Corporate & commercial LawImmigration Law

Common Legal Issues affecting Foreign Companies in Italy

foreign companies in italy

The Rise of Foreign Businesses in Italy in 2024

The number of immigrant-owned businesses in Italy continues to grow, reaching nearly 660,000 registered companies as of December 31, 2023. These businesses account for 11% of all businesses in the country. An impressive 522,055 of these (79%) are owned by entrepreneurs from outside the European Union. Compared to December 2022, there was a 2% increase, solidifying the upward trend of the last five years (+7% since 2019) – a stark contrast to Italian-owned businesses which declined by over 3% during the same period. 

These findings come from Infocamere’s latest report “Immigrant Entrepreneurship in Italy: An Analysis Through Business Register Data for the Second Half of 2023.” This concise report presents the key aspects of the phenomenon through numerous graphs and charts. It serves as an informative resource produced as part of the Futurae Migrant Businesses Program, an initiative promoted by the Ministry of Labor and Social Policies and Unioncamere.

Between January and December 2023, 63,701 new immigrant businesses were registered (+1,034 compared to 2022), while 36,136 closed (-109 compared to 2022), resulting in a positive net increase of over 27,565 units. This growth can be almost entirely attributed to the rise of incorporated companies, as they increased by 11% over the past year, surpassing 129,000. Sole proprietorships, which still make up 73% of the total, remained stable.

The construction and agriculture sectors, representing 24% and 4% respectively, drove immigrant entrepreneurship in 2023 with a 5% annual increase each. The most represented sector is retail with nearly 203,000 businesses, though it experienced a slight decrease (-0.5%), while manufacturing held steady (+0.5%) with over 49,000 companies.

Geographically, Lombardy and the entire Northwest region, home to 31% of immigrant businesses, showed the most distinct annual growth (+3.8%), outpacing the Northeast (+1.4%) and the South (+1.1%). The Central regions saw a modest recovery (+0.5%) and maintain the highest concentration of immigrant businesses overall. The province with the greatest immigrant business density remains Prato at 33.2%, followed by Trieste (20.6%) and Florence (18.7%). At the opposite end, Barletta-Andria-Trani has the lowest at 2.5%.  

Immigrant Businesses in Italy (2023)

Category20232022Change
New Businesses63,70162,667+1,034 (+1.7%)
Closed Businesses36,13636,245-109 (-0.3%)
Net Increase27,565
Incorporated Companies129,000116,500+12,500 (+11%)
Sole Proprietorshipsstable

Sector Breakdown

SectorNumber of BusinessesAnnual Change
Construction24% of total+5%
Agriculture4% of total+5%
Retail203,000-0.5%
Manufacturing49,000+0.5%

Province Breakdown examples

ProvinceImmigrant Business Density
Prato33.2%
Trieste20.6%
Florence18.7%
Barletta-Andria-Trani2.5%

Legal Consulting for Foreign Businesses: Why You Should Seek Assistance from ILF

Operating in a foreign country can raise numerous legal and bureaucratic challenges for businesses. This is where ILF, a specialized law firm, comes into play, offering comprehensive legal assistance to help foreign companies navigate the complexities of doing business in Italy.

The business world is ever-evolving and complex, with new legislative and regulatory measures constantly emerging, introducing new constraints and obligations that permeate the daily operations of companies. In addition, businesses routinely face challenges in their relationships with employees, suppliers, customers, banks, and other stakeholders. Managing numerous important relationships while keeping track of Italian regulations proves to be challenging.

At ILF, we assist companies during every stage, from studying and negotiating agreements to drafting and revising contracts, in both Italian and English. Our firm emphasizes understanding the real needs of our clients, analyzing the foreign markets they intend to operate in, and presenting potential solutions.

Our services for businesses in this sector are numerous and varied, including:

  1. Researching and evaluating potential opportunities in sectors of interest
  2. Identifying suppliers of products or services
  3. Seeking companies for acquisition
  4. Selecting commercial personnel and providing necessary contractual assistance
  5. Identifying suitable office spaces, commercial premises, and production facilities for the business
  6. Supporting bureaucratic activities required to obtain necessary licenses and authorizations
  7. Assisting with formalities for opening a company (type, incorporation, notary, registration with the business register, etc.)
  8. Providing assistance and collaboration on fiscal, legal, and administrative matters, including drafting international sales contracts, commercial negotiations, and assistance during negotiations with foreign business partners, as well as support with transportation, customs, licenses, permits, and the establishment of foreign companies

In addition, we offer assistance and consulting services to foreign companies intending to invest in Italy as well as Italian companies seeking to establish their business operations abroad.

To comply with dynamic regulatory framework, resolve legal issues of varying degrees, avoid risks, and devise new operational solutions, businesses require continuous legal assistance. This assistance should not only be qualified and effective, but also a constant guide that accompanies them day-by-day in their daily business processes, allowing more energy and time to be entirely dedicated to the development of their business.

However, this need often conflicts with the necessity for businesses, particularly small and medium-sized enterprises (SMEs), to contain costs as much as possible. Whether they seek external legal counsel or establish an internal legal department, companies face high, if not prohibitive, costs for legal consulting, which significantly impact their budgets.

This often leads companies to forgo legal consulting services they may require and seek external legal assistance only when a problem has arisen. This choice, however, is misguided, as:

  1. External legal counsel intervenes late, when the problem is difficult or impossible to resolve.
  2. The intervention of external legal counsel at that point is costly, especially if repeated.
  3. External legal counsel is unfamiliar with the company and its needs, often leading to inappropriate or ineffective interventions.

Instead, businesses should be able to rely on a law firm specialized in business consulting, readily available to obtain clarifications, opinions, suggestions, and resolve any need. From minor inquiries, which if left unresolved could pose serious problems and jeopardize the business, to the most complex matter, businesses can feel protected without worrying about costs. 

What are the areas of continuous legal consulting?

Continuous legal consulting encompasses all aspects of a company’s typical operations, including its ordinary business activities, based on its respective area of operation.

Foreign Companies Operating In Italy: How?

A foreign company in Italy can operate in various ways:

Establishing a Local Unit

By establishing a local unit, such as a warehouse for storing goods to be marketed in Italy or a representative office, your business can effectively operate in Italy. It is crucial to ensure that local units maintain their tax treatment by avoiding characteristics of a permanent establishment. Since 2018, the Italian legislator has broadened the definition of a permanent establishment to account for digital developments, reducing the need for physical presence by foreign entities in Italy. To avoid being classified as a permanent establishment, local units in Italy must be exclusively auxiliary. Otherwise, if a permanent establishment exists, the profits attributable to it would be subject to corporate income tax in Italy.

Establishing a Branch

Establishing a branch is a viable strategy for operating your business in Italy. This option is essential for those planning to establish a permanent presence in Italy (with full operational capacity, including non-auxiliary functions), while maintaining legal responsibility with the foreign parent company. Branches are subject to Italian taxation like any other company, as they are considered permanent establishments. However, the legal entity of the branch remains foreign.

Establishing Your New Company

Establishing a new company directly in Italy, based on Italian regulations governing corporations or partnerships, depending on the chosen company type, a foreign business can operate in Italy.

Conclusion of Contract

Following the conclusion of a contract (e.g., a construction or machinery installation contract) to be executed in Italy, the foreign company may send its employees and/or goods to Italy to fulfill the contract terms.

It is crucial to emphasize that each option is strictly regulated and must meet specific legal requirements. Consider the difference between local units and branches: precisely determining the boundary between what constitutes a permanent establishment and what does not necessitates the assistance of a competent professional in the field.

How to Start Your Business in Italy

The procedure for a foreign company to operate in Italy varies depending on the company’s origin. As one might expect, the process is significantly simpler for companies based within the European Union. For non-EU foreign companies, the procedure is slightly more complex and requires a series of checks by the relevant authorities. However, it is important to note that it is not necessary to have residency in Italy to operate within the country.

If prerequisites are met, the bureaucratic process involves registering the company’s headquarters with the Italian business register and subsequently obtaining a VAT number. For this to occur, an Italian notary must deposit certain documents and verify their legality. Finally, the competent Chamber of Commerce must receive all the necessary material to register the foreign company as operating in Italy.

Companies Based In The European Union

To operate in Italy, foreign companies must meet the requirements established by the laws of one of the 27 member states of the European Union. In essence, the company must be registered with the business register of its home country. The documents for registration with the Italian business register or the Economic and Administrative Index (R.E.A.) will be obtained from the foreign register of the member state.

Companies Not Belonging To The European Union

For companies not belonging to the European Union, the procedure is less straightforward from a bureaucratic standpoint. For a non-EU foreign company to operate in Italy, verifying the reciprocity condition is essential. This often depends on bilateral agreements established between countries. The reciprocity condition stipulates that foreign citizens may enjoy the same treatment as Italian citizens, provided that such treatment is guaranteed for Italian citizens in the foreign country.

Services Provided by ILF

Here are some typical examples of activities included in a continuous legal consulting service:

  • Drafting and revising contractual forms used with clients, suppliers, partners, collaborators, etc. to ensure compliance with applicable regulations and alignment with organizational and business needs.
  • Managing and resolving legal issues related to various aspects of business operations (compliance with general and industry-specific regulations, unfair competition issues, labor relations, corporate matters, etc.).
  • Consulting with unions, workers, contractors, banks, and other credit and insurance institutions.
  • Out-of-court debt recovery.
  • Drafting letters and/or formal notices.
  • Providing written and oral legal opinions.
  • Periodic regulatory and jurisprudential updates.

Continuous legal consulting services typically exclude support for complex operations or projects that fall outside a company’s ordinary operations (like extraordinary transactions) and litigation assistance, which is unquantifiable due to its nature.

By leveraging ILF’s extensive expertise, foreign businesses can navigate the legal and bureaucratic complexities of operating in Italy with confidence, ensuring compliance while focusing on driving their business forward.