The foreign company may decide to establish its own secondary office, or branch, in Italy. A branch constitutes a territorial extension of the parent company, without being a legally independent subject thereof, both at the decision-making and at the organizational level. A branch allows entering into trade agreements and, for all intents and purposes, conducting regular business and production activities, as well as delivering services, in the interest and in the name of the foreign parent company. The distinguishing elements of a secondary office are a stable physical establishment and representation in Italy.


To establish the secondary office in Italy, the foreign company must solicit the support of a Notary, who draws up a report attesting to the filing of the Memorandum of Association relating to the branch of the foreign company. The Notary also files the report with the Register of Companies of the competent Chamber of Commerce, which must include the physical address of the secondary office and data of the appointed Manager (or representative of the foreign company in Italy), and all powers conferred upon them. The Manager can also be a person residing abroad, as long as they have an Italian ax ID. The branch must also be registered with the competent Revenue Agency, which will issue the branch’s Tax ID and VAT number.

Taxation matters

As it pertains to taxation matters, the branch is akin to a “Permanent Establishment”, with the consequence of being fiscally liable both with regard to income taxes and to the application of VAT.

Consequently, the branch is subject to income tax in Italy, as well as in the country of the parent company. Double taxation is obviated by the application of specific agreements, which Italy has entered into with many foreign countries[1].

The secondary office, and, in general, the “Permanent Establishment”, is required to meet all the accounting and statutory obligations with which an Italian company is expected to comply (first and foremost, bookkeeping), as well as taxation requirements regarding VAT and income taxes (settlements and payment of VAT, periodic communications, annual tax returns, IRAP and VAT filings, payment of any taxes due, etc.).

The secondary office prepares its own financial statements solely for tax purposes, since they serve as the basis to assess income taxes, pursuant to Italian tax legislation.

On an annual basis, the branch must also submit a copy of the financial statements of the parent company to the competent Companies Register.

The accounting practice of transfer pricing, namely the price at which intra-group parties transact with each other, is applied to the relations between the permanent establishment and the parent company. We will discuss this topic more in detail below.

Social Security and Welfare matters

In the event that the foreign company operates in Italy through a secondary office, which, as we have seen, is a “permanent establishment”, the branch is required to register at the competent social security and welfare institutions, as well as to fill in and manage the mandatory register and pay all due social security contributions and tax withholdings, pursuant to Art. 23 of Presidential Decree no. 600/1973, which includes the permanent establishment among the subjects holding the title of withholding agent. It will also be required to issue a CU (consolidated certification) form and submit withheld tax returns, Form 770.