Branch vs Subsidiary in Italy: A Practical Comparison
For most foreign groups that want to start operating in Italy quickly, an Italian S.r.l. owned by the parent company is the simpler route: it needs fewer documents from abroad, it can be set up remotely through a power of attorney and it limits liability to the Italian company. A branch (sede secondaria) remains a sound choice when the foreign company wants to operate in Italy directly, without a separate legal entity. This guide compares the two on the points that matter in practice, based on our recent work with UK, US and EU groups.
At a glance
- S.r.l.: in our recent cases, about 4–6 weeks from engagement; the notary prepares the deed within 7–10 days of complete documents.
- Branch: usually longer, because more documents of the foreign company must be collected, translated and filed.
- Both can be set up remotely through a power of attorney: no travel to Italy is needed for the deed.
- Share capital: from €1 for an S.r.l.; none for a branch.
Key Differences
| Branch (sede secondaria) | Italian subsidiary (S.r.l.) | |
|---|---|---|
| Legal nature | Secondary office of the foreign company, without separate legal personality | Italian company with its own legal personality |
| Who owns it | The foreign company itself | Any group company, including a non-EU parent directly |
| Liability | The foreign company is fully liable for the branch's obligations | Limited to the S.r.l.'s own assets |
| Capital | Not required | From €1; below €10,000 contributions must be in cash and fully paid in. €10,000 is commonly used |
| Representation | A permanent representative (preposto) appointed by the foreign company | One or more directors appointed by the shareholder |
| Documents from abroad | Register extract and full articles of association; resolution of the parent company's board (or competent body) to open the Italian branch, appointing the legal representative, certified, apostilled where required, with sworn Italian translation; the articles are translated and filed with the Italian Companies Register | A power of attorney from the shareholder, plus evidence of its existence and of the signatory's powers |
| Indicative timing | Usually longer, mainly because of document collection and translation | In our recent cases, about 4–6 weeks from engagement |
| Annual filings | Italian accounting books kept for tax purposes; the foreign company's financial statements are filed with the Italian Companies Register | Italian statutory financial statements, approved and filed every year |
| Italian taxation | IRES 24% and IRAP 3.9% on the profit attributable to the branch | IRES 24% and IRAP 3.9% on the company's profit |
| Profits to the parent | Branch profits are part of the foreign company's profits; their treatment at head office depends on local rules and tax treaties | Dividends: an EU parent may be exempt from Italian withholding tax under the Parent-Subsidiary Directive, a non-EU parent may benefit from a reduced treaty rate, subject to conditions |
| Closing down | Deregistration of the branch | Liquidation procedure |
The SRLS (simplified S.r.l.) is reserved to individual shareholders and is not available when the shareholder is a company.
Documents and Formalities: Where the Real Difference Lies
In practice, the choice is often decided by paperwork. For an S.r.l., the foreign shareholder signs a power of attorney before a notary in its own country, and an attorney then signs the deed of incorporation before an Italian notary. The Italian notary also needs evidence of the shareholder's existence and of the signatory's powers.
In our recent set-ups for UK and US groups, only the power of attorney needed an apostille: the register documents were accepted as copies, with Italian translations prepared by us.
For a branch, the foreign company must also adopt a resolution establishing the Italian branch and appointing its permanent representative, and its full articles of association, translated into Italian, are filed with the Companies Register. More documents to translate and more formalities in the home country usually make the branch the slower route.
See the full checklists: documents for an Italian S.r.l. with a foreign shareholder and documents to open a branch.
Costs Compared
| Item | Italian S.r.l. | Branch |
|---|---|---|
| Our set-up fee | from €2,000 | from €2,500 |
| Notary fees | approx. €1,800 | quoted case by case |
| Registration tax, stamp duties and Companies Register fees (incl. first-year Chamber of Commerce fee) | approx. €750 | quoted with the notary |
| Share capital | from €1 – not a cost, it remains available to the company | not required |
| Accounting, VAT and tax compliance | from €350 per month | from €350 per month |
Indicative figures from our recent quotes, net of VAT. Costs abroad (home-country notary, apostille) and translations of the group documents are not included and are quoted on receipt. For the full breakdown, see the cost of opening a branch in Italy.
When an S.r.l. Is the Better Choice
- Speed and simplicity are the priority
- The parent wants to limit its liability to the Italian company
- The Italian company will provide services to the group and invoice the parent
- The parent is outside the EU and wants to own the Italian company directly
- Italian clients, banks or partners expect a local legal entity
When a Branch Is the Better Choice
- The foreign company wants to operate in Italy directly, in its own name
- The Italian activity is closely integrated with an EU head office
- Separate liability is not needed
- Head-office tax rules make it preferable to keep Italian results within the foreign company (to be confirmed with local advisers)
Points to Check in Either Case
- If Italian staff habitually negotiate or conclude contracts on behalf of the parent, the parent may have a permanent establishment in Italy, with its own tax and filing obligations.
- Services between the Italian entity and the group must be priced on an arm's-length basis (transfer pricing).
- Directors or representatives who are not Italian residents need an Italian tax code, which we obtain on their behalf; non-EU employees may need a work permit.
- Opening the Italian bank account may require a short trip to Italy, depending on the bank's identification requirements.
Need help with choosing the right structure in Italy?
Our team of Italian chartered accountants assists foreign companies with tax registration, accounting and compliance in Italy.
Frequently Asked Questions
Which is faster to set up in Italy, a branch or an S.r.l.?
In our experience, usually the S.r.l. Once the documents are complete, the notary prepares the deed within 7–10 days and the Companies Register and VAT registrations follow within a few days. A branch requires more documents from the foreign company, which usually extends the timeline.
Can the whole process be handled remotely?
Yes. The foreign company signs a power of attorney before a notary in its own country and an attorney signs the deed in Italy. Only the opening of the bank account may require a short trip, depending on the bank.
How much share capital does an Italian S.r.l. need?
Any amount from €1. Below €10,000, contributions must be in cash and fully paid in. The capital is paid into the notary's escrow account before the deed and transferred to the company's bank account once it is opened. It is not a cost.
Is the parent company liable for the debts of an Italian branch?
Yes. A branch has no separate legal personality, so the foreign company is fully liable for its obligations.
Do branches and subsidiaries pay the same taxes in Italy?
Both pay IRES (24%) and IRAP (3.9%) on their Italian profit. The difference lies in how profits reach the parent: branch profits are already part of the foreign company's profits, while an S.r.l. distributes dividends, which may be exempt or subject to a reduced withholding tax depending on the parent's country.