Corporate & commercial Law

The Italian branch of a foreign company: a legal guide

A branch is a subsidiary or operational unit of a company, organization, or institution that is located in a different location from the main or central headquarters. It is a secondary structure, distinct from the main one, but it is part of the same corporate or organizational entity.

In legal terms, it’s crucial to understand the concept of a branch, defined as a foreign economic entity lacking independent legal status and functioning under the jurisdiction of the primary headquarters. Large corporations and organizations often use branches to extend their presence into new markets, enhance customer service, streamline operations across different regions or nations, or achieve specific objectives.

Branches can vary in size and scope, offering diverse functionalities. For instance, a bank might establish branches in multiple cities to deliver localized banking services to clients. A manufacturing firm could have production plants and sales branches in various geographic areas. Notably, branches remain connected to and fall under the purview of the central headquarters, responsible for strategic decision-making and overarching oversight of the entire organization. Consequently, a secondary headquarters is considered a distinct location separate from the main legal seat, as stipulated by Article 2197 of the Civil Code:

The entrepreneur who establishes secondary offices with a permanent representation within the territory of the State must, within thirty days, request their registration from the business register office located where the main headquarters of the business is situated. Within the same period, the request must also be made to the office in the location where the secondary office is established, specifying the main headquarters, and the last name and first name of the representative in charge of the secondary office. The representative must also deposit his or her handwritten signature at the same office. The provision of the second paragraph also applies to the entrepreneur who has the main headquarters of the business abroad. The entrepreneur who establishes secondary offices with a permanent representation abroad must, within thirty days, request their registration from the register office within whose jurisdiction the main headquarters is located.

Opening a branch in Italy

Usually, the process of opening a branch in Italy includes the following steps:

Registration and documentation

The foreign company must submit the required documentation and register the branch with the Italian Business Register. The required documentation may include the foreign company’s articles of incorporation, documents demonstrating the legal validity of the company, the name of a legal representative in Italy, and other relevant information.

Authorizations and permits

Depending on the industry in which the company operates, specific authorizations and permits may be required to conduct its activities in Italy. For example, if the company operates in regulated sectors such as finance or pharmaceuticals, additional authorizations may be necessary.

Taxes and fees

The foreign company will be subject to Italian tax laws and will need to pay applicable taxes and fees for its activities in Italy.

Accounting and administrative compliance

The branch must adhere to Italian accounting and administrative regulations and maintain proper accounting records in accordance with local rules.

It’s important to emphasize that it is advisable to seek the assistance of a legal consultant or local experts to guide the process and ensure compliance with all Italian regulations.

Accounting and Tax Aspects of the Branch in Italy

To conduct secondary activities with a branch in Italy, you must make a request to the relevant Chamber of Commerce for obtaining the tax code (codice fiscale) and the assignment of a VAT number (partita IVA).

For the purpose of opening an Italian VAT number, it is necessary to fill out the ANR form (declaration for the identification of VAT non-resident subjects).

It is also essential to specify the activities that the company will carry out at the Italian branch to correctly indicate the Ateco code and the VAT number of the foreign company. The VAT number is, in fact, required by the Italian Revenue Agency (Agenzia delle Entrate) for assigning the VAT number to the Italian branch.

Ultimately, through a notarial deed, the foreign company will be registered in the Business Register, and this registration will also be communicated to the Italian Revenue Agency.

The Branch as a Tool of the Parent Company

The decision to open a branch in a foreign country should be a carefully considered choice in line with the company’s overall strategy. Sometimes, it can be advantageous for the company to have a strategic presence in a foreign country, enabling it to expand into international markets and adopt effective marketing strategies to enhance customer growth.

In other cases, having a branch means maintaining control over an important instrument that does not have its legal autonomy. Therefore, it will always be the parent company that must dictate the action strategies and take responsibility for any actions committed by the branch. It is advisable to consult an experienced advisor who can guide your company toward an optimal decision based on your specific goals.

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