Investment in Italy 2019 kpmg.com/it © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Italy 2019 Preface Investment in Italy is one of the series of booklets published by KPMG to provide information of interest to those considering investing or doing business in the appropriate countries. This publication has been prepared by KPMG in Italy. Every care has been taken to ensure that the information presented in this publication is correct and reflects the situation at 31 December 2019. Its purpose is to provide general guidelines on investing or doing business in Italy. However, the reader should be aware that the general framework of the legislation and the detailed regulations underpinning it are subject to frequent changes. Therefore, before taking specific decisions, further advice should be sought. If there is a significant lapse of time between determining a strategy and implementing it, any advice obtained which is critical to the strategy should be confirmed. KPMG in Italy December 2019 Tenth Edition © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4 Investment in Italy Attracting foreign investment is a strategic priority of Italy’s national economy Despite its volatile markets and political 1,500km of high-speed rail track, as well instability, Italy has risen to the eighth as 300 ports, strategically distributed biggest economy in the world and the for Mediterranean trade over more than third in the euro zone, after Germany 7,000km of coast, and 130 airports. and France. It has a population of around For over 30 years Italy has been 60 million and GDP of approximately Europe’s second biggest manufacturer, EUR1,788 billion. after Germany, and fifth worldwide. To The country’s main resource is invest in Italy is to gain access to the household wealth because Italian very best know-how and skills in the families are big savers and have some of machinery and automation, fashion and the lowest debt in Europe; this translates design, and food and wine industries. into potentially large spending and Recently, Italy has also opened its investment capacity. doors to foreign investment in sectors such as energy, distribution networks, Geographically, Italy is in a strategic telecommunications and transport. location for international commerce: it is the crossroads of the European Drivers of the Italian economy are the market, the bridge between Northern country’s SMEs – leaders in global value and Southern Europe, but also the port chains and suppliers of high-quality semi- of departure to North Africa and the finished products. Middle East. The country has a very Tertiary education is of a high standard wide transport network, extending and 15 Italian universities are listed over some 180,000km and including among the world’s top 500. 7,000km of motorways and more than © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Italy 5 Research and innovation are tightly It is in this context that Investment in woven into industrial processes. Italy sets out to be a practical guide to Italy is one of the countries with the investors by giving a snapshot of the highest number of applications for the general economy, listing the incentives international registration of industrial available, outlining the legal framework designs, and third in the league table of for special transactions, describing the countries with the highest number of basic bookkeeping and tax rules, and trademark applications in the agricultural making useful suggestions on how to and food industry. In the Global invest in Italy. Innovation Index 2019, Italy’s economy The information in this booklet reflects and enterprises rank 30st for innovation. the situation as at 31 December 2019. The artistic heritage of Italian cities is Since then, the Italian economy, like unrivalled. The country has more world the rest of the world, has been deeply heritage sites than any other country on affected by the COVID-19 pandemic. the UNESCO list. Each year some 50 To support market players and the million tourists head to Italy, making our population, the Italian government has country the fifth most popular tourist been issuing numerous temporary destination in the world. measures (e.g. to suspend certain tax In 2019, Italy rose from 31st to 30th payments, extend deadlines, relax position in the World Economic Forum’s corporate governance rules). Global Competitiveness Index. These measures, which are subject to Foreign investment is key to a country’s change, affect some of the matters dealt growth: in Italy especially, investment with in this booklet. can provide the capital that small Given the purposes of this Investment businesses need in order to invest in in Italy booklet and the nature of the innovation and skilled management temporary measures, these recent and to retain their competitive edge in changes to the rules could not be international markets. Attracting foreign covered in the following pages by the investment is one of the strategic time it went to press. However, readers priorities of Italy’s public authorities, should bear their existence in mind. which are developing policies to create an investor-friendly environment. Eugenio Graziani International Tax Partner KPMG in Italy, Tax & Legal © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 Investment in Italy Contents 1. Country overview 11 1.1 Transportation network 12 1.2 Snapshot of the Italian economy 14 1.3 Private investment in Italian companies 18 2. Incentives for investors 21 2.1 Main funding and facilities offered by Europe 21 2.2 Main incentives offered by the Italian government 24 2.3 Regional investments 26 3. The incorporation or acquisition of a company: legal aspects 29 3.1 Foreign investors 29 3.2 Company law 29 3.3 M&A transactions 34 3.4 Corporate criminal liability 36 4. Accounting and reporting 39 4.1 Legal framework and regulations 39 4.2 Requirements 39 4.3 Compulsory bookkeeping 39 4.4 The language of accounting records 40 4.5 Keeping accounting records abroad 40 © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Italy 7 4.6 The financial statements 41 4.7 International Financial Reporting Standards (IFRS) 42 4.8 Statutory audit requirements 46 4.9 Due dates for filing the year-end accounts and tax returns and for making tax payments 47 4.10 Failure to keep accounting books and records properly 49 4.11 Electronic invoicing 49 5. Taxation of business income 51 5.1 Domestic aspects 51 5.2 International aspects 63 5.3 Anti-avoidance measures 70 6. Transfer pricing 77 6.1 General principles 77 6.2 Documentation issues 77 6.3 Penalties 78 6.4 Advance tax agreements for enterprises with international activities 78 7. Taxation of individual income 81 7.1 General rules 81 7.2 Taxable income 82 7.3 Tax-exempt items and personal deductions 84 7.4 Tax rates 86 7.5 Administrative and filing requirements 88 7.6 Other taxes 90 7.7 International aspects 91 © 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato - Consulenza legale e tributaria, an Italian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 Investment in Italy 8. Employment law and immigration 95 8.1 Employment law 95 8.2 Immigration 100 9. VAT 103 9.1 Scope 103 9.2 Rates 103 9.3 Registration 104 9.4 VAT grouping 105 9.5 Returns 107 9.6 VAT recovery 109 9.7 International supplies of goods and services 111 9.8 Invoices 113 9.9 Electronic reporting of daily receipts by retailers 115 9.10 Transfers of business 116 9.11 Opting for VAT 116 9.12 Head office and branch transactions 116 9.13 Bad debts 116 9.14 Anti-avoidance 117 9.15 Penalty regime 117 10.