Not having legal personality status in Italy, no notarial deed is required for the establishment of a representative office, and therefore there is no need for a minimum initial share capital.
However, it is necessary to request a tax code to the competent office of the Revenue Agency, and to register in the Business Register of the local Chamber of Commerce. The parent company must identify an address in Italy and appoint a key agent of the representative office. The agent can also be a person who is not resident in Italy, but they must have an Italian Tax ID. The address of the representative office and its appointed representative are registered with the Register of Companies and with the Revenue Agency.
➤ Taxation matters
The representative office cannot conduct commercial or production activities; it represents a mere cost center for the foreign company. This means that it does not produce any income in Italy, and, as a result, is not subject to any taxation in the country. Likewise, it is VAT exempt. Its expenses can be deducted by the foreign parent company.
The representative office is not required to keep the company books, nor to prepare and file its financial statements and tax and VAT returns.
➤ Social Security and Welfare matters
The representative office cannot conduct commercial or production activities; it represents a mere cost center for the foreign company. This means that it does
In terms of social security matters, the general principle of territoriality applies, namely, the principle according to which a worker is subject to the social security system of the country in which they perform their work activities (lex loci laboris principle).
In short, the social security contributions for employees who carry out their business in Italy must be paid in Italy. To this end, the company must provide for the appointment of a representative for social security purposes, by means of a power of attorney conferred by public deed. The document effectively gives a specific mandate to a person who resides in Italy, so that they can act in the name and on behalf of the foreign company, fulfilling all employment-related social security and insurance requirements. The social security representative and the foreign company are jointly and severally bound to fulfill their obligations, which must be made explicit in the public appointment deed.
The social security representative, in the name and on behalf of the foreign company, must:
- request from the Revenue Agency in Italy the Tax ID of the company as a non-resident subject, unless it was previously issued;
- establish an INAIL record (attaching a copy of the Special Power of Attorney) at the competent local INAIL office. The relevant record must be established prior to the start of work activities and entails the submission of complete personal data and the Tax IDs of the employed staff;
- establish the INPS social security record in the name of the foreign company (attaching a copy of the Special Power of Attorney) at the competent local INPS office and, if applicable, enroll the foreign company in the additional supplementary assistance and pension funds;
- pay the contributions and premiums to the various social security and welfare systems within the due deadlines;
- fulfill the requirements: keep the Single Labor Book, pay contributions when due via the so-called “shadow payroll”, prepare and submit the consolidated certification (Form CU), and submit the relevant communication to the Employment Office.
The representative office, as already discussed above, does not have tax payer status and, for this reason, any employee of the foreign company who performs their activity in Italy and resides in Italy for more than 183 days a year must, on their own, file their tax returns and pay any tax amount due; however, pursuant to a recently introduced provision, the Revenue Agency now offers an alternative: the possibility for the foreign company to be considered a tax payer despite not having a permanent establishment in Italy. As a result, foreign companies can now essentially choose whether or not to have tax payer status in Italy.
The foregoing also applies if the foreign company has no registered office in Italy, no representative office, no permanent establishment and no subsidiary; an employee who telecommutes in Italy suffices to claim the required status.