How do you set up a business in Italy? Payroll, HR and entering the Italian market

Updated on 12 April 2024

As the home of sharp suits, stunning scenery, and mouthwatering meals, Italy has plenty to offer the world. It would be a mistake to ignore the business potential of Italy, though.

Quick, easy, no commitment!

The nation offers strong trading relationships with the rest of Europe and beyond, and if you can afford the many and varied set-up fees your business interest will accrue, you’ll have plenty of opportunities to turn a profit.

Video: Understanding international payroll

Does Italy welcome overseas businesses?

As befits the home of the Latin language, Italy operates a quid pro quo approach to overseas business. By this, we mean that the Italian authorities typically treat an overseas business the same way an Italian interest would be treated in a foreign country – making life as simple or difficult as this dictates.

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That’s not ideal news for a British business, as Brexit means that it’s a little more challenging to get a venture off the ground in Italy. You’ll need a residence permit to live in the country as well as a visa, in addition to jumping through a range of administrative hoops to establish your offering.

If you can get your company off the ground, however, the rewards can be substantial.

What industries are most popular in Italy?

There is more to the Italian economy than coffee and carbohydrates. The most popular industries in the country are:

  • Automobile manufacture and maintenance
  • Fashion and clothing design, manufacture, and sale
  • Footwear design, manufacture, and sale
  • Leisure and tourism
  • Mechanical manufacturing, including electrical consumer goods
  • Pharmaceuticals

Is it easy to set up a business in Italy?

There is no denying that setting up a business in Italy can be challenging – there are numerous regulatory bodies, and the process can be a little chaotic at times. Enlisting help from a local is advisable.

Here is the process for setting up a company in Italy:

How to set up a business in Italy

  1. Decide on your business structure

    Most companies in Italy operate as an SRA

  2. Find a base of operations in Italy

    You don’t need to live in the country to run a company, but you’ll need a registered business address

  3. Draft an atto costitutivo, or memorandum, and statuto (articles of association)

    And have these notarised by InfoCamere, the Universal Company Register

  4. Register your company

    With the Italian Chamber of Commerce and the Trade Register

  5. Receive your taxpayer information

    Consult a local expert if you need any assistance

  6. Open a local bank account

    You’ll find it much easier to operate your business in Italy if you have a domestic business bank account

After this, you will be ready to start trading in Italy.

Can I run a business in Italy while living overseas?

You will not need to be a resident of Italy to run a business in the country, but you will need a local bank account that needs to be set up in person. To this end, it’s advisable to hire at least one director to act in your stead that is an Italian native.

Cultural considerations when running a business in Italy

When looking to trade with Italian business partners, ensure you understand some of the cultural nuances to avoid inadvertently causing offence. Business etiquette to be aware of includes:

  • Hierarchy is a big deal in Italy, so always address the most senior person in a room first and do not expect junior staff to speak unless spoken to. Impiegati, or employees, will rarely attend meetings – you’re likelier to deal with quadri – middle managers – who will run decisions up the flagpole to dirigenti, the undisputed decision-makers.
  • Dress to impress – your associates will notice what you are wearing. If you do not wear formal clothing, or fail to invest in suitably stylish business apparel, you risk not being taken seriously.
  • Punctuality is not considered a huge concern in Italy for hosts. Guests are expected to be on time, but be prepared to wait for your associates to arrive. Likewise, if you are hosting, your associates are unlikely to be concerned if it takes you 10 minutes to make yourself available.
  • Italian culture is passionate, so expect discussions to get loud. Avoid matching this energy with hostility – there is a difference between excitement and aggression.
  • You’ll likely be invited to dinner to seal a deal, rather than reaching a conclusion in the boardroom. Always accept this invitation, as it is considered the height of rudeness to decline hospitality in Italy.
  • It can take a long time to get a deal rubber-stamped as Italian business culture is quite cautious, but a handshake or oral agreement is often considered binding. Avoid getting a reputation as flaky or unreliable by going back on something you have promised. 

What business structures are supported in Italy?

There are two popular structures if you wish to set up a business in Italy.

Società a Responsabilità Limitata (SRA)By far the most popular business entity in Italy, this is a Limited Liability Company. You will keep your business and personal affairs separate, pay less tax, and enjoy unlimited trading opportunities. However, if you decide to leave the business, you must fold the company – the founder of an SRA cannot move on and hand over running responsibility.
Società per Azioni (SpA)A public company, in which you can sell shares of your business to employees or members of the public. There is a lot of administration involved in running an SpA so only take this route if you are keen to gain outside investment.

If your business has significant international renown you may wish to open an Italian branch, but this involves a lot of administration. Most people consider it more trouble than it is worth, preferring to open an SRA.

Taxation in Italy

If you want to do business in Italy, you must understand the taxation rules and regulations that will impact your bottom line. 

What is the corporate tax rate in Italy? 

Businesses in Italy will pay two types of corporate tax.

  • Imposta sul reddito sulle società, or IRES, is charged at 24% on all trading profits.
  • Imposta regionale sulle attività produttive, or IRAP, is a regional tax that varies according to location. The average rate is 3.9%.

Italy has a double taxation treaty with the UK, so you will not be taxed twice on any business profits generated in Italy.

What are the employee income tax brackets in Italy?

All employees in Italy that earn above a certain threshold need to pay income tax. This is known as impostasulredditodellepersonefisiche, or IRPEF for those that cannot wrap their tongue around that! These tax contributions break down as follows.

Annual salaryIncome tax rate
€15,000 or lower23%
€15,001 – €28,00025%
€28,001 – €50,00035%
€50,001 or higher43%
Income tax bands in Italy

In addition to income tax, Italian employees must pay around 9% of their salary into a social security fund, and all employees will be subject to two further taxes – a regional income tax, which will fall between 1.23% and 3.33% depending on location, and a municipal income tax of up to 0.9%.

It is the responsibility of the employer to withhold all deductions from an Italian employee’s wages upon running a monthly payroll. 

How are taxes paid in Italy?

The financial year in Italy mirrors the calendar year, starting on January 1st and concluding on December 31st.

Payments to the Agenzia delle Entrate are due by the 30th of June the following year, so a business would need file and pay all taxes related to the 2023 financial year by the end of June 2024.

Payroll and hiring Employees in Italy

Hiring the right talent can make or break a company. Ensure your Italian business interests are staffed by the best possible talent.

Does Italy welcome overseas talent?

Italy has quite a high unemployment rate, so in theory the country will be welcoming to foreign talent that can plug any skills gaps.

However, as you can imagine, the local authorities are keen to get local residents into work wherever possible. You may meet some resistance to importing talent from abroad, especially non-EU nations.

The following industries are most in need of support in Italy, so if your business falls under these categories, your application for overseas talent is likelier to be accepted:

  • Health and wellness
  • Education 
  • Marketing and creative
  • STEM
  • Information and communications technology

Who needs a visa or work permit to work in Italy?

Anybody that holds an EU, EEA, or Swiss passport can work in Italy without restriction. If you are from a third country, including the UK, you will need to apply for a visa to work in the country. Apply for a nulla osta, the equivalent of a long stay visa.

If you are not an EU, EEA, or Swiss citizen, you will need a residence permit – known as a carta di soggiorno elettronica – to stay in Italy for more than 90 days.

What employee benefits are compulsory in Italy?

Employees of an Italian business are entitled to the following mandatory benefits by law.

  • Overtime pay for any working week that exceeds 40 hours unless a waiver has been signed.
  • A “13th Month” extra wage payment at the end of every calendar year.
  • Minimum of 20 days of paid holiday (up to 10 of these can be exchanged for salary), plus 12 public holidays.
  • 15 days of wedding leave on full pay, where applicable.
  • Full sick pay for 3 days of sickness, then a percentage of salary from the employer and a further percentage from the Istituto Nazionale della Previdenza Sociale (INPS.)
  • Five months of paid maternity leave (80% paid by the INPS, the rest by the employer) and 10 days of fully paid paternity leave.
  • 33% contribution of an employee’s salary to a retirement pension plan.
  • Contributions to the Istituto nazionale Assicurazione Infortuni sul Lavoro (INAIL) to protect against workplace accidents and long-term sickness.

As these benefits are quite generous, and income taxes are so high in Italy, you may find that employees seek lower salaries in favour of superior benefits. Consider making your business appealing by offering even more benefits, especially those related to private healthcare and flexibility in working hours and location.

Employment law considerations in Italy

Italian employees are protected by The Italian Constitution. This offers all the protections that you would expect, such as the right to join a workplace union, protection from discrimination, and equal pay for all genders.

It’s also quite common to face unfair dismissal legal action in Italy if you do not provide compelling and reasonable grounds for terminating an employee or at least provide the statutory 30 days’ notice or equivalent severance package.

Rights are weighted more in favour of employees than employers in Italy, so seek legal advice if you wish to terminate employment.

There is no national minimum wage in Italy.

Cultural considerations when hiring employees in Italy

If you wish to run a business in Italy that relies upon the local labour force, ensure you understand some of the nuances you will encounter. These include:

  • Unions are a big deal in Italy, and it’s almost certain that your team will form a Collective Bargaining Agreement that protects their rights.
  • Employees in Italy respect the workplace hierarchy, so you may find employees reluctant to speak up or give you their opinion. You may need to encourage your team to meet their potential.
  • Further to this, expect a lot of administration as part of your role as a business owner and leader. Employees will likely not be comfortable taking action without first discussing potential outcomes with you and getting you to sign off on a decision.
  • As with trading with associated, punctuality is not considered a huge deal in Italy. Your employees will work hard, and likely stay late – do not be a stickler about starting times unless it actively harms your business when people keep erratic hours.
  • Your employees will likely socialise outside of work, taking long lunches that they may invite you to join. You may even be invited to a family dinner with your employees. It will be considered an insult if you decline to interact with your team.

FAQs about setting up a business in Italy

Still have questions or are seeking a swift answer to a basic query? Here are some of the most frequently asked questions about establishing a business in Italy.

How long does it take to set up an Italian entity?

The process of setting up a business in Italy typically takes a little under three months to complete – two if you enlist help and manage to avoid some of the long processing times.

What is the minimum share capital required to establish an entity in Italy?

You’ll need a minimum of €10,000 (around £8,600) in capital to open an SRL and €50,000 (£43,000) for a SpA.

What documentation will I need to set up an Italian entity?

This depends on your business model. An SRL just requires proof of identity, an Italian tax code, and a deed for the approved business. An SpA is much more forensic, and you’ll need to provide detailed financial ledgers for the business and any shareholders.

What is the difference between a SpA and SRL company in Italy?

SRL, short for Società a Responsabilità Limitata, is a Limited Liability Company so your business affairs will be kept separate from your personal finances. This is the fastest and cheapest business to set up in Italy. SpA, or Società per Azioni, is a public company that can be floated on the stock exchange.

Do you need to set up a local bank account in Italy?

Yes, you’ll need a local bank account, and you’ll need to set this up in person. You do not need to live in Italy to open a bank account, though.

Is there a residence requirement for directors of Italian entities?

You do not personally need to live in Italy to run a business, but you’ll need a local trading address to open a bank account so it’s best to have at least one director based in the country.

What is the standard working week in Italy?

Italian workdays are a little different to the UK or the USA. While employees will typically work 7 to 8 hours per day from Monday to Friday, these days are broken up by a two-hour lunch. This means many employees will not conform to a standard 9–5 working pattern, instead starting earlier or finishing later.

What is the statutory notice period in Italy?

Most employees will expect to give 30 days of notice when resigning from a position in Italy.

What are common supplementary employee benefits in Italy?

While Italian law dictates that mandatory benefits are already generous, you’ll attract top-tier talent by offering private healthcare insurance. Many Italian employers also offer flexibility in working hours, especially around important national and social events.

In Italy, can employment contracts be terminated at will by the employer?

No, Italian employment law does not recognise instant termination without an extremely compelling reason. Unless you have evidence of your employee committing gross misconduct, you’ll need to offer 30 days of notice or an equivalent payoff.

What is the standard annual leave entitlement in Italy?

Employees in Italy will expect no less than 20 days of paid holiday in their contract, plus an additional 15 days of paid wedding leave if applicable.

Can you establish a branch of your company in Italy?

You will be permitted to open an Italian branch of an existing business, but this involves much more bureaucracy than starting an independent SRL.

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