Doing Business in Italy (1)

8/3/2019 Doing Business in Italy (1)

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Copyright2010UHYInternationalLtd 1

Contents

1. Introduction................................................................................................... 22. Businessenvironment.................................................................................. 33. Foreigninvestment....................................................................................... 64. SettingupaBusiness.................................................................................... 95. Labour .......................................................................................................... 18

6.Taxation........................................................................................................ 23

7. Accounting&reporting............................................................................. 288. UHYfirmsinItaly ...................................................................................... 329. UHYofficesworldwide ............................................................................. 32


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1. Introduction

UHYisaninternationalorganisationprovidingaccountancy,business

managementandconsultancyservicesthroughfinancialbusinesscentres

inover70countriesthroughouttheworld.Businesspartnerswork

togetherthroughthenetworktoconducttransnationaloperationsfor

clientsaswellasofferingspecialistknowledgeandexperiencewithintheir

ownnationalborders.Globalspecialistsinvariousindustryandmarket

sectorsarealsoavailableforconsultation.

Thisdetailedreportprovidingkeyissuesandinformationforinvestors

consideringbusiness

operations

in

Italy

has

been

provided

by

the

office

of

UHYrepresentatives:

FiderConsultS.r.l.

ViaBirmania,81

I00144Rome,Italy

Phone: +39065917469

Website: www.fiderconsult.com

Email: [email protected]

YouarewelcometocontactDrPaoloLenziforanyinquiriesyoumay

have.

Informationinthefollowingpageshasbeenupdatedsothattheyare

effectiveatthedateshown,butinevitablytheyarebothgeneraland

subjecttochangeandshouldbeusedforguidanceonly.Forspecific

matters,investorsarestronglyadvisedtoobtainfurtherinformationand

takeprofessionaladvicebeforemakinganydecisions.Thispublicationis

currentatFebruary2010.

WelookforwardtohelpingyoudobusinessinItaly.

FiderConsultS.r.l.isamemberofUHY,aninternationalassociationofindependent

accountingandconsultancyfirms,whoseorganisingbodyisUrbachHackerYoung

InternationalLimited,aUKcompany.EachmemberofUHYisaseparateandindependent

firm.ServicesdescribedhereinareprovidedbyFiderConsultS.r.l.andnotbyUrbach

HackerYoungInternationalLimitedoranyothermemberofUHY.NeitherUrbachHacker

YoungInternationalLimitednoranymemberofUHYhasanyliabilityforservices

providedbyothermembers.


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2. Business environment

TheItalianconstitutionandgovernmentItalyisarepublicdividedintoregions,provincesandmunicipalities.The

ParliamentisthelegislativebodyoftheRepublicandconsistsofaSenate

andChamberofDeputies.Itsmembersareelectedbypopularvotetofive

yeartermsofoffice.

ThepresidentoftheRepubliciselectedforasevenyearperiodby

parliamentandmustbeanItaliancitizenofatleast50yearsofage.The

presidenthasmanypoliticalduties,butminimalpoliticalpower.

The

government

of

ministers

holds

executive

power

and

parliament

may

delegatelegislativepowertoitforspecificmatterswithindefinedlimits.In

emergencies,thegovernmentofministersmayissuetemporarydecrees,

whicharesubjecttoparliamentaryratificationorveto.

Theregionalgovernmentshavelegislativepowerincertainareas,suchas

healthandhospitalservices,localtaxes,urbanplanningand

transportation.

TheDomesticMarket

Population

Italyhasapproximately57millioninhabitants,withanaveragepopulation

densityof189peoplepersquarekilometre(490persquaremile).The

populationispredominantlyRomanCatholic.

Area

Thecountrycoversanareaof301,266squarekilometres(approximately

116,300squaremiles).Romeisthecapitalcity.Otherlargecitiesinclude

Milan,Naples,TurinandGenoa.MilanandTurinandVenetoregionare

themain

industrial

centres

of

the

country.

TheeconomyItalyseconomyisbasedprimarilyonthetransformationofrawmaterials,

whichareusuallyimported,intofinishedproductstosatisfydomesticand

foreigndemand.Investmentopportunitiesareencouragedandthe

government,regionsandprovincesofferinvestmentincentives,manyof

whichencourageindustrialisationinthesouthernpartofthecountry.

Italyseconomicdevelopmentvariesgreatlyfromregiontoregion.The

northishighlyindustrialisedwithagoodinfrastructureandahighly


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trainedworkforce.Thesouthrankslowinthosecharacteristicindicators

andsignificantincentivesareofferedtoinvestorstodevelopinthearea.

The

Italian

economy

consists

of

three

major

sectors:

large

private

companies,thepublicsectorandthesmallbusinesssector.

Essentialindustries

Italyranksamongthesevenmostindustrialisedcountriesintheworld.

Italianindustryconsistsofafewlargecompaniesandmanysmalland

mediumsizedenterprisesspecialisedinavarietyofactivities.Industryis

presentlydecliningduetohighlabourcostscomparedtothoseofless

industrialisedcountries,whileserviceactivitiesareexpanding.

Serviceactivitiesrepresentabout60%ofgrossdomesticproduct(GDP)

andincludecommerce,transportation,communications,propertyrental,

bankingandinsurance.

Themanufacturingindustryrepresentsabout30%ofGDPandincludes

construction,textilesandapparel,machinery,chemicals,pharmaceuticals,

nonmetalmineralsandtransportationvehicles.

Theagricultureindustryrepresentsabout4%ofGDP;itsprincipal

productsarewheat,riceandothercereals,vegetables,fruits,wine,oliveoil

anddairyproduce.

Employmentenvironment

TheItalianlabourmarketischaracterisedbyashortageofskillsinsome

sectorsandnotableunemploymentinothers.Thelevelofemployment

variessignificantlybetweenregions,althoughofficialstatisticsdonot

reflectthesituationaccuratelyduetothehighlevelofunofficial

employment(theofficialaverageunemploymentratefor2009is8.5%of

theactivepopulation).

Employeesareclassifiedbylawintofourcategories:workers(operai);low

rankingwhitecollarworkers(impiegati);highrankingwhitecollar

workers(quadri);

and

executives

(dirigenti).

The

law

specifically

protects

lowerrankingemployees.

Pricesandinterestrates

ItalyseffortstomeettheMaastrichtconvergencecriteriafortheEuropean

MonetaryUnion(EMU)haveresultedinastabilisationofpricesanda

decreaseininterestratestohistoricallows.

Theinflationrateasat31December2009was1%.


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Foreigntradeandthebalanceofpayments

ItalyisamemberstateoftheEUandalsoadherestotheEMU.Thecountry

is

a

significant

net

importer

of

energy,

chemicals

and

ferrous

and

non

ferrousmetals,andisasignificantnetexporterofmanufacturedgoodsand

textiles.

Italysforeigntradeinmerchandiseshowsalowsurplus,whileservices

andtransfersproduceconsistentsurpluses.

Financialsystem

Thecentralbank,theBankofItaly,stabilisesthemoneysupplyand

supervisesbankingandcreditinstitutions.

Historically,the

Bank

of

Italys

primary

concern

was

to

assure

the

stability

ofthecreditsystem.Itcurrentlyencouragesthemergerofthesmallest

bankinginstitutionswithlargerinstitutionsandpromotesthe

technologicalevolutionofbanks,assistingtheminthemodernisationof

thepaymentsystem.

Thebankingsystem,supervisedbytheBankofItaly,consistsprimarilyof:

Ordinarybanks,whichincludeprivatecompaniesandthesubsidiariesandbranchesofforeignbanksand

Cooperativepeoplesbanks(banchepopolari),whicharegenerallyactivewithinprovincesorregions.

ABankDepositInsuranceFund(FondoInterbancariodiGaranziadei

Depositi)wascreatedin1987tocoverdepositsinmeasuresappropriateto

differentbalances.Banksthatparticipateinthefundhold99%ofItalys

customerdeposits.Theymustmeetstandardsofcapitaladequacy,asset

qualityandbaddebtratiossetbythefund.

Banksarecompetingbyengaginginnewactivitiesandacquiringinterests

inotherfinancialactivities,suchasmerchantbanking,leasing,factoring,

managementofinvestmentportfolios,paymentservicesandinformation

technology.


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SpecialexportinsuranceisavailablefromtheAgencyforExportCredit

Insurance(SACE)forexportsofdurablegoodsmachinery,equipment

andtransportvehiclesaswellasforservices,studiesanddesignprojects,

andforcivilengineeringworkscarriedoutabroad.

Toencouragesuchexports,fundingisavailablefromspecialcreditbank

departmentsandstateagenciesintheformofmediumtermloansatlow

interestrates.

Registrationofintellectualproperty

ThroughtheCentralPatentOffice(UfficioCentraleBrevetti),Italianlaw

providespatentprotectionfornovelinnovations,suchascreative

inventionsandutilitymodels,whicharesuitableforindustrialapplication.

Foreignindividualsmayobtainpatentsforindustrialinventionsorutility

modelsonthesametermsasItaliancitizens.

Licensingarrangements

Licensingoffersameansofprofitingfrominventionswithouttheneedto

investsubstantialcapitalandriskeconomicfailure.

ForeignentitiesmayfindlicensingarrangementsattractiveinItalybecause

thegovernmentimposesnoexchangecontrollimitationsonthetransferof

royaltiesabroad.


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4. Setting up a Business

ForeigninvestorswhointendtoconductcommercialactivitiesinItalycan

choosefromawiderangeoflegalentities.EffectivefromApril1,2010,

communicationstoTaxAuthority,RegisterofCompaniesandLabour

AuthoritieswillbemadethroughthesocalledSoleCommunicationthat

willgrantshortesttimetosetupabusinessinItalywithrespecttothe

currentsituation.Wedescribebelowthestructureofthemostcommon

businessentities.

Personalcompanieswithoutlimitedliabilitystatus:

Snc

(societinnomecollettivo

general

partnership):

a

partnership

whereallpartnersarejointlyliableforallofthefirmsdebtsand

obligations

Sas(societinaccomanditasemplicelimitedpartnership):apartnershipwithtwodifferentcategoriesofpartners;silent

partners(sociaccomandanti) liabilityislimitedtotheextentoftheirpercapitalcontribution;orgeneralpartners(sociaccomandatari) jointlyliableforalldebtsandobligationsofthe

partnership.

Companieswithlegalpersonalityandlimitedliabilitystatus:

SpA(societperazionicorporation):inwhichtheparticipantsequityisrepresentedbyshares

Srl(societaresponsabilitlimitatalimitedliabilitycompany):inwhichthecapitalstockisrepresentedbyquotasandnotbyshares

Sapa(societinaccomanditaperazionilimitedpartnershipbyshares):thiscombinessomeofthefeaturesofbothalimited

partnershipandalimitedliabilitycompany.Itisacompanyin

whichatleastonememberhasunlimitedliabilitywhilethe

liability

of

remaining

members

is

limited

to

the

extent

of

their

sharecapitalsubscriptions.

LtdtypeSpAandSrl

BothSpAandSrlhavealegalpersonality.ThesharesofaSpAmaybe

quotedonthestockexchange;thequotasofaSrlmaynot.Thesharesofa

SpAaregenerallyfreelytransferable;thequotasofaSrlmayberestricted

bythearticlesofincorporation.TheannualfinancialstatementsofaSpA

andaSrlmustbepublished.

TheminimumcapitalstockforaSpAisEuros120,000,whileforaSrlitis

Euros10,000.


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Singleowner

BothSpAandSrlcanbeformedbyasoleshareholder.Thesole

shareholder,

whether

a

legal

or

natural

person,

usually

has

limited

liability

forthecompanysobligations.However,thelimitedliabilitybenefitislost

ifcertainformalitiesarenotmet.Therefore,itisnormallyadvisableto

haveaminimumoftwoshareholders.

Corporatelaw

CorporatelawisprovidedmainlybytheCivilCode.

TheSpAtypecompanywillbeabletochoosefromamongthreedifferent

modelsofcorporategovernancebasedonagroupofthreebodies:

managementbody,managementcontrolbodyandauditbody:

1. A twolevel ordualisticmodel,wherebytheconductofthebusinessrestswiththeBoardofManagement(Consigliodi

gestione)andcontroliscarriedoutbytheBoardofSurveillance

(Consigliodisorveglianza),thathassomeattributionsofthe

generalmeetingofaSpaadoptingthetraditionalmodel(i.e.

approvalofthefinancialstatements).ThemembersoftheBoardare

appointedbytheshareholders;

2. A onelevel ormonisticmodel,wherebytheconductofthebusinessrestswiththeBoardofDirectors(Consigliodi

Amministrazione),appointedbytheshareholders;controliscarriedoutbytheManagementControlCommittee(Comitatoper

ilcontrollosullagestione),composedofthemembersoftheBoard

andappointedbythelatter.

Inbothcases,accountsarecontrolledbyanauditingcompanyor

auditor;

3. Atraditionalmodel:thefollowingisasummaryofthemostrelevantprovisionsunderthetraditionalmodel,whichisbyfar

themostusedinpractice;i.e.theSrltypecompany(themost

commoncompany

type

in

Italy)

will

be

able

to

apply

only

the

traditionalmodel.

SpAUnderthetraditionalmodel,thecorporatestructureismadeupas

follows:

Boardofdirectors Boardofstatutoryauditors Registeredauditor/auditingfirm.


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BoardofDirectors(ManagementBody Organodigestione)

ASpAcanbeadministratedbyasoledirectororbyaboardofdirectors.

Inthislattercase,oneofthemisappointedaschairman.Itisrecommendedthatatleastoneofthedirectorsappointedisalocal

resident,asitmaysimplifyanumberofprocedures(eg.signatureof

annualtaxreturnandsocialcontributionreturns).Otherwisealocalproxy

holdermustbeappointed.

Thedirectorsneedtobeindividuals.Withtheexceptionofthose

appointedwiththearticlesofincorporation,directorsareelectedbythe

shareholdersresolutions.Adirectorstermofofficemaynotexceedthree

years,butitmayberenewed.

Inthe

instance

of

the

resignation

of

the

majority

of

directors,

the

whole

boardisvoidandashareholdersmeetingmustbecalledtoappointanew

board.Directorscanberemovedbyaresolutionoftheshareholders.

Aboardmeetingisdulyconstitutedifthemajorityofdirectorsarepresent,

unlessthearticlesofassociationprovideforalargerquorum.Underthe

bylaws,attendancemaybepermittedviatelecommunications.

Resolutionsarepassedwhenapprovedbythesimplemajorityofthose

presentunlessprovidedotherwise.Directorsmaynotvotebyproxy.

Thedirectorsremunerationorcompensation,includingapossibleshareof

theprofits,isnormallysetoutinthearticlesofassociationorfixedbythe

shareholdersinageneralmeeting.

Managingdirectors

Theboardofdirectorscandelegatesomeofitsmemberstoperform

specifictasks.Ifthedelegationisgiventooneorafewdirectors,theyare

appointedasmanagingdirectors.

Thefollowingpowersmaynotbedelegatedinanyinstance:

Todrawupthefinancialstatements

To

increase

the

share

capital

Tocalltheshareholdersmeetinginthecaseoflosseshigherthanonethirdofthesharecapitalandtoaskthecourttoreduceshare

capital

Topreparemergerordemergerprojects.

Themanagementstructureofthecompanyoftenincludesgeneraldirectors

(direttorigenerali).Theseareemployeeswhoassisttheboardofdirectorsintheexerciseofitsfunctionsandareempoweredtorepresentthecompany.

TheCivilCodeextendstheregulationsontheresponsibilityofthe

directorstothegeneraldirectors.


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Legalrepresentative

Thearticlesofincorporationappointthedirectorswhomayrepresentthe

company.

Failing

this,

the

company

is

represented

by

the

directors

appointedbytheshareholdersmeeting.Ifnosuchappointmenthasbeen

made,theboardofdirectorsmayspecifywhoisentitledtorepresentthe

companyormayreservethisrighttoitself.Usually,however,the

chairmanandthemanagingdirectorsareentitledtobelegal

representatives.

StatutoryAuditors(Managementcontrolbody Organodicontrollo

sullagestione)

Theboardofstatutoryauditors(collegiosindacale)iscompulsoryforaSpA.Itcomprisesthreeorfiveeffectivemembers(sindaci)andtwoalternates.Thememberscannotbeemployeesordirectorsorcloserelativesof

directors;theycannotbestatutoryauditorsofsubsidiaries,parent

companiesorcompaniesunderjointcontrol.

Theremunerationofthemembersoftheboardisdeterminedeitherinthe

articlesofassociationorbytheshareholdersinageneralmeeting.Thefirst

membersoftheboardareelectedforthreeyearsandtheycannotbe

removedbytheshareholdersmeetingunlessthereisfaircause.

Theboardofstatutoryauditorsmustmeetevery90days,optionallyvia

telecommunications.The

board

of

statutory

auditors

is

duly

constituted

if

themajorityofstatutoryauditorsarepresent,andresolutionsarepassed

whenapprovedbytheabsolutemajorityofthosepresent.

ThemostspecificdutyoftheboardofstatutoryauditorsinaSpAisto

controlthemanagementofthecompanyinrespectofthelawandits

articlesofassociation;however,articlesofassociationofSpAs,whichare

notlistedandarenotrequiredtoprepareconsolidatedfinancial

statements,mayprovidethattheboardofstatutoryauditorsisalso

performingtheperiodicalAccountingcontrol(everythreemonths)and

theexaminationoftheannualfinancialstatementsinaccordancewith

recommendedauditingstandards,withaviewtoexpressanopinionthereon.

RegisteredAuditor/Auditingfirm(Auditbody Organodicontrollo

contabile)

Unlessotherwiseprovidedbythearticlesofassociationandaspermitted

bythelaw(seeabove)themostspecificdutyoftheRegisteredAuditor/

AuditingfirmistoperformtheAccountingcontrolasdefinedabove.


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TheAuditbodyisappointedbytheshareholdersmeetingaftertheboard

ofstatutoryauditorshasreported.TheShareholdersMeetingsetsthe

remunerationtobepaidfortheentiretermofoffice.

Ineligibilityrulesdescribedinrespectoftheboardofstatutoryauditors

alsoapplytoindividualcomponentsoftheAuditbody.

Thetermofofficeisthreeyearsandcanberenewednomorethantwice.

Generalmeeting

Shareholdersmeetingsareclassifiedasordinary(assembleaordinaria)orextraordinary(assembleastraordinaria):thedifferencebetweentheseclassificationsconcernsthedecisionsthatcanbetakenandthelegal

requirementsneededforthetakingofsuchdecisions.

Inanycase,anannualgeneralmeetingmustbeheldwithin120daysofthe

companysfinancialyearend.

Thenormalbusinessofanordinarymeetingis:

Approvalofthefinancialstatements Electionofdirectorsandthemembersandchairmanoftheboard

ofstatutoryauditors

Determinationoftheirremunerations,unlessalreadydeterminedbythearticlesofincorporation

Discussionofallothermattersrelatingtotheperformanceofthecompanyandtheresponsibilityofthedirectorsandstatutory

auditors.

Theordinaryshareholdersmeetingisdulyconstitutedwiththe

attendanceofanumberofshareholdersrepresentingatleasthalftheshare

capital;resolutionsarepassedwiththeabsolutemajority.

Anextraordinarymeetingisrequiredtodealwithsuchmattersas:

Changesinthearticlesofincorporation Theissueofbonds

The

elections

of

liquidators.

Resolutionsoftheextraordinaryshareholdersmeetingarepassedwiththe

positivevoteofanumberofshareholdersrepresentingmorethanhalfof

thesharecapital.SrlThisisthemorecommoncompanytypeinItaly.Thetraditionalmodel

describedabovegenerallyappliesalsotoaSrl,withanumberof

simplificationsinrespectofaSpAandalargedegreeofflexibilityas

regardstheinternaldecisionmakingprocessandtheallocationof

responsibilitiesbetweenquotaholdersanddirector(s).


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However,thelawexpresslystatesthatquotaholdersareentitledtovote

onthefollowing:

Approval

of

the

financial

statements

Appointmentofdirectors Appointmentofstatutoryauditorsoranauditor Changestothearticlesofassociation Materialchangeinthecompanyspurpose.

Quotaholdersmeetingsaredulyconstitutedifquotaholdersrepresenting

atleasthalfofthecapitalarepresent.Resolutionsarepassedwhen

approvedbyabsolutemajority.Intheeventofchangestothearticlesof

associationandresolutionsinvolvingamaterialchangeinthecompanys

purpose,resolutionsarepassedwhenapprovedbyanumberofquota

holdersrepresenting

at

least

ahalf

of

the

capital.

Other

particular

features

regardingSrlsarelistedbelow:

Boardofdirectorsandquotaholdersresolutionscanbetakenbyconsentexpressedinwriting,withoutaformalmeetingbeing

held;

Directorscanbeappointedforanundefinedperiod; Unlessdifferentlystatedinthebylaws,aboardofstatutory

auditorsoraregisteredauditor/auditingfirmisgenerallynot

requiredif(a)thecompanyscapitalislessthantheminimum

sharecapitalrequiredforSpAtypecompanies,120,000;orif(b)

thecompanyhasnotexceededtwoofthefollowingparametersinthefirstyearofoperationsor,afterthat,fortwoconsecutiveyears:

totalassetsreportedinthebalancesheet,4,400,000;revenues

fromsalesandservices,8,800,000;averageemployeesduringthe

year,50units;

Bothmanagementcontrolandauditfunctionsarenormallycarriedoutbytheboardofstatutoryauditors,ifrequired;

Nodistinctionexistsbetweenordinaryandextraordinaryshareholdersmeeting.

Minutes

Allofthemeetingsheldbyshareholdersorquotaholders,theboardof

directorsandstatutoryauditorsmustbeprintedinspecificbooksprovided

bylawandproperlystampedbeforetheiruse.Determinationofasole

directormustbeprintedinaspecificbooktoo.

Jointventures

SeveralformsofjointventuresmayoperateinItaly.Examplesrangefrom

participating(unincorporated)associationstoconsortiaforspecial


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Failuretoadoptthesafetymeasuresisanoffencewithaspecificpenalty

system.

Administrativeliability

of

legal

entities

TheDecree231/2001hasintroducedintheItalianlegalsystemtherulethat

liabilityarisesnotonlyontheheadoftheindividualandactual

perpetratoroftheoffence,butforlegalentitiesaswell.

BeforetheenforcementoftheDecree,entitiescouldbeheldliableonly

underthecivilgroundandchargeabletopayfinesintheeventofthe

perpetratorinsolvency.

TheDecreesetsforthasortofliabilityexemptioninfavouroftheentities

abletoprovetohaveadoptedandeffectivelyimplementedtheappropriateorganisational,managementandcontrolmodelsinorderto

preventoffencesastheoneoccurred.

Thecontrolsystem,assetforthbythenorm,isoptionalandnot

compulsory.However,itisevidentthatintheeventofanadversesentence

underthecriminalcodetheentitycouldbepunishedwithsanctionsas

providedforbytheDecree,while,ontheotherhand,shareholderscould

takeactionagainstthecompanysdirectorsfornegligenceintheprior

arrangementoftheorganisation,managementandcontrolmodelinorder

totake

advantage

of

the

exemption

clause.

Therepresentativeassociationsofentitiesdrawupguidelinesonwhich

eachentitymaystarttoimplementitsspecificorganisational,management

andcontrolModel.

Bankruptcyandproceedingsfordistributionamongcreditors

AccordingtotheItalianbankruptcylaw,anindividualentrepreneurora

company,whichisinastateofinsolvency(i.e.whenduetonon

performanceand/orotherexternalfactors,heappearstobeunableto

regularlyfulfil

his

obligations),

is

declared

bankrupt

by

the

court

of

the

placewheretheenterprisehasitsmainoffice.

Abankruptcyprocedureconsistsoftheliquidationofthebankruptsassets

andsubsequentintegralorpartialpayingoffofcreditors.

Thisprocedure,however,doesnotapplytosmallentrepreneurs(i.e.

persons,individuallyorjointlycarryingouttrade,who,alsoalternatively,

didnotmakeinvestmentsforoverthreehundredthousandeurosand/or

didnotobtainaveragegrossearningsofthelastthreeyearsforatotal

amountofovertwohundredthousandeurosand/ordidnothold

liabilities,evenifnotexpired,foratotalamountofeurofivehundred

thousandeuros).


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Thebankruptcyadjudicationdeprivesthebankruptadministrationofits

assets.Whenbankruptcyinvolvescompanies,thelawlaysdown

provisionsforthebehaviourofdirectors,generalmanagers,andthe

membersofcontrolbodies,liquidatorsandshareholders.

Anarrangementwithcreditorsmaybereachedduring(concordatofallimentare)orbeforethebankruptcyprocedure(concordatopreventivo).Inthearrangementduringthebankruptcyprocedure,theproposalmaybe

submittedbyoneormorecreditors,byathirdpartyorbythebankrupt

company.Suchproposalsmayprovideforthesubdivisionofcreditorsinto

classes;differenttreatmentsforcreditorsbelongingtodifferentclasses,

indicatingthereasonforsuchdifferentiation;therestructuringofdebts

andthesettlementofcreditsinwhateverform;areportofabusiness

consultanthas

to

be

attached

to

the

plans

concerning

the

restructuring

of

debtsandthesettlementofcredits.


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5. Labour

Employmentenvironment

TheItalianlabourmarketischaracterisedbyashortageofskillsinsome

sectorsandnotableunemploymentinothers.Thelevelofemployment

variessignificantlybetweenregions,althoughofficialstatisticsdonot

reflectthesituationaccuratelyduetothehighlevelofunofficial

employment(theofficialaverageunemploymentratefor2009is8.5%of

theactivepopulation).

Employeesareclassifiedbylawinfourcategories:workers(operai);low

rankingwhitecollarworkers(impiegati);highrankingwhitecollarworkers(quadri);andexecutives(dirigenti).Thelawspecificallyprotectslower

rankingemployees.

Employersmaychoosetorecruitworkersiftheyhaveregisteredwitha

locallabouroffice(ufficiodicollocamento)andappearonalocalunemploymentlist.

Toenterprisesemployingmorethan35people,thelawrequiresthehiring

ofaspecifiedproportionofdisabledworkers.

Duringthelastyearsamajorreformofemploymentandthelabourmarket

wasintroducedandwasaimedatexpandingemploymentandovertakingrestrictionsandthestiflednatureofthelabourmarket.

Themainfeaturesprovidethefollowingadditionalformsofemployment:

Joboncall:thejoboncallcontractisanemployeecontract,andcanbeoneitheratermorpermanentbasis.Thiscanbeusedfor

discontinuousorintermittentworkperformedaccordingtoneeds

identifiedincollectivecontractsor,provisionally,bytheLabour

Ministry;

Jobsharing:thejobsharingcontractisdefinedasonewherebytwo

workers

assume

joint

and

several

liability

for

asingle

and

identicalworkobligation;

Staffleasing:withincertainlimitsandundercertainconditions,companiescannowusetheservicesofpeoplewhoarenottheir

ownemployees.Astaffleasingcontractcanbeenteredintobyany

userwhorequestspersonnelfromanauthorisedprovider.The

agencyisrequiredtopaythemandatorysocialsecurity,healthcare

andworkerscompensationcontributions,butthelandlordand

thelesseearejointlyandseverallyliablefortheworkerswages

andsocialsecuritytreatment;


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Entrylevelcontracts:thepurposeofthiscontractistoenablecertainkindsofpeopletoenterorreenterthelabourmarketvia

anindividualtrainingorretrainingproject;

Apprenticeshipcontracts:underthisschemetheemployerssocialsecuritychargeisreducedbyafixedpercentage.

Themaincharacteristicsoftheabovecontractsaretheflexibilityinthestaff

managementand,insomecases,thereducedsecuritychargebelow

normallabourrelationships.

Workingconditions

Wagesandsalaries

Minimumwagesarefixedbynationwidecollectivebargainingagreementsbetweenunions,theAssociationofItalianEnterprisesandthegovernment.

Theresultingcontracts,whichhaveforceoflaw,establishminimumwages

forentireindustries,whetherornotaparticularemployeroremployee

waspartytothenegotiations.Inadditiontonationalcontracts,companies

alsonegotiatetheirownterms(contrattiintegrativi),usuallyintheyear

afternationalcontractsarenegotiated.

Annualsalariesarepaidin13or14instalments,dependingonwhich

nationalcollectivecontractapplies.The13thinstalmentispaidattheend

ofDecemberandthe14th,ifdue,ispaidinJune.

Workinghours,holidaysandvacations

A40hourworkingweekisconsideredstandardforallemployees.

Overtimeisgenerallypermitted,butislimitedbylawtotwohoursaday

andmustbeauthorisedbythecompanyspersonneldepartment.These

limitsmaybereducedbycollectivebargainingagreements.

Overtimeratesmustexceednormalratesandcompaniesmustpaythe

nationalsocialsecuritysystema15%wagepenaltyforhoursfrom41to48

perweekand20%forhoursexceeding48.

Inadditionto10nationalholidays,eachcitycelebratesthefeastdayofits

patronsaint.Italyalsohasfournonspecificholidays,whichworkersmay

takeattheirconvenience,withcertainlimitationstoensurethesmooth

runningofthefactory,andtwodaysworked,butpaidatspecialrates.

Threeweeksofvacationarecompulsoryduringthefirsttwoyearsof

employment.Thereafter,fourweeksareusuallygiventobothofficeand

factorypersonnel.


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Terminationofemployment

Thestatutorynoticetobegivenonterminationofemploymentvaries

considerably

according

to

seniority

and

the

category

of

the

employee.

The

minimumnoticeperiodvariesfrom15daystosixmonths.Thestatutory

noticemustalsobeobservedbytheemployee,whomustgivenoticetothe

employerinaccordancewiththeperiodsprovidedbylaw.Iftheemployee

leavesemploymentwithoutgivingpropernotice,theemployermayretain

anindemnityproportionaltothenoticeperiod.

Dismissalispossibleincasesofseriousmisconduct,butinpracticeitis

difficulttoestablishthatsuchmisconducthasoccurred.Ifacourtfinds

thatadismissalwasunfair,theemployerconcernedmusteitherreinstate

theemployeeorpayadditionalcompensation.Disputesconcerning

terminationof

employment

can

prove

difficult

and

expensive.

Allemployeesareentitledbylawtoreceivedeferredcompensation

payableattheendoftheiremploymentrelationship.Theemployermust

annuallyaccrueanamountthatcanbealternativelymaintainedbetween

companysliabilitiesor,uponemployeesrequest,paidinto

supplementarywelfarebodies.Theannualaccrualamountstothe

employeesyearlytotalcompensationdividedby13.5.Theunpaidbalance

isincreasedineachofthesubsequentyearsatarateof1.50%plus75%of

thecostoflivingindex.Thisamount,knownasTrattamentodiFine

Rapporto(TFR),mustbepaidwithinsixmonthsoftheterminationof

employment.TheemployeemayrequestanadvancepaymentofaportionofTFRtobuytheirfirsthomeorforcertainextraordinarymedical

expenses.

Tradeunions

ApproximatelyhalfofallItalianworkersbelongtosometradeunion.The

percentagevaries,however,fromsectortosector.Therighttoformunions

andtherighttostrikeareconstitutionallygrantedprerogatives.

Thethreemainunionsare:ConfederazioneGeneraleItalianadei

Lavoratori(CGIL);ConfederazioneItalianaSindacatiLavoratori(CISL);andUnioneItalianadelLavoro(UIL).

Eachunionusuallyrepresentsapoliticalpartyandhastheopportunityto

negotiatedirectlywiththegovernmentandtheAssociationofItalian

Enterprises(Confindustria)fornationalcollectiveagreements,whichare

validforanentireindustry.


22/33


Specialrequirementsforforeigners

Prospectiveemployerswhohireforeignersmustsecureworkpermitsfrom

theLabourMinistryandsupplyproofthattheforeignemployeehas

certainqualificationsnotpossessedbyunemployedItalians.Managersand

otherexecutivesofforeignownedcompaniesaregenerallyassumedto

havethosequalifications.

Itmaytakethreeorfourmonthsforaforeignertoobtainaworkpermit

fromanItalianembassyabroad.Employerswhohireforeigners(aswellas

Italians)withoutworkpermitsmaybesubjecttomonetaryorcriminal

penaltiesorboth.

EUcitizenssecondedtoItalydonotrequireworkpermits.Aworkpermit

forsecondmentisgenerallyrequestedfornonEUcitizens.However,

internationalagreementsmaymodifythisrequirement.

Socialsecurity

Thecompulsorysocialsecurityinsuranceschememanagedbythe

NationalInstituteforSocialSecurity(INPS)coversallemployeesandtheir

families,includingforeigners,withawiderangeofbenefits.Thefollowing

aretheprimarybenefitsofferedtoallworkers:

Oldagepensionafteratleast20yearsofcontributions(pensionableageis65formenand60forwomen),disability

pensionandsurvivingdependentspension

Unemploymentbenefits Sicknessbenefits Maternitybenefits Statesubsidisedmedicalcare Insuranceagainstaccidentsandoccupationaldiseases Subsidiesintheeventoflabourredundancyresultingfroma

temporaryfinancialcrisisorsimilarsituation.

ContributionstotheNationalMedicalInsuranceScheme,whichprovides

medicalassistancetoemployeesandtheirfamilies,ispaidaspartoflocal

taxdueonincome(IRAP).Medicalassistance,dependingonthe

employeesincome,covershospitalisationinapublichospital,afamily

doctor,somemedicinesandcertainmedicaltestsandexaminations.The

NationalMedicalInsuranceSchememayalsoreimbursemedicalcosts

sustainedabroadifapprovedinadvance.

Socialsecuritycontributionratesvarydependingonthetypeofbusiness

andthecategoryoftheemployee.Somecontributionsarepayableontotal

grosssalaries

and

others

are

subject

to

awage

or

salary

ceiling;

the

average


23/33


contributionisapproximatelybetween36.19%to42.27%dependingonthe

typeofbusiness.Ofthisapproximately8.89/9.19%ispaidbythe

employee.

Withafewexceptions,thecontributionsarebasedongrossearningspaid

incashorinkind.

INPScontributionsmustbepaidonthe16thdayofeachmonth.

Insurance

Thereisacompulsorypublicinsuranceforemployees,calledINAIL

(IstitutoNazionaleAssicurazioniInfortunisulLavoro).Ratesnormallyapplicabletoatradingcompanyvaryfrom0.51.3%ofthegrossannual

salaries,dependingonthedegreeofriskincurredbytheemployee.For

example,employeeswhohavetouseacarfortheirjobpayahigher

premium.

TheINAILcontributionispaidonceayearon16February.Managers

fundsarepaidonaquarterlybasisonthe10thdayofthefollowingmonth

thereferenceperiod.

AforeignerenteringItalywithaworkpermitissubjecttotheItaliansocial

securityscheme:EUregulationsandinternationalbilateralagreements,

however,maymodifythisobligation.


24/33


6. Taxation

Italiantaxationcanbeunderstoodbyexaminingthetaxationofboth

companiesandindividuals.

Corporationtaxes

IncometaxesapplicabletoalimitedliabilitycompanyinItalyincludethe

followingtaxes:

IRES(ImpostasulRedditodelleSociet):nationalcorporateincometaxwassetat27.5%.Lossescanbecarriedforwardanddeductedfromfuture

profits,normally

for

five

years,

except

for

losses

realised

in

the

first

three

yearsfromtheincorporationofthecompany,whichcanbecarried

forwardwithoutanylimitationoftimeduringthelifeofthecompany.

IRAP(ImpostasulRedditodelleAttivitProduttive):regionaltaxonproductiveactivitiesat3.9%.Itischargedonthenetvalueproductionin

commerceandmanufacturing.Thenetvalueofproductionisdetermined

bythegrossturnoverplustheincreaseinstocktradeandworkinprogress

lessexpensesofproduction(depreciationincluded).Animportantfeature

ofthistaxisthatbothtaxinterestspaidandpayrollcostsarenot

deductible.10%ofIRAPcanbedeductedforIRESpurposes.

Thefollowingtaxreturnsmustbefiled:

AnnualVAT(ImpostasulValoreAggiunto)basedatareturn AnnualVATreturn Annualincomereturn AnnualIRAPreport Annualreturnofpaymentssubjecttowithholdingtax Intrastatreport:monthly,quarterlyorannually,dependingonthe

amountoftransactions.

Taxpaymentsaredueassetoutbelow:

Incometaxesduebythecompany:twoadvancepaymentsplusabalance

payment.Thebalancepaymentandthefirstadvanceareduewithinthe

16thdayofthesixthmonthfromtheendofthefinancialyear.Thesecond

advanceiswithintheeleventhmonthofthefinancialyear.Asof31

December2009,advancesarecalculatedon100%ofIRESandIRAPfrom

thefiscalyear2005.Thefirstadvanceamountsto40%ofthetotal,while

thesecondamountsto60%.

VAT:monthlyorquarterly,dependingonturnover,onthe16thdayof

eachmonth.


25/33


Withholdingtaxesandsocialcontributionsonsalaries,commissionsand

professionalfeespaid:monthly,onthe16thdayofeachmonth.

Stamp

tax

on

a

companys

books(Imposta

sulle

Vidimazioni):

annually

by

16

March(309.87ifstockcapitalislowerthan516,456.90;otherwise,

516.46).

TaxandsocialsecuritypaymentsduebyVATregisteredentitiesare

requiredtobemadeelectronically,whateverornotanintermediaryis

involved.

Grossincome

Grossincomefortaxpurposesconsistsofincomerecordedinthe

companysfinancialstatements,adjustedforrequirementsofthetaxlaw.

Businessincome

Businessincomeincludesincomefromatrade,interest,royalties,

dividendsandcapitalgains.

Capitalgains

Capitalgainsaredefinedasthesaleproceedslessnetbookvalue.Thereis

anonfavourabletaxrateforcorporationsearningcapitalgainsthatmay

beincludedintaxableincome;however,eitherentirelyintheyearrealised

orinequalannualinstalmentsoverafiveyearperiod,atthetaxpayersdiscretion.Nointerestisdueonthedeferralofthetaxliability.

Participationexemption

Undercertainconditions,the95%ofcapitalgainsrealisedindispositionof

participationsheldincompaniessubjecttoIRESisexcludedfromtaxable

income.

Rents

Taxableincome

from

real

property,

including

farming

land

and

buildings

notusedforbusinesspurposes,iscomputedbasedonacadastralsystem

(catasto),inwhichalllandandurbanbuildingsareclassifiedaccordingto

theirestimatedordinaryaverageincome.Thedeemedincomeiscalculated

bymultiplyingthebasicvaluesassignedinthecadastralrecordsby

applicablerates,whichareperiodicallyrevised.

Dividendsfromresidentcompanies

95%ofdividendsreceivedbyaresidentcompanyfromanotherresidentor

nonresidentcompanyareexcludedfromtaxableincome.


26/33


Dividendsfromnonresidentcompanies

Dividendsfromsubsidiariessituatedincountriesthathaveprivilegedtax

systems

are

fully

taxable

for

IRES.

Interestandroyalties

Interestandroyaltiesreceivedbycorporationsfromanysourcemustbe

reportedattheirgrossamountbeforewithholdingtaxisdeducted.

Otherforeignsourceincome

Otherforeignsourceincomeisincludedintaxableincomeforcorporate

incometaxpurposes.

Treatmentof

groups

of

companies

Theoptionforgrouptaxationisirrevocableforaminimumperiodofthree

years.Theoptionmustbeexercisedbythecontrollingcompanyandbyits

subsidiariesandissubjecttovariousobligationsandcovenants.

Worldwidegrouptaxationhasalsobeenintroducedandisapplicableto

Italiancontrollingcompaniesquotedonthestockexchangeorownedby

shareholdersnotcontrollingothercompanies.

TaxTransparency

Theoptionforthetaxtransparencyisirrevocableforaminimumperiodof

threeyears.Theoptionmustbeexercisedbythecontrollingcompanies

andbytheirsubsidiary.

Whetherlimitedcompanies(residentornonresidentundercertain

conditionsprovidedbythelaw),controllingaresidentlimitedcompany,

maketheoptionforthetaxtransparency,theshareholderswillbesubject

toincomestaxation,carelessaboutadividendsdistribution.

Theoptioncanbechosenonlyifallpartnersarelimitedcompanies,with

participationnotlowerthan10%,andnothigherthan50%.

Nonresidentcompanies

NonresidentcompaniesareliabletoItaliantaxationonlyonincome

arisingwithinItaly.

ThefollowingcategoriesofincomearedeemedtobefromItaliansources:

IncomefrombusinessactivitiesconductedthroughapermanentestablishmentinItaly,whichincludescapitalgainsorlossesonthe

dispositionofgoodsorassets,includingshares,employedin,orin


27/33


anywayrelatedto,thebusinessactivitiesconductedinItalyeven

ifnotearnedthroughtheItalianpermanentestablishment;

IncomefromlandandbuildingslocatedinItaly; Incomefromcapital,suchasdividendspaidbyItaliancompanies,

interestpaidbyindividualsandentitiesresidentinItaly,and

incomepaidbytheItalianpermanentestablishmentsofnon

residents;

IncomefromprofessionalorartisticactivitiesperformedinItaly; IncomefromItalianpartnerships,whetherornotsuchincomeis

distributed;

Royaltiesfromthelicensingoftrademarksortradenames,industrialinventions,creativeworkandsuchotheritems,when

suchroyaltiesarepaidbyItalianresidentsorbytheItalian

permanentestablishmentofnonresidents.

Branches

Abranchofaforeigncorporation(sedesecondaria)issubjecttoIRESandIRAPonallincomearisingordeemedtohavearisenwithinItaly.

AlthoughabranchisgenerallytaxedunderthelawsapplicabletoItalian

corporations,thetaxlawprovidescertainadvantagesanddisadvantages

forabranch.Themainadvantageisthatprofitsmayberemittedtothe

foreigncompanyfreeofwithholdingtax.

Individuals

Asof1January2007,personalincometaxisappliedtoindividualsona

progressivebasis,withratesrangingfrom2343%.Taxdeductionsare

alsoavailable.Inaddition,aregionaltaxofupto1.4%andalocal

communaltaxofupto0.8%areappliedonallindividualsincome.

InordertoensurethepaymentofIRPEF(individuals taxation),thelaw

establishesarulewherebyallemployershavetowithholdpartofthe

salaryandpayittotheTaxAuthoritiesonbehalfoftheiremployeesand

onaccountofthetaxeventuallyduebythelatter.

Dividendsreceivedbyindividualsareincludedinthetaxableincometo

theextentof49.72%oftheamountdistributed.

Taxationofexpatriatesandnonresidents

Foreignersaregenerallytaxedaccordingtotheirresidentstatus.Ifthey

meetthecriteriaforresidencyinanyfinancialyear,theyaretaxedon

worldwideincome.Individualsnotconsideredresidentaretaxedon

Italiansourceincomeonly.


28/33



29/33


7. Accounting & reporting

AccountingprinciplesItalianaccountingrequirementsaregovernedbycivillaw.Theregulations

ofApril1991,andsubsequentmodifications,prescribethepresentationof

atrueandfairviewofthecompanysfinancialandeconomicsituation.

TheCivilCodeprovidesdetailedguidanceconcerningtheclassificationof

accountsandtheformatoffinancialstatementsaswellasageneral

guidanceconcerningaccountingprinciplestobeadopted.

Withinthiscontext,theConsigliNazionalideiDottoriCommercialistiedeiRagionieri(NationalCouncilsofDoctorsofCommerceandofAccountants)

haveundertakentoestablishaccountingprinciples,whichnormally

conformtointernationalgenerallyacceptedaccountingprinciples,by

issuingaseriesofpronouncementsthatexpandontherequirementsofthe

CivilCodeandcovermattersnotcontainedinthecode.The

pronouncementsdonotestablishprinciplesorencouragepracticesthatare

prohibitedbytheCivilCode.

Areviewofthesepronouncementsstartedin2004alongsidethe

introductionofthecorporatereformlaw.

TheaboveCouncilsaremembersoftheInternationalAccountingStandardsCommittee(IASC).

Yearendfinancialstatements

Atthesettingupofalimitedliabilitycompany,thecompanymustdefine

theclosingyearenddate.

Everyyear,attheendoftheaccountingperiod,thedirectorsmustprepare

theannualfinancialstatements(balancesheet,profitandlossaccountand

explanatorynotes),togetherwithareportthereon.Theannualfinancial

statementsandthedirectorsreportmustbepreparedwiththeformatandtimingstatedbyregulationsoftheItalianCivilCode.

Atleast30daysbeforetheshareholdersmeetingwhichwilldiscussthem,

thedirectorsreportandtheannualfinancialstatementsmustbe

communicatedtotheboardofstatutoryauditors(ifexisting),andwho

shallalsoprepareareportthereon.

Thefinancialstatements,togetherwiththedirectorsandboardof

statutoryauditorsreports,mustbedepositedattheregisteredofficeofthe

companyatleast15daysbeforetheshareholdersmeetingand,nolonger

than30

days

after

the

meeting,

must

be

filed

with

the

register

of


30/33


commercialenterprises,togetherwithacopyoftheshareholders

resolutionofapproval,forpossibleinspectionbythepublic.

Condensedyear

end

financial

statements

Unlesstheyhaveissuedsecuritiesmarketedonregulatedmarkets,

companiesmaypreparetheirfinancialstatementsincondensedform,

whentheyhavenotexceededtwoofthefollowingrequirementsinthe

firstyearofoperationsor,afterthat,fortwoconsecutiveyears:

Totalassetsreportedinthebalancesheet:Euro4,400,000 Revenuesfromsalesandservices:Euro8,800,000; Averageemployeesduringtheyear:50employees.

InternationalAccounting

Standards

AlawdecreeissuedinFebruary2005hasintroducedtheapplicationof

IASaccordingtothefollowingsimplifiedscheme:

Entity Required

financial

statements

FromFY2006

Listedcompanies

Issuersof

financial

instrumentsamongthe

public

Banksandotherfinancial

intermediaries

Ordinary

Consolidated

IAScompulsory

IAScompulsory

Insurancecompanies Ordinary

Consolidated

IAScompulsoryif

listed

IAScompulsory

Companiesauthorisedtopresentcondensed

financialstatements

Ordinary ExcludedfromIAS

Others Ordinary

Consolidated

ExcludedfromIAS

IASfacultative


31/33


Otheraccountingandcompanylawrequirements

Thefollowingcompanybookshavetobemaintained:

Shareholders Minutesoftheshareholdersmeeting Minutesoftheboardofdirectors Minutesoftheboardofauditors Annualaccountsbook.

Thefollowingaccountingbooksmustbekept(otherbooksmaybe

requestedbyspeciallegislation):

Generalledger VATsalesregister

VATpurchases

register

Depreciableassets.AuditingIngeneralterms,auditactivitycanbesplitintotwodifferentcategories:(i)

Accountingcontrols examinationoftheannualfinancialstatementsin

accordancewithrecommendedauditingstandards,withaviewtoexpress

anopinionthereon,and(ii)ManagementcontrolsorCorporate

surveillance reviewofthecompanysbusinesswithrespecttothelaw

andthestatutes.

Underthetraditionalcorporatemodel(section4,Settingupabusiness),theauditactivitycanbecarriedouteitherbyaboardofstatutoryauditors

orbyaregisteredauditor/auditingfirmoracombinationoftheseentities.

Companies,whicharenotlistedandarenotrequiredtoprepare

consolidatedfinancialstatements,may,asageneralrule,appointthe

boardofstatutoryauditorstoperformbothfunctions(i)and(ii);inother

cases,theAccountingcontrolsfunctionisallocated,bylaworbyarticles

ofassociation,toregisteredauditors/auditingfirms.

Listedcompanies,statecontrolledcompanies,municipalitycontrolled

companies,large

consortia,

insurance

companies,

brokers,

(securities

traders),publishingcompaniesandothersmustbeauditedbyaspecial

classofauditingfirmsregisteredwiththeNationalCommissionfor

Companies&StockExchange(CONSOB).Theauditingfirmisappointed

bytheshareholdersforthreeyearsandmaybereappointedonlyfortwo

successivethreeyearterms.

Auditorsarerequiredtobeindependent.Theyarepersonallyliableforthe

accuracyandtruthfulnessoftheirstatementsand,withthedirectors,are

jointlyliableforthedirectorsactionsoromissionswheneveritcanbe

shownthatalosscouldhavebeenavoidediftheauditorshadperformed

theirdutiesproperly.


32/33


Pleaserefertosection4aboveforotherdetails.

AuditorsreportsAccountingcontrols

ReportsonAccountingcontrolsfollowasimilarformattothoseadopted

internationallybyallmajorindependentauditingfirms.

Managementcontrols

ReportsonManagementcontrolswhichunderthetraditionalmodel

areissuedsolelybytheboardofstatutoryauditorsnormallyfollowa

specialformatrecommendedbythenationalaccountingbodies.


33/33

8. UHY firms in Italy

FiderConsultS.r.l.offices:

Rome

viaBirmania81

I00144,Roma

Italy

Phone: +39065917469

Website: www.fiderconsult.com

Fax:

+3906

5913582

Contact: DrPaoloLenzi

Email: [email protected]

WithadditionalofficesinFlorenceandMilan

9. UHY offices worldwideFor contact details ofUHY officesworldwide, or for details on how to

contacttheUHYexecutiveoffice,pleasevisitwww.uhy.com

Doing Business in Italy (1)

Documents