If you are a foreign business owner thinking of expanding into Italy, setting up an Italian branch of your company could be the right choice, as it would allow you to operate permanently in the country while maintaining legal ties to your parent company abroad. In order to fully comply with Italian law, however, it is important to understand every bureaucratic and fiscal step.

In this article, we’ll explore what it means to have an Italian branch of a foreign company, how you can set one up in Italy, what taxes you would be subject to, and what recurring requirements you’d need to meet.

What’s in this article?

• What is a branch?
  
• What is an Italian branch of a foreign company?
  
• How to set up a branch of a foreign company in Italy
  
• How taxation works for Italian branches of a foreign company
  
• Stripe solutions for managing branches in Italy
  
• Recurring requirements
  
• Differences between a branch and a representative office
  

What is a branch?

A branch is simply a subsidiary, a permanent place of business through which a company can carry out its economic activities in another area. A branch does not have separate legal personhood (i.e., autonomy), but is subject to tax and accounting obligations for activities carried out locally.

What is an Italian branch of a foreign company?

An Italian branch of a foreign company is a subsidiary of that company; it is without independent legal personhood and is directly dependent on its headquarters abroad. The branch is not a separate legal entity but represents the parent company in Italy, carrying out operational, commercial, or production activities.

Setting up a branch of a foreign company in Italy allows the parent company to expand into another market without establishing a new company. From a fiscal perspective, an Italian branch of a foreign company is considered a permanent establishment pursuant to Article 162 of the Consolidated Law on Income Tax (TUIR). This means that, despite not having legal autonomy, the branch is required to comply with Italian tax obligations with regard to income generated within the country. Foreign business owners must therefore register for value-added tax (VAT) and comply with accounting, tax, and employment obligations, just like any other person who is a taxable resident of Italy.

How to set up a branch of a foreign company in Italy

To set up a branch of a foreign company in Italy, you must follow a series of specific bureaucratic steps, which we’ll discuss in detail below.

Draft a resolution to establish the branch

The foreign headquarters of the company must formally approve the establishment of a branch in Italy by means of a resolution of the board of directors or other competent body. This document must indicate the address of the branch and the name of the legal representative with management powers over the branch. The legal representative does not have to be a resident of Italy, but it is preferable that they have their tax domicile in Italy to facilitate the management of compliance and relations with local authorities.

Translate all documents and have them certified

The deed of incorporation, bylaws, and minutes of the board meeting must be translated into Italian. The same translator must get the documents either certified by a court or certified before a public official (usually a court official or notary). With the sworn translation, the translator declares under oath that the translation is an accurate representation of the original text. This gives the documents legal validity in Italy.

This step is key because it allows the Italian authorities—specifically the Business Register—to officially verify the contents and legal framework of your foreign company. It is advisable that you contact professional firms specializing in certified translations to avoid delays or errors in the procedure. You will then need to attach the certified documents to the application for registration of the branch with the relevant Chamber of Commerce.

Obtain an Italian VAT number

To set up an Italian branch of a foreign company, you must obtain an Italian VAT number. This step must be carried out with the Italian Revenue Agency by filling out form AA7/10, which is specifically for entities other than individuals. You can submit your application online or go directly to the relevant district office.

On the form, you will need to put your parent company’s details, the address of the branch in Italy, the Classification of Economic Activity (ATECO) code corresponding to the type of business, and the name of the legal representative in Italy. Choosing the correct ATECO code is important, as it determines the fiscal and social security requirements applicable to your business.

Once you have obtained your VAT number, you can start issuing invoices, recording transactions, and meeting all fiscal requirements under Italian law, such as making periodic VAT payments and filing annual tax returns.

Register the branch in the Business Register

This is a fundamental step in ensuring that the branch of your foreign company is fully operational in Italy. You must fill in form S1 by accessing the Business Register portal and following the instructions for the ComUnica procedure. The following documents must be attached:

• A certified and translated copy of the deed of incorporation and bylaws
  
• A copy of the legal representative’s identity document
  
• The register code (i.e., registration with the corresponding foreign Business Register)
  
• Data relating to the branch
  
• The deed of appointment of the representative in Italy
  
• An EUID code—a unique European identifier established by Directive 2012/17/EU that is used to identify foreign companies in European registers and facilitate their interconnection
  
• Payment of Chamber of Commerce fees and stamp duty
  

Register with the INPS and INAIL

If your company’s branch intends to hire staff in Italy, you will need to register with the National Institute for Social Security (INPS) and the National Institute for Insurance Against Accidents at Work (INAIL).

Registration with the INPS is necessary in order to pay social security contributions for your employees. During registration, you will be asked to indicate your area of business (i.e., the type of commerce, industry, or type of services), the number of workers you expect to hire, and the national collective labor agreement you intend to apply.

In regard to the INAIL, you will need to insure your employees against accidents at work and occupational diseases. When you register, you will be assigned a local insurance position. An insurance premium—which you will need to pay periodically—will also be calculated based on the nature of your business and its level of risk.

You can register with both the INPS and INAIL online, through their respective institutional portals. Please note: it is important to complete these steps before starting any employment relationships, as to ensure full compliance with Italian regulations and protect both your branch and your employees.

Obtain a Certified Notice of Start of Business (SCIA)

The SCIA is a requirement for setting up almost all businesses in Italy. It must be submitted to the One Stop Shop for Production Activities (SUAP) of the municipality where the branch is located—which is also done online. Based on your type of business, additional documentation or permits might be required (e.g., professional qualifications, zoning compliance, health or environmental permits).

It can be beneficial to consult an experienced advisor who can help simplify the process of setting up a foreign branch in Italy and ensure that you comply with all legal and administrative requirements.

How taxation works for Italian branches of a foreign company

Although it does not have separate legal autonomy, the local branch of a foreign company is subject to taxation in Italy for income generated within the country. This means that the branch is treated as a permanent establishment for fiscal purposes.

Let’s look at the main taxes your Italian branch will have to pay.

Corporate income tax (IRES)

IRES is the main tax applied to the profits of corporations. In this case, a tax rate of 24% is applied to the net profits generated by a branch in Italy.

Regional production tax (IRAP)

IRAP is a local tax levied on the net value of production generated by the foreign branch. The standard rate is 3.9%, but this can vary depending on the region. For commercial enterprises, the taxable base is the difference between revenues and production costs, excluding certain items such as interest payable or compensation to occasional self-employed workers.

Value-added tax (VAT)

Your branch must manage its own VAT position in Italy, issuing invoices with VAT and meeting periodic requirements (i.e., monthly or quarterly payments, annual returns). The VAT mechanism includes:

• Output VAT: Output VAT is the tax that the branch collects from customers on sales of goods and services.
  
• Input VAT: Conversely, input VAT is the VAT that the branch pays to suppliers on purchases.
  

The branch must pay the difference between the output VAT and the input VAT to the tax office. If the input VAT is higher, it can be carried forward to subsequent periods or claimed as a refund.

Withholding taxes

This is a fiscal requirement whereby the branch—when making payments to employees, collaborators, or freelancers—must withhold a portion of the amount due and pay it directly to the Italian government. In this role, the branch does not pay tax for itself but rather withholds a portion of the income corresponding to its employees (or other beneficiaries), and pays it to the tax office on their behalf. It therefore acts as an intermediary between those who receive income and the government.

Taxation of a branch follows the principles of Italian tax law and requires separate accounting from that of the foreign parent company. If you want to set up a branch of a foreign company in Italy, you must therefore set up a compliant accounting system and consult a certified accountant who practices in Italy.

Furthermore, to avoid double taxation, you need to check whether there is a convention for the avoidance of double taxation between Italy and the country in which your parent company is located.

Stripe solutions for managing foreign branches in Italy

If you are about to set up a branch of a foreign business in Italy, having the right tools for payment management, invoicing, and tax compliance is key for operating efficiently. Stripe solutions offer a solid, integrated infrastructure to support every operational phase of your business in Italy.

With Stripe Payments, you can accept online payments in a secure and scalable way. If you plan to have a physical point of sale, Stripe Terminal allows you to accept card payments in person in several countries. Terminal also lets you streamline the management of online and in-person payments, displaying them in a single dashboard and thus simplifying reporting, reconciliation of accounts, and data analysis.

To manage billing you can use Stripe Invoicing, which allows you to create and send invoices for one-time and recurring invoices alike—without writing a single line of code. With this tool, you can save time and receive payments more quickly (87% of Stripe invoices are paid within 24 hours). And, thanks to collaboration with third-party partners such as A-Cube, you can also use Invoicing for mandatory electronic invoicing.

The Italian branch of your foreign company will be subject to VAT obligations, as well. Stripe Tax can help you calculate, apply, and pay VAT correctly, ensuring compliance in Italy and more than 100 other countries. Further, if you manage subscriptions or recurring revenue, Stripe Revenue Recognition lets you record revenue in accordance with international accounting standards.

Recurring requirements

After its establishment, the Italian branch of a foreign company is required to meet a series of ongoing requirements, similar to those applicable to Italian companies.

Bookkeeping

You must adopt an accounting system for the branch that complies with Italian regulations and that allows you to chronologically and systematically record transactions. You must also prepare the required books (e.g., journal, inventories, VAT registers) and keep them for at least 10 years.

Filing tax returns

Every year, you must file IRES, IRAP, and VAT returns, as well as any Intrastat forms for transactions with other EU countries. In addition, the branch is required to report periodic VAT payments and pay taxes by the relevant deadlines.

Paying taxes and contributions

In addition to income tax and VAT, the branch must pay withholding taxes on remuneration paid to employees and collaborators. If you have employees, you must also pay social security (INPS) and insurance (INAIL) contributions according to the monthly due dates.

Filing the parent company’s financial statement

Even if the branch does not draw up separate financial statements, it is required to file a copy of the parent company’s financial statements—translated into Italian—with the Business Register. This must be done within 30 days of the statements’ approval.

Complying with employment regulations

When hiring staff, the branch must draw up contracts, send mandatory communications (UniLav), prepare pay slips, apply collective bargaining agreements for the sector, and comply with health and safety regulations.

Updating the Business Register

Any changes regarding the registered office, business, legal representative, or other relevant details must be promptly communicated to the appropriate Chamber of Commerce.

Differences between a branch and a representative office

If you intend to operate in Italy, you have two options: set up a branch of your company or set up a representative office. A representative office is a very different legal entity, suitable for different operational purposes.

How a representative office works

A representative office is a small facility used for preparatory or ancillary activities, such as market research, promotional contacts, commercial support, or technical assistance. It cannot carry out productive activities, issue invoices, or enter into contracts on behalf of the parent company. It cannot generate income in Italy, and it is therefore not subject to IRES or VAT. However, registration in the Business Register is still mandatory—albeit as a secondary office without any economic activities. You must also request a tax code to fulfill minimum administrative requirements.

How a branch works

A branch is a permanent establishment of the foreign company, with representation and operations in Italy. It carries out economic activities, generates taxable income, issues invoices, and can enter into contracts. As such, a branch is subject to all fiscal and social security obligations, just like any other Italian company: IRES, IRAP, VAT, INPS, INAIL, and so forth. It is also required to keep separate accounts and have an adequate administrative framework to operate in the local market.

What can a representative office do?

A representative office in Italy can only perform supporting functions for the foreign parent company, without generating income. Specifically, it can deal with:

• Market research activities
  
• Brand or product promotion
  
• Nonoperational commercial support
  
• Technical assistance for Italian customers
  
• Institutional representation
  

On the other hand, a representative office cannot sell goods or services, issue invoices or enter into contracts on behalf of the foreign company. It is a useful solution if you want to test the Italian market on a trial basis, without opening an Italian branch of a foreign company.