As a foreign company starting a business in Italy it is important to consider the Italian tax system, Italian tax rates and recent changes which may affect the amount of corporate Italian income tax that will have to be paid.
In the Italian legal system the following criteria will be important to the Italian tax authority in deciding whether your business will come under the Italian Tax system:
- place of legal seat
- place of management
- principle place of business
If one or more of the above are within Italy then the company will be subject to Italian tax not just on incomes within Italy but on its worldwide income and with this comes the added consideration of double taxation. For these reasons we can see why it is imperative to have the right Italian income tax system and accounts in place to avoid tax investigations by the Italian tax authorities, Giambrone Law can advise you on this.
Rules to establish tax residency for the purpose of Italian income tax are set out in Tax Code 73(3). In this the legal seat is the registered office as it appears registered with the Italian Register of Enterprises. However it has been known for Italian tax courts to refer the place of legal seat as where the actual seat of superior management is. This is usually where the main strategic, administration and direction of the company takes place. Ascertaining the above can involve in-depth tax investigations collecting information on all elements and factors of a business by the Italian tax authority which can be complex. As a result of this, besides clearly abusive cases, legal seat is usually taken as the registered office of the business, place of management is where the directors meet and do business and place of business as the home state of the business.