Brexit – How to set up your British company in Italy and keep your hand in the EU.

Angela Marino and Gianluigi Cassandra – Lawyers

The UK / EU deal to overcome the Brexit impasse has ensured secure tariff-free and quota-free trading between the two blocs.

Under the agreement, however, food and goods imported into the UK from third countries and then shipped to the EU will be subject to new charges. The agreement also introduces new customs controls and bureaucratic practices to be carried out at the border.

For these reasons, British companies exporting to the European Union have been encouraged by the UK government’s business consultants to set up autonomous companies, or branches, inside the EU to circumvent additional costs, documents and taxes resulting from Brexit.

In particular, as the “Observer” noted, the Department of International Trade (DIT) advised small businesses in the UK that the best way to get around border and VAT problems that have accumulated since January 1 is to register new businesses within the EU single market, from where they can distribute their goods much more freely.   

Italy, due to its geographical location and its low costs, is one of the most sought after destinations by British entrepreneurs to open their branches in the European Union and therefore remain connected to the “original“ free market.

There are several solutions offered by the Italian legal system to develop a commercial network in its territory:

1) Opening of a secondary office (Branch) with permanent representation;

2) Opening of a representative office;

3) Establishment of a company (corporation).

Secondary office.

The definition of secondary office (branch) is contained in the art. 2508 of the Italian Civil Code, entitled “foreign companies with secondary offices in the territory of the State”.

According to the constant interpretation of the jurisprudence of the Italian Supreme Court, the branch of a foreign company is constituted by an organized body, organically connected with the foreign headquarters and to which a legal entity invested with the permanent representation of the company in Italy has been appointed. 

The law requires that companies set up abroad with secondary offices in Italy are subject, for each office, to the provisions of the Italian law about the public access to the corporate documents; they must publish, according to the same provisions, the identifying data of the persons who permanently represent them in Italy, with the indication of the relative powers.

Representative office.

The representative office performs a purely auxiliary and preparatory activities for the company’s growth in the foreign market: it concentrates promotional and marketing activities, collection of information, scientific or market research, but not production or commercial activities. The representative office is not subject to the obligations envisaged for secondary offices, however it remains the obligation to advertise to the Register of Companies.

The Italian legislation does not contain an explicit definition of a representative office: It refers to the provisions of the Organization for Economic Co-operation and Development – OECD (also available on the website of the Ministry of Foreign Affairs) on the Convention against double taxation.

In brief, the representative office constitutes a “cost center” whose the manager has no managerial power and cannot to render binding decisions with third parties. This means that the representative office does not produce any income, and its costs are fully deductible for the main company.

Establishment of a corporation.

The third way for foreign entrepreneurs who intend to extend its business on the Italian market consists in setting up a corporation. 

In this case, at the outset, it is important to identify the company form most suited to the business.

 There are two main types of corporations that can be set up:  

Società per Azioni (S.p.A.). It is equivalent to a public limited liability company.  The minimum capital is € 50,000.00, and it is represented by shares. The S.p.A. is required to be audited. In this type of corporation we find also the S.a.p.a. (limited partnership limited by shares). It is a company in which two different groups of shareholders coexist: a) limited partners, who are excluded from the administration and are liable only for their contributions; b) general partners, who are administrators by law, are personally and without limitation liable (within the limits of their assets).

Societa’ a Responabilita’ Limitata (SRL). It represents the most widely used form, to which recent reforms have granted a series of concessions regarding the share capital (which, under certain conditions,  can be even 1 €), the organizational structure and the audit system. This is a more streamlined and less demanding form in economic terms and is the type of company most similar to a private limited liability company under the Law of England and Wales.

To deepen the themes covered in this article, do not hesitate to contact us, we will be happy to advise you about the company form that best suits your business.


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