Starting business activity in Italy – incorporation of a company or constitution of a branch?
The main difference between a subsidiary and a branch consists in the limited liability of the former. However, in specific situations the constitution of a branch is compulsory (i.e. when the foreign company has to participate to Italian public contracts tenders. In this case, according to the EC rules governing Italian contracts, the contractor has to demonstrate its professional and technical skills acknowledging a specific turnover). Taxation occurs according to the same rules either for the subsidiary and the branch. However, a branch shall not deposit the annual financial statement at the local Enterprise Register. The income of the branch is determined according the general rule of O.C.S.E. treaties against double taxation that provides for that the permanent establishment is taxed only on the income directly or indirectly produced through the activities performed in the country of location. The constitution of a branch is much faster than incorporating a company, since it requi
