Italy offers investors a large domestic market, world-class industrial supply chains and a strategic position in the Mediterranean. Its legal framework is robust, but it has features a foreign entrepreneur should understand early on: corporate formalities, screening of investments in strategic sectors, employment rules and the pace of civil litigation.

Choosing the right vehicle

There are three main options:

  • Incorporating a company, usually a limited liability company (S.r.l.), which is flexible and suitable for most projects, or a joint-stock company (S.p.A.), better suited to larger structures or to a possible future listing;
  • Opening a branch (sede secondaria) of the foreign company, registered with the Italian Companies Register but without separate legal personality;
  • Acquiring an existing company or business, which brings customers, permits and staff already in place, but calls for thorough due diligence.

Incorporation requires a notarial deed and registration with the Companies Register (Registro delle Imprese). Foreign shareholders and directors need an Italian tax code (codice fiscale), and the company must have a certified email address (PEC), the standard channel for official communications. Anti-money laundering checks and identification of the ultimate beneficial owner also apply. For nationals of non-EU countries, the reciprocity requirement under Article 16 of the preliminary provisions of the Italian Civil Code should be checked; it does not apply, among others, to EU citizens and to foreign nationals lawfully resident in Italy in the cases provided by law.

Golden power and regulatory approvals

Decree-Law 21/2012 gives the Italian Government special powers, known as the golden power, over transactions in strategic sectors: defence and national security, energy, transport, communications and 5G technology, as well as other areas aligned with the EU framework for screening foreign direct investment, such as critical infrastructure, technology, data, finance and healthcare. Many transactions must be notified to the Prime Minister’s Office before completion, and in some cases the obligation extends to investors from other EU countries.

Failure to notify may lead to substantial fines and to the transaction being invalid. The assessment should be made at the outset, as it affects both the timetable and the conditions of the deal. Certain regulated sectors, such as banking and insurance, also require approval from the relevant supervisory authorities.

Contracts, employment and real estate

Italian contract law is largely codified in the Civil Code and includes formal requirements that foreign parties sometimes overlook, for example the specific written approval needed for certain onerous clauses in standard terms. Employment relationships are generally governed by sector-wide national collective agreements (CCNL), which set pay scales, job grades and working hours. Statutory severance pay (TFR) and the rules on dismissal should be factored into the business plan from the start.

For real estate investments, prior checks on planning and cadastral compliance, restrictions and mortgages are essential. Title passes by notarial deed, usually preceded by a preliminary agreement setting out the terms and guarantees.

Tax and incentives

Tax matters, such as corporate taxation, the risk of creating a permanent establishment when operating in Italy without a local company, and the repatriation of dividends, should be planned with qualified tax advisers. National and regional incentives exist, including for investment in Southern Italy, but their availability and conditions change over time and should always be checked against current rules.

Disputes, and when to seek legal advice

The length of Italian civil proceedings remains a factor to consider. Business disputes may fall within the jurisdiction of the specialised business chambers of the Italian courts, and it is often worth negotiating arbitration or choice-of-court clauses tailored to the transaction.

Speaking with Italian counsel is useful from the earliest planning stage: to choose the vehicle, check whether golden power rules apply, structure agreements with local partners and coordinate notaries, accountants and employment advisers. Where a transaction involves other jurisdictions, matters of foreign law should be handled by lawyers qualified in the relevant country, with a single point of coordination.

This article is for general information only and does not constitute legal advice.