More and more Italian companies, startups, and entrepreneurs are setting up companies abroad to expand beyond national borders or refine their tax structures. Several factors contribute to this expansion, such as more favourable tax regimes, less bureaucracy, access to new markets, and greater ease in doing business.

However, transferring or setting up a business outside of Italy requires attention to both Italian and international tax and corporate regulations. This can help entrepreneurs avoid risks, such as foreign relocation or classification as a permanent establishment in Italy.

This article provides information about setting up a company abroad, including advantages, legal requirements, best countries and key points to consider. We also explain whether it is possible to set up a foreign company while remaining in Italy.

What's in this article?

• Why set up a company abroad from Italy?
  
• Reasons for setting up a company in a foreign country
  
• Requirements to set up a company abroad
  
• Can you set up a company abroad while based in Italy?
  
• How to legally set up a company abroad
  
• Where is it advisable to open a company abroad?
  
• How Stripe Atlas can help
  

Why set up a company abroad from Italy?

In recent years, interest in the possibility of setting up a company abroad has grown significantly among Italian entrepreneurs, freelancers and digital companies. There are multiple reasons for this, including both fiscal and operational factors.

Many entrepreneurs wonder where it is best to set up a company abroad to benefit from a more favourable system than the one in Italy. According to the Italian National Institute of Statistics (Istat), the overall tax burden in Italy in 2024 was equal to 42.5% of the gross domestic product (GDP). This includes direct and indirect taxes and mandatory social security contributions. This percentage confirms Italy's high level of taxation and social security contributions, which also affect business activities.

Because of digitisation, it is now possible to set up a foreign company online in many jurisdictions. These require simplified procedures and reduced time frames, when compared to the past. Some countries allow entrepreneurs to set up companies in just a few days, without the need to physically visit the location.

However, it is important to clarify one point: Setting up a foreign company does not automatically mean paying less in taxes or avoiding Italian taxation. Tax handling depends on several factors, including the following:

• Location where the company is actually managed
  
• Tax residence of the directors
  
• Location where the economic activity takes place
  
• Presence or absence of a permanent establishment in Italy
  

It is possible to set up a company abroad, but this must be done in accordance with specific tax and corporate rules.

Reasons for setting up a company in a foreign country

The advantages of setting up a foreign company can be significant, but they vary depending on the country chosen and the business model. Below, we outline the main reasons that drive Italian entrepreneurs to consider setting up a business abroad.

More favourable taxation

Many entrepreneurs consider setting up a company in a foreign country to pay less tax and access more competitive tax regimes than those in Italy.

For instance, this includes the following:

• Estonia: Tax on profits is 0% until they are distributed.
  
• Ireland: Corporate tax is 12.5% on income from commercial activities, one of the lowest rates among major European countries.
  
• UK: Corporate tax is generally lower than the overall tax rate in Italy.
  

Creating a business in these countries does not automatically mean paying less tax. However, it can mean having greater tax flexibility and better financial planning.

Simpler bureaucracy

In many countries, setting up a foreign company requires fewer administrative procedures than in Italy. This results in a reduction of the following:

• Administrative costs
  
• Incorporation timeline
  
• Operational complexity
  

Access to international markets

Setting up a company abroad can facilitate access to new markets, partners and investors. This is especially important for the following businesses:

• Tech startups
  
• E-commerce companies
  
• Software-as-a-service (SaaS) companies
  
• Enterprises operating at global level
  

Greater international credibility

In some sectors, having a company based in jurisdictions such as the US, UK or Switzerland can increase credibility with customers and investors.

Requirements to set up a company abroad

It is legal for an Italian entrepreneur to set up a company abroad. The company will need to meet some basic requirements to avoid penalties. The Italian tax system establishes that the tax residence of a company depends on its registered office and the location of its administrative headquarters or where its main business activity happens. This is provided for in Article 73, Paragraph 3, of the Italian Consolidated Income Tax Act (TUIR) within Presidential Decree No. 917/1986.

According to this law, a company is considered a tax resident in Italy if at least one of the following is located in Italy for most of the tax period (i.e. more than 183 days per year):

• Registered office
  
• Administrative headquarters
  
• Main business activity
  

The most important of these is the administrative headquarters (i.e. the place where the company makes strategy and management decisions). Tax residence depends on the actual management of the company, not just on its formal registered office.

Foreign incorporation (Esterovestizione)

Foreign incorporation occurs when a company is formally incorporated abroad but is managed from Italy. In this situation, the registered office is located in another country, but the company makes actual management and strategy decisions in Italy. In such cases, the Italian Revenue Agency can reclassify the company as resident in Italy for tax purposes. The result is that all income generated will be subject to Italian taxation, regardless of whether the company was incorporated abroad.

Permanent establishment

Another fundamental concept is that of permanent establishment, governed by Article 162 of the TUIR and consistent with the Organization for Economic Cooperation and Development (OECD) model for the avoidance of double taxation. A permanent establishment exists when a foreign company carries out economic activities in Italy on a permanent basis. This can occur through the following:

• A fixed place of business, such as an office or co-working space used on a permanent basis
  
• Staff or employees operating in Italy
  
• Agents who habitually enter into contracts on behalf of the company
  
• An operational structure used to provide services or sell goods
  

In the case of a permanent establishment, income attributable to business conducted in Italy is taxed in Italy, even if the company is formally foreign.

Possible penalties

There can be serious tax and legal consequences. In the event of concealed foreign incorporation or permanent establishment, the Italian Revenue Agency can apply the following:

• Recovery of unpaid taxes: Italian corporate income tax (IRES), Italian regional tax on productive activities (IRAP), and value-added tax (VAT)
  
• Administrative penalties: From 90% – 180% of the evaded tax
  
• Criminal penalties: In the most serious cases of false declarations or non-declaration, according to Article 4 of Legislative Decree No. 74/2000
  

Setting up a foreign company is a legitimate choice, but it must be accompanied by an actual economic presence in the foreign country and a consistent structure.

Can you set up a company abroad while based in Italy?

From a legal standpoint, an entrepreneur residing in Italy can incorporate or own a company abroad. Nevertheless, this does not automatically mean that the company will be considered a tax resident in the foreign country.

Tax residence depends on the location where the company is actually managed. If administrative management and strategy decisions are made in Italy, the company can be considered a tax resident in Italy, even if it is formally registered abroad.

Specifically, the risk that a foreign company will be considered a tax resident in Italy increases if the following apply:

• The director resides in Italy and makes strategy decisions from Italy.
  
• Operations are mainly managed from Italy.
  
• Contracts are negotiated or concluded from Italy.
  
• There is no real operational structure in the foreign country. For instance, the registered office is a domicile address or virtual office.
  

In these situations, the Italian Revenue Agency might challenge the foreign incorporation and consider the company to be resident in Italy for tax purposes. This will include the consequent taxation of income according to Italian law.

For a company to be considered resident abroad, there must be a real economic presence in the foreign country, including the following:

• Actual operational headquarters
  
• Administrative management carried out in the foreign country
  
• Strategy decisions made outside of Italy
  
• Structure consistent with business activity
  

Furthermore, tax residents in Italy that own a foreign company must comply with specific reporting obligations. These include indicating shareholding in section RW of the tax return, which is used for tax monitoring of foreign activities and checking for tax obligations, such as Tax on the Value of Financial Assets Held Abroad (IVAFE).

How to legally set up a company abroad

To legally set up a company abroad, it is important to follow a structured approach that complies with both foreign and Italian regulations.

Choose the jurisdiction

The first step is to choose the jurisdiction that best suits the business model. The choice should be based on taxation and other factors, including the following:

• Legal and tax-related stability
  
• International reputation of the country
  
• Ease of setting up and managing the company
  
• Access to the banking system
  
• Compatibility with the relevant market
  

Incorporate the company

Once the country is chosen, the next step is to set up the company in accordance with local regulations. This generally includes the following:

• Register in the local Business Register
  
• Draft the articles of incorporation
  
• Appoint directors
  
• Open a business bank account
  
• Obtain licenses or authorisations
  

Adhere to legal requirements

In many countries, it is possible to set up a foreign company online. However, formal incorporation is only the first step. To ensure full compliance with the law, it is important that the company has real economic substance. This includes a concrete operational presence in the foreign country with actual economic activity, business management and, where necessary, adequate staff or facilities.

This concept is also becoming increasingly important at the global level, following the OECD's initiatives against tax avoidance, such as the Base Erosion and Profit Shifting (BEPS) project. The BEPS project – promoted by the OECD and the G20 economic forum – aims to combat the strategies used by some multinational companies to artificially transfer profits to countries with lower or no taxation, exploiting differences and loopholes across national tax systems. The aim is to ensure that profits are taxed in the country where economic activity actually occurs and generates value.

In practice, the company needs to include tangible elements, such as the following:

• Actual operational headquarters
  
• A physical address, not just a virtual one
  
• Staff or collaborators
  
• Actual economic activity in the foreign country
  
• Business decisions made in the foreign country
  

Moreover, entrepreneurs residing in Italy must comply with Italian tax obligations relating to participation in the foreign company. This can include the following:

• Declare participation in section RW of the tax return.
  
• Declare any dividends received.
  
• Adhere to the rules on foreign-controlled companies, according to Article 167 of the TUIR. This outlines taxation in Italy of the profits of foreign-controlled companies, in certain cases.
  

Lastly, it is highly advisable to seek the assistance of qualified professionals to ensure that the company is operating in full compliance with the law. These can include accountants specialising in international taxation and lawyers specialising in international corporate law.

Where is it advisable to open a company abroad?

Understanding where it is best to set up a company abroad depends on several factors. These include the type of business, target market and operational structure. There is no single best country, but some jurisdictions stand out for their more favourable tax burden, simpler administrative procedures and greater opportunities for international growth. These countries include Estonia, Slovenia, Switzerland, the UK and the US. Below, we examine these options.

Estonia

Within the EU, Estonia is one of the most popular countries, especially among startups, freelancers and digital businesses. Its main strength lies in its tax system, which imposes a 0% tax on undistributed profits, encouraging reinvestment and company growth. Also, because of the e-residency program, entrepreneurs can set up a foreign company online and manage it digitally. Nonetheless, it is important that the company has effective management consistent with its Estonian headquarters to avoid tax disputes.

Slovenia

Another interesting option is Slovenia, often chosen for its geographical proximity to Italy and straightforward administration procedures. This country can be a suitable solution for commercial and operational activities in the European market.

Switzerland

Switzerland is particularly valued for its economic stability, international reputation and competitive tax system in certain cantons, even though it has higher operating costs.

UK

The UK also continues to be a popular jurisdiction for Italian entrepreneurs. Companies can be set up quickly with low costs and high international credibility. Setting up a company in the UK can be especially beneficial for digital, consulting and commercial businesses with international clients.

US

The US is one of the most important destinations for those who want to operate on a global scale. Incorporating a US company – such as a limited liability company (LLC) or C corporation – provides access to one of the largest and most dynamic markets in the world and increases credibility with international customers and investors. There are also tools that make it possible to set up a company in the US remotely. This makes the US increasingly accessible to Italian entrepreneurs who intend to expand their business internationally.

Comparison of main foreign countries for business setup from Italy

Which European country has the lowest taxes?

Among European countries, Hungary currently has one of the lowest corporate taxes, with a rate of 9% on corporate profits. This is the lowest in the EU. Bulgaria (10%), Ireland (12.5%) and Estonia are also often considered favourable tax jurisdictions. In particular, Estonia applies a unique system where profits are not taxed, as long as they remain reinvested in the company. Tax is only applied when dividends are distributed. In any case, cost-effectiveness also depends on other factors, such as tax residence, operational presence, and the regulations applicable to the business activity.

How Stripe Atlas can help

Stripe Atlas sets up your company's legal foundations so you can fundraise, open a bank account and accept payments within two business days from anywhere in the world.

Join 75K+ companies incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z and General Catalyst.

Applying to Atlas

Applying to form a company with Atlas takes less than 10 minutes. You'll choose your company structure, instantly confirm whether your company name is available and add up to four co-founders. You'll also decide how to split equity, reserve a pool of equity for future investors and employees, appoint officers and then e-sign all your documents. Any co-founders will receive emails inviting them to e-sign their documents, too.

Accepting payments and banking before your EIN arrives

After forming your company, Atlas files for your EIN. Founders with a US Social Security number, address and mobile phone number are eligible for IRS expedited processing, while others will receive standard processing, which can take a little longer. Additionally, Atlas enables pre-EIN payments and banking, so you can start accepting payments and making transactions before your EIN arrives.

Cashless founder stock purchase

Founders can purchase initial shares using their intellectual property (e.g. copyrights or patents) instead of cash, with proof of purchase stored in your Atlas Dashboard. Your IP must be valued at US$100 or less to use this feature; if you own IP above that value, consult a lawyer before proceeding.

Automatic 83(b) tax election filing

Founders can file an 83(b) tax election to reduce personal income taxes. Atlas will file it for you – whether you are a US or non-US founder – with USPS Certified Mail and tracking. You'll receive a signed 83(b) election and proof of filing directly in the Stripe Dashboard.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company. Atlas C corp documents are built in collaboration with Cooley, one of the world's leading venture capital law firms. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution and tax compliance.

A free year of Stripe Payments, plus $50K in partner credits and discounts

Atlas collaborates with top-tier partners to give founders exclusive discounts and credits. These include discounts on essential tools for engineering, tax, finance, compliance and operations from industry leaders like AWS, Carta and Perplexity. We also provide you with your required Delaware registered agent for free in your first year. Plus, as an Atlas user, you'll access additional Stripe benefits, including up to a year of free payment processing for up to $100K in payments volume.

Learn more about how Atlas can help you set up your new business quickly and easily and get started today.