Italy payroll and tax overview.

Foreign Direct Investment in Italy

There are a wide range of investment opportunities available in Italy, with incentives provided at European, National and Regional levels. In most cases, foreign and local investors are treated equally and are both eligible for investment incentives.

The European Regional Development Fund (ERDF) provides monetary assistance to safeguard sustainable jobs and the European Social Fund (ESF) provides monetary assistance to encourage enterprise and job creation. Central and Regional Government incentives include:

• Contratto di Programma which provides investors with large scale industry incentives.
• Localisation agreements which provide Foreign Investors with Financial, Administrative and Procedural support.
• The Nation Programme for Research and Competitiveness which aims to support investors interested in research, innovation and business development.
• Grants and Subsidised loans for SMEs (Sistema Monetario Europeo).

Registering a Company and Establishing an Entity in Italy

To process payroll in Italy, a foreign company needs to be registered with the following Italian authorities, before hiring employees and starting any activity:

• INPS (Social Security);
• INAIL (Labour Insurance);
• Sistema Regionale COB (Labour Office).

These obligations are due with a permanent establishment or a simple social security representative office.

In the event of a permanent establishment (PE), there will be additional potential tax implications for the company (corporate taxation) and the employees (the company will be obliged to perform the role of the tax-withholding agent). If the company has a stable presence in Italy the nature of the activity conducted as well as the level of autonomy and responsibility of the people involved in the activity may trigger some tax implications for the company.

A preliminary tax analysis is suggested to confirm if there is an Italian Permanent Establishment (PE) in Italy in order to set the right structure for carrying out the business in Italy. In fact, if from the analysis it arises that your Company is not putting in place any PE, a suitable solution could be the domiciliation of a Social Security Representative (SSR) in Italy in order to comply relevant domestic duties via domestic payroll. The Legal Representative of the mother Company, as well as the company needs to be fiscally domiciled in Italy in order to receive a Company Identification Number (so called “codice fiscale”).

The company will need to decide if they wish to set-up a PE or a legal entity and this may be based on the type of involvement and cost structure required Italy. This can be a branch (with an Italian VAT code) or a limited liability company (SRL or SPA). T

Business Banking in Italy

It is mandatory to make F24 form payments, (which cover social contribution, insurance contribution and taxes) to the authorities from an in-country bank account. All other payments can be made from anywhere.

The RiBa (Ricevuta Bancaria) is a commonly used Italian electronic bank draft. It includes a bank receipt which is issued by the creditor on the basis of an invoice and submitted to the debtor for approval. All RiBas are processed electronically and the use of cheques is in decline but they remain an important means of business payment.

The use of IBAN is very common for bank transfers.

Working Week in Italy

The working week in Italy is usually Monday to Friday and weekly working hours are normally stated by the NCA.

General Information

Population: 60.6 million (World Bank, 2016)

Capital: Rome

GDP (2011): USD 2,05 trillion

Main Industries: Agriculture, Manufacturing, Services

Official Language: Italian

Monetary Unit: 1 euro = 100 cents

Internet domain: .it

International Dialling Code: +39

The Tax Year usually runs from 1st January to 31st December. Companies may however choose a different fiscal year.

All companies must have:

1. A tax code
2. An employment agency access code
3. An INAIL code
4. An INPS code

Income Tax in Italy

The Company Identification Number (“codice fiscale”) is required for any operation involving local authorities.

For companies without an In-Country presence: The in-country payroll office may obtain the company tax code number on behalf of the company by obtaining Italian Personal Fiscal Code and the company code. It normally takes 15 business days to process and the legal representative will be required to sign the necessary documents.

Any delays in the process will affect the implementation for a new employee as no employees can commence employment before this process is successfully completed.

A tax advisor is required to support the clients in setting up an Italian Branch, a Capital Company or a Subsidiary. They must obtain a VAT and Fiscal Code by requesting it from the local VAT Office.

Income Tax withheld to the employee must be paid to the Tax Office (Agenzia Entrate) before the 16th of the following month.

Social Security in Italy

The Social Security body is named INPS (Istituto Nazionale Previdenza Sociale). A company must register with the Labor Office, the Social Security Institute and the Insurance Institute, all of which are public authorities. The core business of the company will define the “class of activity” to determine the contribution rate.

The Legal Representative of the company is required to sign the relevant documents which are then delivered to the relevant Institutions by the In-Country Payroll at the agreed schedule.

The pre-agreed schedule dates for the process:

• Insurance Institute (INAIL): Registration must be completed no later than the first day of employment.
• Social Security Institute Registration: By the 16th of the month after commencing the employment.
• Labor Office Registration: Must be completed at least 1 day prior to the start date of employment.
• Penalties: In the cases of delay, fines and interest are due to the respective authorities