in italy ? p. | 3 what about italy ? Easy guide to your Italian order to carry out a business activity in italy is it necessary to incorporate a company or is it possible to act by means of a branch?It is possible to start a business activity in italy through (i) the incorporation of a company, or (ii) the opening of a the Italian Civil Code, a company is an independent entity with respect to the foreign may have limited liability or it may be a partnership.

3 In the first case, the liability of the stockholders is limited to the amount of the participation subscribed by each of them while partnerships do not have a limited liability status and the partners are liable for all the debts and obligations of the a legal and a statutory point of view, the incorporation and management of a limited liability company implies greater fulfilment and fixed costs than those imposed for a branch such as, for example, the approval and yearly registration of the statutory financial statements, the obligation to keep statutory books, the appointment of the statutory auditors in the event that certain thresholds are exceeded, order to perform a business activity in italy , foreign companies may establish a branch, according to the Italian Civil a legal point of view, a branch is not a separate legal entity with respect to the parent company and its establishment in italy must be registered with the Register of Companies. A branch is subject to less statutory fulfilment with respect to a company s a tax point of view, a branch is deemed a permanent establishment of the foreign company and it is mainly treated as an independent entity for tax purposes.

4 In general, a branch is subject to the same tax treatment of an Italian company as it is subject to corporate taxes for the profits produced in italy (for this purpose, the branch must draw up yearly financial balance sheet). Furthermore, a branch is subject to the same tax fulfilment as Italian companies such as, for example, the keeping of official registers and the obligation to file corporate taxes returns as well as VAT returns. what business activities may be carried out in italy which are not subject to Italian taxation on income?In general terms, a foreign company will not be deemed to have a permanent establishment in italy , and therefore will not be subject to taxation in italy , if it carries out solely a preparatory or auxiliary activity, even if this activity is carried out in a fixed place of business (premises and/or personnel).In particular, a fixed place of business cannot be deemed to be a permanent establishment of a company resident abroad, if the following activities are carried out:i.

5 The use of an installation solely for the purpose of storage, display or delivery of goods or merchandise belonging to the company;ii. the maintenance of a stock of goods or merchandise belonging to the company solely for the purpose of storage, display or delivery;iii. the maintenance of a stock of goods or merchandise belonging to the company solely for the purpose of processing by another company;iv. the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or collecting information for the company;v. the maintenance of a fixed place of business solely in order to carry out any other type of preparatory or auxiliary activity on behalf of the company;vi. the maintenance of a fixed place of business solely for any combination of the activities mentioned above provided that the overall activity resulting from this combination is of a preparatory or auxiliary further details on the above stated points, reference should be made the Italian Income Tax Code (TUIR - Testo Unico delle Imposte sui Redditi, Presidential Decree No.)

6 917 of December 22, 1986) with regards to the rules concerning the permanent establishment , introduced in companies may enter into a preliminary ruling procedure with the Italian Tax Authorities with the aim to ascertain whether the activities to be performed in italy give rise to a permanent | 4 what about italy ? Easy guide to your Italian there a definition of permanent establishment in the ItalianLaw?The definition of permanent establishment is stated in art. 162 of the ItalianIncome Tax Code under two different descriptions:a. fixed place of business (at the disposal of the Principal) through which the business of the foreign entity is wholly or partly carried on in italy material PE ;b. dependent agent that is acting on behalf of the foreign entity and has, and habitually exercises, in italy an authority to conclude contracts in the name of the foreign entity agency PE .In general, the material PE is described as a fixed place of business by means of which the non-resident company carries out all or part of its business activities within the territory of italy .

7 In particular, the material PE comprises:i. a place of management;ii. a branch;iii. an office;iv. a factory;v. a workshop;vi. a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;vii. a building site or construction or installation project constitutes a permanent establishment only if it exists for more than three , the so called agency PE is described as a dependent agent , in other words any party having a dependent status that concludes contracts other than contracts for the purchase of goods in the name of the non resident an agency PE, the following conditions must exist: the entity/person must be a dependent agent ; the entity/person must habitually conclude contracts on behalf of the non-resident company; the contracts concluded must not be contracts for the purchase of is worth pointing out that the definition of permanent establishment set in the tax treaties prevails over the domestic definition, in all such cases whereby a tax treaty Individuals have been transferred to italy to set up the business ; how are they considered for income tax and social security purposes?

8 For income tax purposesAssuming that the presence and the activity of the transferred individual do not create any permanent establishment issue in italy , the individual is liable to Italian income taxes on the basis of his/her tax residency status to be determined in accordance with Section 2 of the Italian Income Tax individual is considered resident for tax purposes if, for the greater part of thefiscal year ( : at least 183 days): is registered with the Registry of the Italian Resident Population ( Anagrafe ); or has his/her domicile in the territory of the Italian State, as defined by Section 43 of the Italian Civil Code (the place where the individual as his/her economic, social and family center of interests); has his/her residence in the territory of the Italian State, as defined by Section 43 of the Italian Civil Code (the place where the individual has declared their habitual abode).Taxation of resident individuals:Resident individuals are subject to the Italian personal (or national) income taxes on their income wherever produced (under the so called worldwide principle ).

9 Therefore, residents are also subject to taxation on income deriving from real estate owned outside of the Italian territory, foreign dividends and interests, foreign compensations and director s fees and other types of foreign addition to the personal income tax, Italian legislation, as of fiscal year 2012, has introduced for individuals resident in italy a wealth tax on investments which are located outside of the Italian territory (called IVAFE for financial investments owned outside of italy and IVIE for real estate investments).Taxation of non-residents:Individuals who are non-residents are subject to PIT (IRPEF) only on income arisingfrom Italian sources ( income earned in italy ).Therefore, foreign income is not relevant for the purposes of taxation in italy ; this applies to both income and wealth | 5 what about italy ? Easy guide to your Italian social security purposesAccording to the Italian employment law a foreign individual working in the Italian territory ( : even if the employer is located outside of italy ): is subject to the same rights and duties of an Italian worker also in terms of social security coverage; is liable to Italian social security contributions during the period of his/her work stay in Italian social security contributions are provided by both the employee and the employer, while the settlement can only be carried out by the exception to the above rule may be provided by the Social Security Agreements between italy and the Country of origin (see also ).

10 Has italy signed any Treaties to avoid double taxation? italy has signed over 90 Treaties to avoid double taxation. The majority of the Treaties are based on the OECD model which has the following structure: 1 - Persons coveredArticle 2 - Taxes coveredArticle 3 - General definitionsArticle 4 - ResidentArticle 5 - Permanent establishmentArticle 6 - Income from immovable propertyArticle 7 - business profitsArticle 8 - Shipping, inland waterways transport and air transportArticle 9 - Associated enterprisesArticle 10 - DividendsArticle 11 - InterestArticle 12 - RoyaltiesArticle 13 - Capital gainsArticle 14 - Independent personal services (this article has been deleted from the OECD model but is still present in different Double Tax Treaties)Article 15 - Income from employmentArticle 16 - Directors feesArticle 17 - Artists and sportsmenArticle 18 - PensionsArticle 19 - Government serviceArticle 20 - StudentsArticle 21 - Other incomeArticle 22 - Taxation of capitalArticle 23 - Methods for elimination of double taxationArticle 24 - Non-discriminationArticle 25 - Mutual agreement procedureArticle 26 - Exchange of informationArticle 27 - Assistance in the collection of taxesArticle 28 - Members of diplomatic missions and consular postsArticle 29 - Territorial extensionArticle 30 - Entry into forceArticle 31 - TerminationAlbania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belgium, Brazil, Bulgaria, Byelorussia, Canada, China, Congo, Croatia, Cyprus, Czech and Slovak Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Ghana, Greece, Hungary, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Ivory Coast, Japan.