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Branch vs. subsidiary in Italy

Updated on Thursday 14th April 2016

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branch_vs_subsidiary_in_italy.jpgItaly’s strong economy is attractive for many foreign investors. Entrepreneurs who wish to set up a company in Italy or to expand their activities in this historically rich country have a number of options regarding the types of companies that can be legally incorporated.

An available business option in Italy is the incorporation of a branch or a subsidiary. The two forms of business entities are essentially extensions of a parent company in another country, but there are certain differences that need to be taken into consideration before deciding which type of company best suits specific business needs.

Branches in Italy

A foreign company can choose to set up a branch in Italy. Because the branch is not considered a separate legal entity, the head office is responsible for the obligations and financial situation of the branch. This particularity can prove to be a disadvantage of the branch in the event of financial difficulties.

In order to register a branch in Italy, the parent company must provide certified copies of the certificates of incorporation, the resolution to establish the branch and bylaws. The documents must be apostilled.

There is no minimum statutory capital requirement for a branch. The branch must provide its own documents regarding the annual financial statements.

Subsidiaries in Italy

Although there are no taxation differences for branches and subsidiaries in Italy, many foreign companies prefer to set up a subsidiary. This means that the parent company creates a new Italian company that will be owned by the parent company.

Unlike in the case of the branch, the parent company only answers with its assets for the obligations of the subsidiary. In the event of bankruptcy, the shareholders will only lose their share capital and the parent company will not be affected by the subsidiary. This is one particularity of the subsidiary that makes many investors choose this type of business entity.

Many subsidiaries in Italy are organized in the form of a limited liability company or a joint stock company (for large and medium-sized companies). The minimum share capital is larger for a joint stock company than it is for a limited liability company and there are other differences regarding the incorporation of the two types of companies.

Foreign investors need to consider what type of business entity best suits their needs. Contact us for more information.
 

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