Starting a Business
The bureaucracy associated with starting a business (azienda) in Italy is horrendous and rates among the most pernicious in the world. Italy is an almost impenetrable red tape jungle and Italian civil servants (impiegati) can be inordinately obstructive, endlessly recycling bits of paper to create ‘employment’ for themselves. For foreigners, Italy is a bureaucratic nightmare, particularly if you don’t speak Italian, and you will be inundated with official documents and must be able to understand them. It’s only when you come up against the full force of Italian bureaucracy that you understand what it really means to be a foreigner! You should expect to spend most of your time battling with civil servants when establishing a new business. However, despite the red tape, Italy is traditionally a land of small companies (there are over three million employing less than 50 people) and individual traders, where the culture and economic philosophy actually encourages and even nurtures the creation of small businesses.
Due to the difficulties in complying with (or understanding) Italian laws and bureaucracy, there are agencies (colloquially called galoppini) that specialise in obtaining documents and making applications for individuals and businesses, listed in the yellow pages under Certificati, Agenzie. They act as a buffer between you and officialdom, and register your business with the tax registrar’s office
(ufficio registro), registrar of enterprises(registro delle imprese), the registrar of companies at the local chamber of commerce(ufficio delle ditte), local tax office(intendenza di finanza) and obtain a value added tax (imposta sul valore aggiunto/IVA) number from your local vat office (azienda delle entrate). A notary (notiao) can also do this, but is much more expensive. If you’re a professional, you may need to take a routine examination before you can be included on the professional register (albo professionale) with the chamber of commerce. There are also business consultants and relocation agencies in many areas that provide invaluable local assistance. International accountants such as PricewaterhouseCoopers and Ernst & Young have offices throughout Italy, and are an invaluable source of information (in English) on subjects such as forming a company, company law, taxation and social security. Many countries maintain chambers of commerce in Italy, which are also a good source of information and assistance.
Italian Trade Organisations
There are a number of Italian trade organisations, including the Istituto Nazionale per il Commercio Estero (ICE), Via Lizst, 21, 00144, Rome (06-59921, www.ice.it ), which is a public organisation (with over 30 offices in Italy and some 80 abroad) that promotes Italian trade throughout the world. Confcommercio, Confederazione Generale Italiana del Turismo dei Servizi e delle PMI, Piazza G G Belli 2, 00153 Rome (( 06-58661, www.confcommercio.it ) is another trade organisation specialising in certain industries, such as construction, computers (hardware and software), cosmetics, fashion, retailing, and import and export, which organises trade fairs and other promotional activities, and provides free financial and legal advice to its members.
Before undertaking any business transactions in Italy, it’s important to obtain legal advice to ensure that you’re operating within the law. There are severe penalties for anyone who ignores the regulations and legal requirements. It’s also important to obtain legal advice before establishing a limited company. Businesses must also register for value added tax. Non-EU nationals require a special licence to start a business in Italy and no commitments should be made until permission has been granted. Among the best sources of help and information are local chambers of commerce and town halls (municipio).
Generally speaking you shouldn’t consider running a business in Italy in a field in which you don’t have previous experience (excluding ‘businesses’ such as bed and breakfast, where experience isn’t really necessary). It’s often wise to work for someone else in the same line of business in order to gain experience, rather than jump in at the deep end. Always thoroughly investigate an existing or proposed business before investing any money. As any expert will tell you, Italy isn’t a country for amateur entrepreneurs, particularly amateurs who don’t speak fluent Italian! Many small businesses in Italy exist on a shoe-string and certainly aren’t what would be considered thriving enterprises. As in many countries, most people are self-employed for the lifestyle and freedom it affords (no clocks or bosses!), rather than the financial rewards. It’s important to keep your plans small and manageable, and stay well within your budget, rather than undertaking some grandiose scheme.
Avoiding The Crooks
In addition to problems with the Italian authorities, you may also come into contact with assorted crooks and swindlers who will try to relieve you of your money. You should have a healthy suspicion regarding the motives of anyone you do business with in Italy, particularly your fellow countrymen. It’s also generally best to avoid partnerships, as they rarely work and can be a disaster. In general, you should trust nobody and shouldn’t sign anything or pay any money before having a contract checked by a lawyer. It’s a sad fact of life that foreigners who prey on their fellow countrymen are commonplace in Italy. In most cases you’re better off dealing with a long-established Italian company with roots in the local community (and therefore a good reputation to protect), rather than your compatriots. If things go wrong, you may be unprotected by Italian law, the wheels of which grind extremely slowly – when they haven’t fallen off completely!
Buying An Existing Business
It’s much easier to buy an existing business in Italy than to start a new one and it’s also less of a risk. The paperwork for taking over an existing business is also simpler, although still complex. Buying a business that’s a going concern is difficult as Italians aren’t in a habit of buying and selling businesses, which are usually passed down from generation to generation. If you plan to buy a business, obtain an independent valuation (or two) and employ an accountant (commercialista) to audit the books. Never sign anything that you don’t understand 110 per cent, and even if you think you understand it, you should still obtain unbiased professional advice, e.g. from local experts such as banks and accountants, before buying a business. In fact, it’s best not to start a business until you have the infrastructure established, including an accountant, lawyer and banking facilities. There are various ways to set up a small business and it’s essential to obtain professional advice regarding the best method of establishing and registering a business in Italy, which can dramatically affect your tax position. It’s also important to employ an accountant to do your books.
Starting A New Business
Most people are far too optimistic about the prospects for a new business in Italy and overestimate income levels (it often takes years to make a profit). Be realistic or even pessimistic when estimating your income and overestimate the costs and underestimate the revenue (then reduce it by 50 per cent!). While hoping for the best, you should plan for the worst and have sufficient funds to last until you’re established (under-funding is the major cause of business failures). New projects are rarely, if ever, completed within budget and you need to ensure that you have sufficient working capital and can survive until a business takes off. Italian banks are extremely wary of lending to new businesses, particularly businesses run by foreigners, and it’s almost impossible for foreigners to obtain finance in Italy. If you wish to borrow money to buy property or for a business venture in Italy, you should carefully consider where and in what currency to raise the finance.
Choosing the location for a business is even more important than the location for a home. Depending on the type of business, you may need access to motorways (autostrade) and rail links, or to be located in a popular tourist area or near local attractions. Local plans regarding communications, industry and major building developments, e.g. housing complexes and new shopping centres, may also be important. Plans regarding new motorways and rail links are normally available from local town halls.
Hiring employees shouldn’t be undertaken lightly in Italy and must be taken into account before starting a business. You must enter into a contract under Italian labour law and employees enjoy extensive rights. If you buy an existing business, you may be required to take on existing (possibly inefficient) staff who cannot be dismissed, or be faced with paying high redundancy compensation. It’s very expensive to hire employees, because, in addition to salaries, you must pay an additional amount of around 50 per cent in social security contributions, 13 and possibly 14 months’ salary, five or six weeks paid annual holiday, plus pay for public holidays, sickness, maternity, etc.
Type Of Business
The most common businesses operated by foreigners in Italy include holiday accommodation, caravan and camping sites, building and allied trades (particularly restoring old houses in Tuscany and Umbria), farming, catering, hotels, shops, franchises, estate agencies, translation and interpreting bureaux, language and foreign schools, landscape gardening, and holiday and sports centres. The majority of businesses established by foreigners are linked to the leisure and catering industries, followed by property investment and development. Many professionals such as doctors and dentists have also set up practices in Italy to serve the expatriate community. There are also opportunities in import and export, e.g. importing foreign foods (e.g. health foods) for the Italian and expatriate market, and exporting Italian goods such as handicrafts and fashion. You can also find niche markets in providing services for expatriates and Italians that are unavailable in Italy.
Companies cannot be purchased ‘off the shelf’ in Italy and it usually takes a number of months to establish one. Incorporating a company in Italy takes longer and is more expensive and more complicated than in many other European countries. There are many different kinds of ‘limited companies’ or business entities in Italy and choosing the right one is important. The most common kinds of companies in Italy are a società a responsibilità limitata (Srl) and a società per azioni (SpA), with a minimum share capitalisation of €10,000 and €100,000 respectively. Always obtain professional legal advice regarding the advantages and disadvantages of different limited companies.
Grants & Incentives
Many different grants and incentives are available for new businesses in Italy, particularly in rural areas and the south of the country (the Mezzogiorno). Grants include EU subsidies, central government grants, regional development grants, redeployment grants, and grants from provincial authorities and local communities. Grants may include assistance to buy buildings and equipment (or the provision of low-cost business premises), research and technological assistance, subsidies for job creation, low-interest loans and tax incentives (ten years for new companies established in the Mezzogiorno). Contact Italian chambers of commerce and embassies for information (see Appendix A). Information about chambers of commerce in Italy and a list of offices is provided on the Internet (www.camcom.it ).
Whatever people may tell you, working for yourself isn’t easy and requires a lot of hard work (self-employed people generally work much longer hours than employees), a sizeable investment and sufficient operating funds (most new businesses fail due to a lack of capital), good organisation (e.g. bookkeeping and planning), excellent customer relations, and a measure of luck – although generally the harder you work, the more ‘luck’ you have. Don’t be seduced by the apparent laid-back way of life in Italy – if you want to be a success in business you cannot play at it. Bear in mind that some two-thirds of all new businesses fail within three to five years and that the self-employed enjoy far fewer social security benefits than employees.
This excerpt has been republished with permission from Survival Books. Some of the information may apply to EU citizens only. If you would like to get the inside track on moving to Italy, pick up your copy of this great book by clicking here.