How to Start a Business in Italy as a Foreigner: Legal Guide 2026
How to Start a Business in Italy as a Foreigner: Complete Legal Guide 2026
A UAE-based entrepreneur who has identified a promising opportunity in the Italian market — a technology consultancy, a luxury goods import business, or a hospitality venture in Tuscany — typically faces the same core challenge: turning a well-developed business plan into a registered, compliant, and tax-efficient Italian company. CDC Law regularly assists foreign investors through this process, and this guide reflects the key legal and practical issues that arise in our professional practice.
Types of Business Entities in Italy: Choosing the Right Structure for Foreign Investors
Before filing a single document, foreign investors must make a foundational strategic decision: which legal entity best serves their operational, fiscal, and liability objectives? Italian law offers several options, each governed by the Codice Civile (Italian Civil Code). The choice of entity affects liability exposure, tax treatment, governance flexibility, and the ease of future restructuring.
SRL (Società a Responsabilità Limitata) — The Go-To Choice for Foreign Investors
In Italy, an SRL (Società a Responsabilità Limitata) is a limited liability company in which shareholders are liable only up to the amount of their capital contribution. It is governed by Articles 2462–2510 of the Codice Civile.
The SRL requires a minimum share capital of €10,000, at least 25% of which must be paid in upon incorporation (or 100% if there is a sole shareholder). Management is vested in one or more amministratori (directors), who need not be Italian residents. The SRL is flexible, widely understood by Italian banks and counterparties, and compatible with both small and medium-sized investment projects.
In our professional experience, the SRL is by far the most commonly adopted corporate form among non-resident investors who instruct the firm to set up operations in Italy.
Simplified SRL (SRLS) — The €1 Capital Option: Worth It?
In Italy, an SRLS (Società a Responsabilità Limitata Semplificata) is a simplified variant of the SRL that can be incorporated with a minimum share capital of just €1. It is governed by Article 2463-bis of the Codice Civile.
Notary fees are standardised and capped, making it an inexpensive entry point. However, the SRLS comes with significant constraints: the articles of incorporation follow a mandatory standard template that offers no customisation, which can create complications as the business grows. For foreign investors with medium-to-long-term ambitions in Italy, the standard SRL generally offers better structural flexibility despite its modestly higher setup cost. The firm generally advises against the SRLS for non-resident investors anticipating any degree of operational complexity.
Key difference between SRL and SRLS: The SRL allows fully customised articles of incorporation and is suitable for complex ownership or governance structures. The SRLS uses a mandatory standard template, costs less to set up, but offers no flexibility. The minimum capital is €10,000 for an SRL versus €1 for an SRLS.
SPA (Società per Azioni) — When You Need a Full Corporation
In Italy, an SPA (Società per Azioni) is a joint-stock company — the Italian equivalent of a public limited company or corporation — governed by Articles 2325–2461 of the Codice Civile. It requires a minimum share capital of €50,000.
The SPA is the appropriate structure when the investor anticipates raising external equity, listing on a regulated market, or operating in sectors (such as financial services or insurance) where a corporation is legally required. Its governance model is more complex and compliance obligations are more burdensome, but it offers unmatched credibility and scalability for large-scale ventures.
Branch Office (Sede Secondaria) vs Subsidiary: Key Differences for Tax and Liability
In Italy, a branch office (sede secondaria) is not a separate legal entity but an operational extension of the foreign parent company. It is governed by Articles 2507–2510 of the Codice Civile and must be registered with the Registro Imprese (Business Registry).
The critical distinction is one of legal personality: a subsidiary (such as an SRL) is a separate legal entity from its foreign parent, offering full liability separation. A branch, by contrast, is merely an extension of the foreign company — the parent remains directly liable for the branch's obligations. From a tax perspective, both structures are subject to Italian corporate taxation on Italy-sourced income, but the branch may offer simplified profit repatriation in certain treaty contexts. The choice between branch and subsidiary requires careful analysis of the investor's home jurisdiction, applicable double taxation treaties, and the specific sector of activity.
Sole Proprietorship (Ditta Individuale) — Limited Use Cases for Foreigners
In Italy, a ditta individuale (sole proprietorship) is a business structure in which a single individual conducts commercial activity in their own name, bearing unlimited personal liability for all business obligations. It is mentioned here only for completeness, as it is rarely suitable for foreign investors.
Step-by-Step: How to Set Up an SRL (Italian LLC) as a Foreign Entrepreneur
The following steps apply to the incorporation of a standard SRL in Italy. Each step is a discrete, mandatory stage that must be completed in sequence. The realistic total timeline from initiating the process to a fully operational company is four to eight weeks.
Step 1: Obtain Your Italian Tax Code (Codice Fiscale)
In Italy, the Codice Fiscale is a personal tax identification number assigned to every individual or entity that interacts with the Italian fiscal and administrative system. It is issued by the Agenzia delle Entrate (Revenue Agency) and is required by every individual involved in an Italian company — whether as shareholder, director, or signatory.
Non-residents can obtain it from the Italian consulate in their country of residence or, if physically present in Italy, directly from the Agenzia delle Entrate. This is the mandatory first step and typically takes one to five business days. When acting for non-resident clients, the firm routinely coordinates this step in parallel with the preparation of incorporation documents to minimise the overall timeline.
Step 2: Draft the Articles of Incorporation with an Italian Notary
Italian law requires that an SRL be incorporated by means of a public deed (atto costitutivo) executed before a licensed Italian notary (notaio). The articles of incorporation must specify the company name, registered office address, share capital, corporate purpose (oggetto sociale), and governance structure.
Notary fees for a standard SRL typically range from €1,500 to €3,500 depending on complexity and share capital. If the foreign investor cannot be physically present in Italy, incorporation can be completed by means of a power of attorney (procura speciale), which must be apostilled and, where necessary, translated into Italian.
Step 3: Register with the Business Registry (Registro Imprese)
In Italy, the Registro Imprese (Business Registry) is the official public register of companies, held at the local Camera di Commercio (Chamber of Commerce) and governed by D.P.R. 7 December 1995, No. 581. All Italian companies must be registered here before commencing legal existence.
Registration is typically handled by the notary and is completed within five to ten business days. Upon registration, the company receives its Partita IVA (VAT number) and Codice Fiscale as a legal entity, and its legal existence commences.
Step 4: VAT Registration, INPS, INAIL, and PEC — Mandatory Compliance
Once registered, the company must fulfil several immediate compliance obligations:
- VAT registration (Partita IVA): Required under D.P.R. 26 October 1972, No. 633 for all companies carrying out commercial activities. The standard VAT rate (IVA) in Italy is 22%.
- INPS registration: Mandatory if the company employs staff. In Italy, INPS (Istituto Nazionale della Previdenza Sociale) is the national social security institute responsible for collecting social security contributions and administering pension and welfare benefits.
- INAIL registration: Mandatory for companies with employees. In Italy, INAIL (Istituto Nazionale per l'Assicurazione contro gli Infortuni sul Lavoro) is the national workplace accident insurance authority.
- PEC (Posta Elettronica Certificata): In Italy, PEC is a certified electronic mail system that has the legal equivalent of registered post and serves as the company's official legal mailbox for all communications with public authorities. This obligation is established under D.L. 29 November 2008, No. 185, converted by Law No. 2 of 28 January 2009.
Failure to complete these registrations in the first weeks of the company's life is among the compliance gaps the firm most frequently encounters when conducting due diligence on already-operating foreign-owned businesses.
Step 5: Open a Corporate Bank Account in Italy
Opening an Italian corporate bank account is a practical necessity but can be the most time-consuming step for non-resident foreign shareholders. Italian banks are subject to rigorous AML (anti-money laundering) due diligence requirements and typically request certified constitutional documents, proof of the ultimate beneficial owner's identity, and evidence of the business's economic rationale. Engaging a local legal advisor can significantly accelerate this process.
Choosing the right corporate structure for your business in Italy isn't always straightforward — especially when navigating tax regulations, bureaucratic requirements, and variables that shift depending on your sector and residency status. If you're unsure which path best fits your specific situation, you can request an initial consultation with our team.
Special Requirements for Non-EU Citizens Starting a Business in Italy
The Reciprocity Condition (Condizione di Reciprocità) — Explained
In Italy, the condizione di reciprocità (reciprocity condition) is the legal requirement, set out in Article 16 of the Disposizioni Preliminari al Codice Civile (the Preleggi), by which foreign nationals may exercise civil rights in Italy — including the right to own and operate a business — only if their home country grants equivalent rights to Italian nationals.
In practice, this condition is largely satisfied for citizens of countries that are WTO members, EU Member States, or parties to bilateral investment treaties with Italy. Investors from certain jurisdictions should verify the reciprocity status of their home country before proceeding — this is a check the firm carries out systematically at the outset of every mandate.
Residency and Visa Considerations: Do You Need to Live in Italy?
A non-EU citizen does not need to be an Italian resident to own shares in an Italian company. However, if the non-EU national intends to actively manage or work within the company while physically present in Italy, a residence permit (permesso di soggiorno) for self-employment or entrepreneurial activity is required under Articles 26–27 of Legislative Decree 25 July 1998, No. 286 (the Testo Unico Immigrazione).
Italy also operates an Italia Startup Visa program for founders of innovative startups, which provides a streamlined visa pathway for qualifying entrepreneurs.
Key rule: Non-EU nationals can legally own 100% of an Italian SRL without residing in Italy. The residency requirement arises only when the owner wishes to be physically present and operationally active in Italy on a continuous basis.
Power of Attorney: Forming a Company Without Being Physically in Italy
Foreign investors who are unable or unwilling to travel to Italy for incorporation may authorise an Italian-based representative to act on their behalf by means of a notarised and apostilled power of attorney (procura notarile). This document must clearly specify the powers granted — including the authority to execute the deed of incorporation and register the company — and must comply with both the law of the country where it is executed and Italian formal requirements. CDC Law regularly handles powers of attorney issued from Gulf jurisdictions, Asia, and North America, liaising directly with notaries and competent authorities on legalisation.
Real Costs of Opening and Running a Company in Italy in 2026
The total cost of incorporating and operationalising an SRL in Italy in 2026 should be estimated approximately as follows:
| Cost Item | Amount (indicative) |
|---|---|
| Notary fees (deed of incorporation) | €1,500 – €3,500 |
| Chamber of Commerce registration (diritti di segreteria) | ~€200 (one-off) |
| Annual Chamber of Commerce fee (diritto annuale) | €200 – €500/year |
| Minimum share capital (SRL) | €10,000 (€2,500 paid in at incorporation for multiple shareholders) |
| Legal and advisory fees (full process management) | €2,500 – €6,000 |
| Ongoing accounting and bookkeeping (small company) | €3,000 – €8,000/year |
All figures are indicative and may vary depending on the specific circumstances. Statutory audit requirements and social security contributions may add further costs where applicable.
Tax Framework for Foreign-Owned Businesses in Italy
Corporate Tax (IRES) at 24% and Regional Tax (IRAP) at 3.9%
In Italy, IRES (Imposta sul Reddito delle Società) is the corporate income tax levied on the worldwide net profits of Italian resident companies at a flat rate of 24%, pursuant to Articles 73 and following of the TUIR (D.P.R. 22 December 1986, No. 917). Italian resident companies include all SRLs incorporated in Italy, regardless of the nationality of their shareholders.
In Italy, IRAP (Imposta Regionale sulle Attività Produttive) is the regional production tax levied on companies conducting productive activities in Italy at a standard rate of 3.9%, calculated on a tax base broadly corresponding to gross operating income, under Legislative Decree 15 December 1997, No. 446. IRAP rates may vary marginally by region.
Effective combined tax burden: A foreign-owned Italian SRL is typically subject to a combined corporate tax burden of approximately 27.9% (24% IRES + 3.9% IRAP) on its taxable base, subject to applicable deductions and treaty relief.
VAT (IVA) Obligations and Registration Thresholds
In Italy, IVA (Imposta sul Valore Aggiunto) is the value added tax levied on commercial transactions, governed by D.P.R. 26 October 1972, No. 633. The standard rate is 22%.
Reduced rates of 10%, 5%, and 4% apply to certain categories of goods and services (including food, hospitality, and specific social services). Unlike in some jurisdictions, there is no minimum turnover threshold for VAT registration for corporate entities — registration is mandatory from the outset of commercial activity.
Double Taxation Treaties: Key Agreements with the US, UK, UAE, and Asia
In Italy, double taxation treaties (convenzioni contro le doppie imposizioni) are bilateral agreements based on the OECD Model Convention that prevent the same income from being taxed in both Italy and the investor's home jurisdiction. Italy has concluded treaties with over 100 countries.
Key treaties relevant to foreign investors include those with the United States, the United Kingdom, the UAE, China, and India. These treaties typically regulate the taxation of dividends, interest, royalties, and capital gains, and establish reduced withholding tax rates on cross-border payments. Foreign investors should analyse the applicable treaty before structuring profit repatriation from their Italian company.
The Impatriate Tax Regime: Income Tax Relief
In Italy, the Impatriate Tax Regime (regime degli impatriati) is a personal income tax incentive, introduced by Article 16 of Legislative Decree 14 September 2015, No. 147 (the Decreto Internazionalizzazione), that exempts a significant portion of employment or self-employment income earned in Italy by individuals who transfer their tax residence to Italy.
The Legge di Bilancio 2024 (Law No. 213 of 30 December 2023) significantly reformed the regime for new beneficiaries, reducing the standard exemption to 50% of income and introducing new residency requirements and minimum income thresholds. Investors considering relocating to Italy to manage their company should verify the current applicability of this regime — and any further legislative amendments — with a qualified tax advisor.
Hiring Employees in Italy: What Foreign Business Owners Must Know
Understanding Italian National Collective Bargaining Agreements (CCNL)
In Italy, CCNL (Contratti Collettivi Nazionali di Lavoro) — National Collective Bargaining Agreements — are sector-specific agreements negotiated between national employers' associations and trade unions that set legally binding minimum wages, working hours, notice periods, and entitlements for employees in each sector of activity.
A foreign business owner must identify the applicable CCNL for their sector from the outset, as non-compliance can expose the company to significant penalties and litigation risk. In our experience, incorrect application of the sector CCNL is among the most common employment law irregularities found in foreign-owned companies.
Total Cost of an Employee: The +40% Rule and TFR Severance
Foreign employers are frequently surprised by the true cost of hiring in Italy. As a general indicative rule, the total employer cost of an employee is approximately 40% higher than the gross salary agreed with the employee.
This additional burden includes employer social security contributions (predominantly INPS contributions, ranging from approximately 28% to 32% of gross salary depending on the employment category and sector) and INAIL premiums for workplace accident insurance.
In Italy, the TFR (Trattamento di Fine Rapporto) is a statutory severance fund, equivalent to approximately one month's salary per year of service, which employers are legally required to accrue and pay to employees upon termination of the employment relationship, regardless of the reason for termination. It is governed by Article 2120 of the Codice Civile.
7 Common Mistakes Foreign Entrepreneurs Make in Italy (and How to Avoid Them)
Mistake #1: Skipping Legal Due Diligence on Location and Sector Regulations
Italy's regulatory environment is not uniform. Certain sectors — food and beverage, healthcare, real estate brokerage, financial services, and construction — require specific licences, authorisations, or sector-specific registrations at the municipal, regional, or national level. Failing to identify these requirements before incorporation can result in costly delays, forced restructuring of the business model, or outright prohibition of the intended activity. A pre-incorporation legal audit of the target sector is an integral part of any properly structured mandate.
Mistake #2: Confusing a Branch Office with a Subsidiary
A branch office is not a separate legal entity. Foreign investors who establish a branch in Italy expecting the same liability protection as a subsidiary are making a potentially serious error. The parent company remains fully liable for the branch's debts and obligations. This distinction has direct implications for asset protection strategy and should be made with full awareness of its consequences.
Mistake #3: Underestimating Italian Bureaucracy and Timelines
From the date of notarial incorporation to the moment a company has a registered office, a bank account, VAT registration, and all mandatory registrations in place, a realistic timeline is four to eight weeks — and longer if complications arise with bank account opening or if the investor's home-country documents require apostille and translation. Foreign entrepreneurs who plan to begin operations on day one of registration will almost always need to revise their schedule. Building adequate lead time into the project plan and engaging local legal and accounting support from the very beginning is not optional — it is the difference between an orderly launch and a chaotic one.
Mistake #4: Overlooking the Reciprocity Condition
Non-EU investors sometimes proceed with incorporation planning without first verifying whether their home country satisfies Italy's reciprocity condition under Article 16 of the Preleggi. While WTO membership typically satisfies the condition, investors from jurisdictions with unusual bilateral relationships with Italy should obtain confirmation before committing resources.
Mistake #5: Neglecting to Establish PEC and Mandatory Registrations Immediately
Many foreign-owned companies operate for weeks without a PEC address or complete INPS/INAIL registrations, assuming these can wait. Italian law and enforcement practice do not accommodate this delay. Fines and administrative complications arising from late registration can affect the company's standing with the Camera di Commercio and public authorities from an early stage.
Mistake #6: Choosing the Wrong Entity for the Business Model
Selecting an SRLS to save on setup costs, then discovering six months later that the standard template articles are incompatible with investor agreements or governance requirements, is a recurring pattern. The marginal cost saving of an SRLS over a standard SRL is rarely justified for non-resident investors with substantive business plans.
Mistake #7: Failing to Structure Profit Repatriation Before Incorporation
The method by which profits will be extracted from the Italian company — whether as dividends, management fees, royalties, or salary — has significant tax consequences in both Italy and the investor's home jurisdiction. These decisions should be made before incorporation, not after the first profitable year, as retroactive restructuring is costly and may trigger adverse tax scrutiny.
Frequently Asked Questions
How much does it cost to open a company in Italy as a foreigner?
The total cost of incorporating an SRL in Italy as a foreign investor in 2026 includes several mandatory components. Notary fees for the deed of incorporation typically range from €1,500 to €3,500. Chamber of Commerce registration costs approximately €200, plus an annual fee of €200–500. The minimum share capital for an SRL is €10,000, of which at least €2,500 must be paid in at incorporation (if there are multiple shareholders). Legal and advisory fees for a law firm managing the full process — from Codice Fiscale to bank account opening — typically range from €2,500 to €6,000 depending on complexity. Ongoing annual costs for accounting and bookkeeping start at approximately €3,000–8,000 for a small company. All figures are indicative.
Can a non-EU citizen start a business in Italy without a residence permit?
Yes, under Italian law a non-EU citizen can legally own shares in an Italian company — including 100% of an SRL — without holding a residence permit or being physically present in Italy. However, if the non-EU national intends to actively manage or work within the company while physically in Italy on a continuous basis, a residence permit (permesso di soggiorno) for self-employment or entrepreneurial activity is required under Articles 26–27 of Legislative Decree 25 July 1998, No. 286 (the Testo Unico Immigrazione). Italy's Italia Startup Visa program provides a streamlined pathway for founders of qualifying innovative startups. The key distinction is between passive ownership (no permit required) and active physical presence for work purposes (permit required).
What is the difference between an SRL and an SRLS in Italy?
Both the SRL and SRLS are Italian limited liability companies in which shareholders' liability is limited to their capital contribution. The key differences are: (1) minimum capital — €10,000 for an SRL versus a minimum of €1 for an SRLS; (2) articles of incorporation — an SRL allows fully customised governance and ownership arrangements, whereas an SRLS must use the mandatory standard template under Article 2463-bis of the Codice Civile, with no customisation permitted; (3) notary fees — standardised and capped for the SRLS, variable for the SRL. For foreign investors with substantive business plans, investor agreements, or complex governance structures, the standard SRL is almost always preferable despite its higher setup cost. The SRLS's rigid template frequently becomes an obstacle as the business develops.
How long does it take to register a company in Italy?
The timeline from initiating the incorporation process to a fully operational company with a bank account, VAT registration, and all mandatory registrations in place is realistically four to eight weeks. The notarial deed typically takes one to two weeks to prepare and execute. Business Registry registration (handled by the notary) takes a further five to ten business days under D.P.R. 7 December 1995, No. 581. Opening a corporate bank account — which requires AML due diligence by the Italian bank — is often the most variable and potentially longest step, particularly for non-resident shareholders. Obtaining a Codice Fiscale for all individual shareholders and directors can be initiated in parallel. Foreign entrepreneurs should build this lead time into their project planning from the outset.
What taxes does a foreign-owned company pay in Italy?
An SRL incorporated in Italy is treated as an Italian tax resident regardless of the nationality of its shareholders and is subject to: (1) IRES (Imposta sul Reddito delle Società) at a flat rate of 24% on worldwide net profits, under Articles 73 ff. of the TUIR (D.P.R. 917/1986); (2) IRAP (Imposta Regionale sulle Attività Produttive) at a standard rate of 3.9% on gross operating income, under Legislative Decree 446/1997; and (3) IVA (VAT) at the standard rate of 22% on commercial transactions, under D.P.R. 633/1972. The combined IRES and IRAP burden amounts to approximately 27.9% of the taxable base. Cross-border payments such as dividends and royalties may be subject to withholding taxes, potentially reduced under applicable double taxation treaties.
Is a branch office or a subsidiary better for a foreign company entering Italy?
The choice between a branch office (sede secondaria) and a subsidiary (typically an SRL) depends on the investor's priorities for liability, tax, and operational flexibility. A subsidiary (SRL) is a separate legal entity: the foreign parent's liability is limited to its capital contribution, offering full asset protection. A branch is not a separate legal entity under Articles 2507–2510 of the Codice Civile: the foreign parent remains directly and unlimitedly liable for all branch obligations. Both structures are subject to Italian corporate taxation on Italy-sourced income. Branches may offer simplified profit repatriation in certain double taxation treaty contexts, but the liability exposure they create makes subsidiaries the preferred structure for most foreign investors. The decision requires case-by-case analysis of the home jurisdiction, applicable treaty network, and sector of activity.
In sintesi — Key Takeaways
- The SRL is the standard structure for foreign investors setting up in Italy: it offers limited liability, governance flexibility, and wide acceptance by Italian banks and counterparties, governed by Articles 2462–2510 of the Codice Civile. The minimum share capital is €10,000.
- Non-EU citizens can own an Italian company without living in Italy: passive share ownership does not require a residence permit. A permit is required only when the owner intends to be physically and operationally present in Italy under Legislative Decree 286/1998.
- The total cost of incorporating an SRL in Italy as a foreigner ranges from approximately €4,200 to €9,700 (combining notary fees, registration costs, legal advisory fees, and minimum paid-in capital), plus ongoing annual costs.
- The realistic incorporation timeline is four to eight weeks from initiating the process to a fully operational company with a bank account and all mandatory registrations in place.
- Foreign-owned Italian companies pay IRES at 24% and IRAP at 3.9% on their Italian taxable income, plus mandatory VAT at 22% on commercial transactions. Italy's network of double taxation treaties may reduce withholding taxes on cross-border payments.
- A branch office is not a subsidiary: a branch provides no liability separation between the foreign parent and Italian operations. Foreign investors seeking asset protection must incorporate a separate Italian legal entity.
- The reciprocity condition under Article 16 of the Preleggi must be verified for non-EU investors before proceeding: in practice, WTO membership satisfies this requirement for most nationalities, but confirmation should be obtained at the outset of any mandate.
The information in this article is for general informational purposes only and does not constitute personalised legal advice.
Disclaimer: The information in this guide is provided for general informational purposes only. It does not constitute personalised legal, tax, or professional advice. For an assessment of your specific situation, please consult qualified professionals.
Related: Italy Golden Visa and Investor Visa Programs — for non-EU investors considering long-term residency in Italy alongside their business investment.
Related: Buying Property in Italy as a Foreigner — key legal considerations for foreign nationals acquiring real estate in Italy, including reciprocity rules and fiscal implications.
You've read the guide — now it's time to apply it to your specific case. Our lawyers assist foreign investors at every stage of setting up a business in Italy: from selecting the right legal entity and tax structure to opening a bank account and launching operations. Contact us at info@cdclaw.org or call +39 06 36306020 to schedule a consultation tailored to your investment project.