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The limited liability company or the SRL as it is commonly referred to is the preferred type of company in Italy. Investors who want to register a SRL in Italy need to observe the mandatory steps and follow the applicable company incorporation procedure. This type of company is more suited for small and medium-sized businesses and it is popular among investors because of its flexibility, the simple set up procedures and easy running. This corporation is a legal entity, meaning that its identity is separate from that of its founders and the shareholders are only liable to the extent of the assets invested in the share capital. The main traits of the SRL are as follows:
-Limited liability: the liability of the shareholders is limited only to the amount they have invested in the company;
-Low minimum share capital: at least one euro is needed to incorporate the SRL and the simplified SRL.
-Forms of management: this can be insured by a single managing director or a board of directors.
-Auditing: only in some cases for the SRL when the total assets, the sales, and services revenue or the average number of employees exceeds certain values/limits for a period of two consecutive years.
Types of Italian limited liability companies
There are three types of limited liability companies which can be registered in Italy in 2021:
- the private limited liability company (SRL);
- the simplified limited liability company (SRLS)
- the public limited liability company (SPA).
The SRL and the simplified SRL share many characteristics, however, there are a few key differences investors should be aware of: the simplified form cannot have a share capital of more than 10,000 euros and cannot be incorporated by another legal entity, only by an individual (for the SRL, the shareholders can be either other corporations or individuals). As far as the shared characteristics are concerned, both the SRL and the simplified SRL are the same in the following respects: they both need only one shareholder and one director who can be the same individual and need not be a resident, they must have a registered address in Italy and are incorporated via an incorporation need in front of a public notary.
The simplified company was introduced in Italy for the purpose of encouraging entrepreneurs, as the requirements for the share capital are lower: it can have a capital of at least one euro and a maximum of 9,999 euros. When the value of the capital is included in this limit, the contributions can only be made in kind. When the capital is higher than 10,000 euros, at least 25% of this amount must be paid when the articles of association are signed by the directors. All in-kind contributions need to be paid in full.
Those who want to open a SRL in Italy must keep in mind the following requirements imposed by the Company Law:
- the company is incorporated by at least one shareholder and one director;
- the company’s name must contain the abbreviation SRL or SRLS in the case of the simplified LLC;
- the minimum share capital required to open a SRL is 10,000 euros; however, there is also the possibility of setting up a SRL without a minimum share capital requirement provided other requisites are met;
- the limited liability company must have a registered office in Italy.
In the case of single-shareholders SRLs, the share capital is to be paid in full before the registration. Our company registration agents in Italy can give you more details about the capital obligations. Our local advisors can explain the requirements for setting up a SRL and can assist you in handling all of the registration phases.
Requirements for registering a SRL in Italy in 2021
Contributions can be made both in cash and in kind unless otherwise specified in the company's Articles of Association. The share capital must be made up the shares issued to each shareholder. Our company registration agents in Italy can give you further details about the rights and liabilities of shareholders. Here are other SRL requirements you should consider:
After preparing the statutory documents of the limited liability company, the shareholders have 20 days to file them with the Companies Registrar. Companies must also be registered at the local Revenue Agency and, depending on the business scope, will need to register for VAT.
Business owners who operate in certain sectors will need to obtain special permits and licenses to run their businesses. Our agents can help you apply for these permits and fulfil any other requirements for performing specific business operations in Italy.
The Italian Business Register, with which all companies are required to register with, is under the management of the Chamber of Commerce. Investors can perform a business check by searching the online portal and accessing the public information on a SRL.
SRL management in Italy
A company director is the one who has the duty to manage the company accordingly, perform any and all necessary business transactions and make sure that the company meets its business goals.
The appointment or revoking of company directors takes place during a shareholder’s meeting. Any other important decisions regarding the company (such as amendments to the statutes or capital increases and decreases) are taken only by the company shareholders during their meetings. Shareholders have administrative and economic rights based on their shares in the company. However, special rights for management and the distribution of profits can be granted to shareholders in the articles of association.
SRL taxation in Italy
The corporate income tax, the value added tax and the regional tax on productive activities are the main types of taxes imposed in Italy. The corporate tax, or IRES, has a value of 24% to which the regional tax on productive activities, the IRAP, applies. In general, this tax has a value of 3.9% and it is collected by the Italian Region in which the company engages in business activities. The IRAP applies to companies that produce goods or offer services, both in case of resident and non-resident commercial companies. However, in case of non-resident companies, the IRAP will apply only if the permanent establishment has been conducting business activities for at least three months in a certain Region.
The value added tax applies to the provision of gods and services, with some operations being tax exempt. The standard VAT rate is 22%, with reduced rates of 10%, 5%, 4% and 0% (for the export of goods, the provision of international services related to international trade, the transfer of goods to other EU states and the provision of certain services related to the transfer of goods within the EU). The current value-added tax rate can be subject to a modification included in the 2018 Budget Law. One of our agents who specialize in company formation in Italy can give you updated information about the changed ordinary and reduced VAT rates.
Apart from the main taxes mentioned above, Italy also imposes a set of municipal taxes:
-the property tax: applied on a municipal level for the ownership of buildings, buildable areas as well as agricultural lands;
-stamp duty: levied on certain types of legal and banking transactions, with varying rates.
-social security: mandatory for the employer, the value varies according to the type of job.
Investors who want to open a company in Italy in 2021 and need updated information about the applicable taxes, as well as the registration requirements, can reach out to one of our agents. We can provide complete details about the requirements set forth by the Ministry of Finance.
We invite you to watch a short video about opening a limited liability company in Italy:
Accounting for companies in Italy
A SRL in Italy needs to observe the accounting principles in Italy and observe the requirements for preparing and submitting annual accounting and financial records. A general ledger, an inventory book, and other documents are the accounting books that must be kept by an Italian company.
The annual financial statements required by law for an Italian company include the balance sheet, the profit and loss account, and notes to the financial statements. The company’s assets and liabilities must be accounted for in these documents and they must reflect the true financial status of the company. Directors’ reports might also be needed, although SRLs in Italy are allowed to draw up abridged financial statements.
In some cases, a limited liability company in Italy needs to appoint a board of statutory auditors. A company in Italy must submit the annual corporate income tax returns within nine months after the end of the financial year. This can also be done electronically. The corporate income tax in Italy is paid in two installments and different rules apply for companies whose financial year does not correspond with the calendar year. In general, the first installment consists of 40% of the total amount of corporate income tax due for the previous year, with the second installment paying the remaining 60%. The first part is due by the end of the sixth month the following year and the second part is due by the end of the eleventh month the next year.
The audit is required in case of a SRL when two of the following thresholds are exceeded for 2 consecutive years:
-total assets of 4,400,000 euros;
-revenue from sales and services of 8,800,000 euros;
-average yearly number of employees: 50
-the SRL in question controls another company that is subject to statutory audit.
It is recommended that investors choose to work with a team of tax and accounting experts in order to avoid any unwanted penalties. Companies that fail to pay or fail to file the annual tax returns are subject to penalties.