Setting up a subsidiary in Italy

We support you in setting up a subsidiary in Italy and we help you define the objectives and the necessary conditions to launch it.

The necessary data to define are the following:

legal structure of the company
management
company’s purpose
place of business
capital stock

If you are interested in working with us, do not hesitate to contact us:
T: +39 0474 572900, e-mail: info@graber-partner.com

Content

Definition
The articles of corporation
Incorporation
Incorporation Costs
Liability
Management of the company
Corporation tax
Relationship between subsidiary and holding
IRAP
Intra-community commerce of goods and services
Opening a bank account
Conclusion

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Definition

A subsidiary company is a company that is owned or controlled by the holding, which is also called the parent company. However, the subsidiary company remains an independent and separate entity from the parent company. The subsidiary can be a corporation, and in most cases it is a limited liability company.

The articles of corporation

The articles of corporation must contain the following data:

The personal data of each stockholder
The corporate name containing the reference to the limited liability company
The municipality of the registered office of the company
The business that constitutes the company’s purpose
The amount of subscribed capital stock (not lower than €10,000) and the amount of paid-up capital stock
The stockholding of each stockholder
The corporate governance rules, indicating the management of and powers to represent the company
The person entrusted with the management of the company and the person, if any, entrusted with the statutory accounting audit

The holding company is typically the primary and sole holder of stocks belonging to the subsidiary company. As the sole stockholder, the holding company makes decisions such as the election and appointment of the board of directors in the subsidiary company.

Incorporation

The articles of corporation must be established by public deed and our tax department will draft them for your company and will arrange an appointment with the notary for certification.

Incorporation Costs

The costs of establishing a limited liability company are between €7,000 and €9,000.

Liability

In a subsidiary limited liability company only the holding company is liable for the corporate obligations through its capital stock.

Management of the company

The management of the company is entrusted to one or more stockholders. When the management of the company is entrusted to several persons, they form the Board of Directors. It is also advisable to appoint one or more corporate officers in charge of making the daily business decisions.

Corporation tax

The corporation is subject to the corporate tax IRES. 24 % of the taxable income form the tax liabilities.

Relationship between subsidiary and holding

To eliminate double taxation, the directive 96/2011 UE provides to determinate the taxes in such a way: The dividends distributed from the subsidiary to the holding company are exempt from taxation if certain conditions are present. One necessary condition is that the holdings capital includes a minimum holding of 20%. In the other cases, all taxes paid by the subsidiary can be deduced from the parent company’s tax obligation.

IRAP

In addition to the IRES tax, the companies have also to pay the IRAP, which is a regional tax. (In South Tyrol the rate is 2,98% calculated on the following tax base: income+ personnel expense + interests)

Intra-community commerce of goods and services

The accountant of the relationship between the subsidiary and the holding company is quite simple because they are two separate legal entities.

All operations between these companies have to be documented in an invoice and both companies have to communicate the inter-community sales and purchases. (in Italy the communication is called Intrastat)

When two companies are required to transact with each other, a transfer price is used to determine costs. The transfer price should not differ substantially from the market price to ensure fair competition.

Opening a bank account

To pay tax liabilities, every subsidiary needs a bank account in Italy.
To open an account in Italy, the bank requires the data of the “actual account owner”. This is the owner of the holding company.