How Foreign Companies Can Start a Business in Italy

A comprehensive overview of the legal and tax structures available to foreign companies entering the Italian market — from lightweight VAT registration to full subsidiary incorporation.

Branch

No share capital

Subsidiary (SRL)

Capital from €1

VAT registration

No local entity

Corporate tax

IRES 24%

Entering the Italian Market: Your Options

Foreign companies have four primary ways to establish a presence in Italy, each with different implications for liability, taxation, compliance burden and cost. The right choice depends on your business objectives, the nature of your Italian activities and your long-term strategy.

Branch Office (Sede Secondaria)

A branch is a permanent extension of the foreign parent company. It has no separate legal personality but can carry out full commercial activities in Italy. The parent company retains full liability for the branch's obligations.

Best suited for companies seeking stable operations in Italy with direct control from the parent entity. Full guide to opening a branch.

Subsidiary Company (SRL or SPA)

An Italian subsidiary (typically an SRL — società a responsabilità limitata) is a separate legal entity incorporated under Italian law. It provides limited liability protection, meaning the parent company's exposure is generally limited to its capital contribution.

Subsidiaries are preferred for long-term growth, when liability isolation is important, or when the Italian operations need to enter into contracts independently.

Direct VAT Registration

For companies that only need to carry out taxable transactions in Italy — such as selling goods stored in Italian warehouses or providing certain services — direct VAT identification offers a lightweight compliance solution without establishing a physical presence.

See our VAT registration guide for details on eligibility and process.

Representative Office (Ufficio di Rappresentanza)

A representative office can perform only auxiliary and preparatory activities such as market research, brand promotion and relationship building. It cannot engage in commercial transactions, sign contracts or generate revenue. This is the lightest form of presence and does not create a permanent establishment.

Comparison Table: Branch vs Subsidiary vs VAT Registration

	Branch	Subsidiary	VAT Registration
Legal personality	No	Yes	No
Liability	Parent company	Limited	Parent company
Setup time	Usually longer than an S.r.l.	About 4–6 weeks in our recent cases	Depends on the Revenue Agency; allow up to about 3 months
Corporate tax	Yes (IRES)	Yes (IRES)	No
Best for	Stable operations	Long-term growth	Sales only

Timing depends mainly on how quickly the foreign company's documents are ready. See the documents needed for an Italian S.r.l. with a foreign shareholder.

Tax Obligations for Each Structure

Branches and subsidiaries are subject to IRES (24%) and IRAP (approximately 3.9%) on Italian-source income, plus VAT on domestic sales. Direct VAT registrations are subject only to VAT obligations — no corporate income tax is due in Italy unless the activity constitutes a permanent establishment.

Accounting Obligations

Branches and subsidiaries must maintain full Italian accounting under OIC standards, including a general ledger, VAT registers, and annual financial statements filed with the Companies Register. VAT-registered entities must maintain VAT registers and comply with electronic invoicing requirements.

How to Choose the Right Structure for Your Business

Consider your Italian activity (sales only vs. full operations), liability preferences (limited vs. parent company), timeline, budget, and long-term plans. A structured initial assessment with an Italian tax advisor is the most reliable way to determine the optimal structure.

Working with an Italian Chartered Accountant

An Italian chartered accountant (dottore commercialista) is essential for navigating the registration process, ensuring tax compliance and providing ongoing advisory. Choose a firm with demonstrated experience serving foreign companies.

Get Professional Guidance on the Right Structure

Studio VPG is a Bologna firm of chartered accountants and statutory auditors advising foreign companies on the right structure for Italy. We handle the set-up end to end, in English.

Book a free introductory call Meet the team behind Branch in Italy

Need help with starting a business in Italy?

Our team of Italian chartered accountants assists foreign companies with tax registration, accounting and compliance in Italy.

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Frequently Asked Questions

What is the cheapest way to start operating in Italy as a foreign company?

Direct VAT identification is the most cost-effective entry point. It allows you to carry out taxable transactions in Italy without establishing a physical presence, with lower setup and ongoing costs compared to a branch or subsidiary.

Do I need a physical office in Italy to open a branch?

Yes. A branch (sede secondaria) requires a registered office address in Italy. However, this does not need to be a full commercial office — a registered address with a professional service provider is sufficient for initial registration.

How long does it take to set up an SRL in Italy?

In our recent cases, about 4–6 weeks from engagement: the notary prepares the deed within 7–10 days of complete documents, and the Companies Register and VAT registrations follow within a few days. The main variable is how quickly the foreign documents are ready.

Can I test the Italian market before committing to a branch or subsidiary?

Yes. A representative office (ufficio di rappresentanza) allows you to perform market research and promotional activities without generating taxable income. Alternatively, direct VAT registration enables you to sell into Italy without a permanent establishment.