Faq

Faq Disclaimer

The information provided for by the present FAQ section shall only be used as general information since Italian tax law is subject to continuous changes some or any of that may not have been reported yet therein.
Readers are therefore strongly encouraged to ask for professional advice before taking any business decision concerning any investment or enterprise activity in Italy.
Thus the Studio Tributario Orlandi Contucci disclaims any responsibility about eventual liabilities for damages incurred to third parties for the wrong interpretation of the present FAQ section, for incomplete information of the same or however of the Italian tax law provision reported in the present section as well as for wrong decisions concerning investments or going business in Italy directly or indirectly taken as result of the reading of the present FAQ section.
(Last Review: December 15, 2009)

Faq

How to obtain a fiscal code in Italy

EU-residents individuals as well as any non EU-resident individuals may obtain a fiscal code in Italy by filing an application at any Italian local tax office and declaring a domicile in Italy. The procedure may also be applied for at any Italian Consulate abroad. In this latter case, no domicile declaration in Italy is requested (Art. 1 D.M. 17.05.2001, No. 281).
According to Italian law any non-resident individual has the right to apply for and to have an Italian tax code be released on his name for the Italian legal acts that require the existence of an Italian tax code (Art. 3 and 6 of the law D.P.R. 29.09.1973, No. 605) provided that the country of his residence or nationality has bilateral relationships with Italy. Bilateral relations with Italy are listed in the web-site of the Italian Foreign Affair Ministry.
In case of filing of the application for the release of a tax code in Italy through an attorney at law, a legalized proxy therefore and a photocopy of a personal valid ID card with a legalized autograph signature of the requesting individual shall be accompanied to the application form.

Non EU-residents individuals physically present in Italy may obtain an Italian fiscal code following the mentioned procedure only after having received a sojourn permit and by presenting, even through a formally appointed attorney at law, the original of a valid Id document.
The mentioned procedure is enforced through non-uniform provisions by each single Italian tax office with the result that there might be local different rules to be followed. The above explained procedure is deemed to be valid only for tax offices located in Rome.

Entities may obtain a fiscal code in Italy under presentation, depending on their domestic law, of a legalized copy of board a resolution or of the shareholder’s meeting minutes that declares the reason of such request (generally, for incorporation purposes, for establishing a branch, for appointing a VAT representative in Italy, for direct VAT identification purposes in Italy of EU resident VAT subjects or for the performance of any act that according to art. 6 of the law D.P.R. 29.09.1973, No. 605, requires the previous identification in Italy though an Italian tax code) and of the by-laws. If the legal representative of the entity is a non-resident individual, Italian law requires his previous identification in Italy through an Italian fiscal code too.

The release of an Italian tax code does not necessarily imply income taxation in Italy that occurs only in presence of income in Italy as referred to by Italian law and by International treaties against double taxation.

Inheritance tax in Italy – Inheritance tax return of foreign individuals with real estate and securities located in Italy - Deadline

The inheritance tax has been abolished since January 1, 2001 and partially reintroduced starting from October 10, 2006. The tax is due on net assets superior to 1 million Euro when inherited by the spouse or relatives in direct line and levied at the rate of 4%. The tax is due at the rate of 6% on net asses inherited by other relatives up to the fourth grade and by affinities. On net inheritance assets superior to 100.000 Euro for each heir devolved to brother and sisters the inheritance tax is due at the rate of 6%.

In addition, inherited property is subject to the mortgage and cadastral tax at the rate of 3% (4% on business property) applied on the register tax value of the inherited property. The tax is reduced to 336 Euro in case of assets inferior respectively to 1 million or to 100.000 Euro provided that the aforementioned conditions do occur.

Thus the filing of an inheritance tax return is always mandatory for transcription purposes when at time of opening of the inheritance the dead had property as well as bank accounts and securities deposits in Italy.

The filing of the inheritance allows the transfer of ownership of bank deposits and securities, as well as to execute the transcription of the ownership of property to the heirs and for the further sale thereof.

The inheritance tax return shall be filed within 1 year from the date of opening of the inheritance. Heirs of non-residents have to file the inheritance tax return at the Tax Office of Rome 6.

Non-residents are taxed only on property and other assets located in Italy independently of their nationality. Residents are taxed on their world-wide assets and may deduct from the Italian inheritance the eventual inheritance tax levied abroad.

Reimbursement of Italian VAT to EU- VAT individuals or entities performing business activity in Italy

Foreign entities and individuals may ask for reimbursement of the Italian VAT on goods and services purchased in Italy provided that they do not have a permanent establishment in Italy and provided that they are registered for VAT purposes in their country of residence. The VAT reimbursement to non EU- resident entities is granted only on reciprocity basis provided that a VAT representative is appointed before receipt of the first Italian payables invoice.

Starting July 15, 2009, as effect of the enforcement of articles 171 and 194 of the EU-Directive 2006/112, EU- VAT-subjects may claim VAT refund also in case of performance of transaction subject Italian VAT taxed by their customers through the domestic reverse-charge. The claim is allowed also in case of appointment of a fiscal representative or of direct VAT identification in Italy (i.e. only for EU-resident entities or individuals).

The ordinary VAT reimbursement occurs within 2-5 years from application. When refunds exceed specific fixed amounts, the refund requires the mandatory presentation of an Italian bank guaranty or of a guaranty in Italian treasury bonds for the duration of 5 years after reimbursement to the VAT Office of Pescara.

Direct VAT identification of EU-resident entities and individuals

EU-resident entities and individuals performing business activity in their country of residence and registered therein for domestic VAT purposes may ask to be directly identified for VAT purposes In Italy. The VAT direct identification is alternative to the appointment of a VAT representative and as the latter is executed upon application at the Tax Office of Pescara.
This special procedure allows EU-resident entities and individuals a quick reimbursement of the eventual Italian VAT credit and is mandatory - in alternative to the appointment of a VAT representative in Italy - when the non-resident EU entity or individual performs transactions subject to Italian VAT versus non VAT Italian resident subjects (i.e. individuals) in Italy.
The foreign entity or individual identified for VAT purposes in Italy has the same VAT obligations of a resident VAT subject in terms of VAT bookkeeping and invoicing. Said subjects shall therefore issue regular Italian invoices for goods and services sold in Italy and are entitled to detract the VAT levied on goods and services purchased in Italy.
The reimbursement is granted by the VAT Office of Pescara within 6 to 12 months after application. When the claimed refund exceeds specific amounts, the refund is granted by presentation of an Italian bank guaranty or of a guaranty in Italian treasury bonds for the duration of 5 years after reimbursement.

The direct VAT identification is Italy does not affect the VAT status of EU-resident VAT- subjects that may continue to qualify EU VAT-transactions according to the EU VAT-law and are therefore not obliged to tax said transactions according to Italian domestic VAT-law provisions.

Starting business activity in Italy - incorporation of a company or constitution of a branch?

The main difference between a subsidiary and a branch consists in the limited liability of the former. However, in specific situations the constitution of a branch is compulsory (i.e. when the foreign company has to participate to Italian public contracts tenders. In this case, according to the EU rules governing Italian public contracts, the contractor has to demonstrate its professional and technical skills acknowledging a specific turnover).

Taxation occurs according to the same rules either for the subsidiary and for the branch. However, a branch shall not deposit the annual financial statements at the local Enterprise Register.

The income of the branch is mainly determined according the general O.C.S.E. treaties against double taxation Commentary rules that provides for that the permanent establishment is taxed (only) on the income directly or indirectly produced through the activities performed in the country of location. However the Italian corporate tax law definition of permanent establishments contemplates also the case of indirect permanent establishment in Italy that does occur anytime when the foreign entity employs one or more dependent workers or hires a non independent agents in Italy that directly or indirectly conclude business activities therein. The presence of an indirect permanent establishment occurs also when the foreign employer does not a fixed abode nor an office in Italy.

The constitution of a branch is much faster than incorporating a company, since it requires only a formal declaration to an Italian public notary. The branch is then registered at the local Enterprise Register after having requested a fiscal code and/or a V.A.T. registration number.

The branch may hire personnel and issue as well receive invoices immediately after having requested a fiscal code and/or a V.A.T. registration number without necessity wait to be registered at the local Enterprise Register.

Specific tax problems may arise when the foreign company has to charge general production and R&D costs as well as sales fees to the branch. In this case, it is necessary to rule said charges through a transfer-price agreement. In case of a mother company resident in a tax haven, the above expenses are not deductible for corporate (IRES) and NOI-tax (IRAP) purposes. The same necessity applies for an Italian subsidiary.

The incorporation of a company requires a formal incorporation deed filed by a public notary. The market price of the public Notary fees is for about net 2.500 Euro foe companies having a capital of 10.000 Euro. The company acquires the limited liability only after registration at the local Enterprise Register. The registration requires the release of an Italian fiscal code/VAT registration number to the company as well as to its legal representative and to the shareholders. The registration at the local Enterprise Register requires also the previous release of an Italian certificated e-mail address.

For the period prior to said registration, the administrators are jointly and severally responsible for the liabilities undertaken in running the company. The registration procedure at the local Enterprise Register may last up to ten to fight-teen days.

Thus the company may operate almost immediately after incorporation after the release of the fiscal code and/or a V.A.T. registration number notwithstanding that the registration procedure at the local Enterprise Register is still pending.

If follows that the opportunity of buying a non-operative Italian company and subsequently change its name and business activity may be evaluated carefully, since the technical times of said changes take generally more time then incorporating directly a brand new company. In addition, an existing company should be anyway subject to a due diligence in order to avoid eventual future fiscal and corporate law liabilities to the buyer the cost thereof will probably exceed the cost of the incorporation of a brand new company.

Particular tax problems may arise when the Italian company has to buy goods and services or is charged specific fees from its controlling non-resident company (e.g. "transfer-price" issues). The Italian tax law provides for very specific rules concerning transfer prices of goods and services sold by controlling company to subsidiaries that should be known in advance and evaluated accordingly. In case of a controlling company resident in a tax haven, the above expenses are not deductible for corporate (IRES) and NOI-tax (IRAP) purposes.

According to the Italian corporate law reform it is now be possible to manage a corporation according to the managing schemes existent in Germany and in France as well as to designate part of the capital to specific businesses and to issue securities to finance them as well as to determinate specific and more elastic rules for appointing shareholder’s meetings and for adopting the annual financial statements.

Italian limited liability companies shall have a minimum capital of 10.000,00 Euro. 25% thereof shall be paid in at time of incorporation. In case of unilateral companies (i.e. companies incorporated by a sole shareholder) the capital shall be full paid at time of incorporation.

Joint-stock companies shall have a minimum capital of 120.000,00 Euro and with reference to the capital payment are subject to the same rules set forth for limited liability companies.

Permanent establishment in Italy

The Orlandi Contucci Firm
00185 Rome (Italy) - 8, Via Castelfidardo
Tel +0039 06 47886973 / +0039 06 42005119
Fax +0039 06 4873864
Vat n. 09186080587

Email
aoc@orlandi-contucci.com

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