Setting up a branch or a representative office in Italy: a guide for foreign companies

Are you planning to set up a branch or a representative office in Italy? If so, this will require the fulfilment of certain legal, tax and social security requirements. In this article we will examine the main characteristics of both concepts, list the necessary procedures for their establishment and answer your questions.


1. Setting up a representative office in Italy

The simplest way for a foreign company to operate in Italy is to open a representative office. This office performs purely promotional functions, mainly in the form of preparatory activities for the subsequent opening in Italy of a branch or subsidiary of the foreign parent company, or advertising activities, information gathering and market analysis, customer and supplier research, support in strategic decisions by the foreign parent company and similar activities. 

The representative office is devoid of any organisational and decision-making autonomy and may not carry out production-related or commercial activities on behalf of the foreign company, nor can it legally represent the latter vis-à-vis third parties in Italy, thus limiting itself to an auxiliary or preparatory role for the foreign company to enter the Italian market. Exceeding these limits may result in its possible configuration as a “Permanent Business Establishment” (so-called Stabile Organizzazione in Italy) of the foreign company.

1.2 Setting up a representative office in Italy 

The establishment of a representative office in Italy does not require a notarial deed or any minimum share capital. Instead, the prerequisites are the application for the assignment of a tax code to be filed with the Inland Revenue Agency and the enrolment in the Companies Register of the local Chamber of Commerce. 

The foreign company (parent company) shall identify an address in Italy and appoint a representative for the office itself (the function may also be conferred on a person not resident in Italy, provided he or she has an Italian tax code). This information shall then be registered at the Companies' Register and at the Revenue Agency. 

1.3 Fiscal aspects of a representative office

Since the representative office cannot carry out commercial or production activities, being therefore a mere cost centre, the same does not generate any income in our country. Thus, it is not subject to any taxation in Italy, nor is it a taxable entity for VAT purposes 

Additionally, there is no obligation to keep company books, or to prepare and publish financial statements and file income tax or VAT returns.

1.4  Social security and administrative aspects of a representative office

In terms of social security, the employee must be subject to the social security system of the territory in which he/she works. Therefore, social security contributions for employees working in Italy must be paid to the National Institute for Social Security (INPS).

To this end, the foreign company will have to grant a power of attorney (with a public deed) for the appointment of a representative person for the purposes of social security. This person must be resident in Italy and will act in the name and on behalf of the foreign company, fulfilling the social security and insurance obligations associated with the employment activity.

The social security representative, who is jointly and severally bound with the foreign company (this obligation must be stated in the public deed of appointment), shall:

  • proceed with the opening of the INAIL position at the competent local office, communicating (prior to the commencement of the work activity) the complete personal data and tax code of the personnel employed;
  • proceed with the opening of the INPS social security position on behalf of the foreign company (attaching a copy of the special power of attorney) at the competent local office and, if applicable, enrol the foreign company in the additional assistance and social security funds;
  • proceed with the payment of contributions and premiums to the various social security and welfare managements within the due dates;
  • carry out all the required procedures: registration of the employment relationship with the Employment Centre (Centro per l'Impiego), keeping of the Single Labour Book (Libro Unico del Lavoro), payment of contributions within the due dates by means of the so-called shadow payroll, drafting and submission of the so-called Unique Certification (CU certification of income), forwarding of communications to the Employment Centre.

As previously pointed out, the representative office is not a withholding entity. The employee of the foreign company who carries out his/her activities in Italy and resides there for more than 183 days a year must therefore submit his/her income tax return and pay his/her taxes autonomously. However, the Italian Revenue Agency has recently indicated the possibility for the foreign company to act (at its own choice) as withholding agent despite not having a permanent establishment in Italy. 

The above also applies if the foreign company with no registered office in Italy - i.e. no representative office, no permanent establishment and no subsidiary - simply has a smart-working employee based in Italy.

2. Setting up a branch (a non-mere representative office) in Italy

A branch is a territorial extension of the parent company without, however, being a legally independent entity at either a decision-making or organisational level. It does not merely perform representation functions and, therefore, enables business to be conducted and actual commercial, production or service provision activities to be conducted in the interest and on behalf of the foreign parent company. 

2.1 The establishment of a branch and the need for a notary public

In order to set up a branch in Italy, the foreign company must avail itself of the services of a Notary Public, who shall draw up the deed of establishment of the foreign company's branch in Italy as well as submit it to the Companies Register of the competent Chamber of Commerce, where the address of the branch must also be entered along with the data of the specially appointed attorney-in-fact (i.e. the representative of the foreign company in Italy), specifying the powers vested in the same. 

The branch must also be registered with the territorially competent Revenue Agency for the assignment of a tax code and VAT number. 

2.2 Fiscal aspects of the branch

Being a non-mere representative office, the branch is considered a "Permanent Establishment".  As such, it is subject to both income tax and VAT. Furthermore, the branch is subject to income tax in Italy, as well as in the parent company's country. 

The branch, and more generally the "Permanent Establishment", is required to fulfil all accounting and statutory obligations to which an Italian company is subject (bookkeeping) as well as tax obligations regarding VAT and income tax (VAT settlements and payment, periodic communications, annual income, IRAP and VAT declarations, consequent payment of the relevant taxes, etc.). The branch draws up its own financial statements solely for tax purposes.

2.3 Social security, welfare and administrative aspects of the branch

The branch requires the opening of an insurance position with the competent social security and welfare bodies, the registration of workers with the competent employment centre, the filing and keeping of the Single Labour Book and the application and payment of social security and tax withholdings. It will also be required to issue the Unique Certification (CU certification of income) and submit the so-called 770 Model, namely an annual report through which companies must report to the Revenue Agency the data on the withholding tax in each taxable period.

3. Foreign company operating without a permanent establishment or representative office

Should the foreign company decide to hire the employee abroad and have him/her work in Italy without there being a permanent establishment or representative office, the social security burden is fulfilled by the company in the country where the employment contract was drafted, while from the fiscal standpoint the hired worker will only be required to fulfil tax obligations by filing a tax return. 

The possibility for the foreign company to have the employee work in Italy under a foreign contract has been established by the Revenue Agency in Circular 33/E/2020, ruling that the non-resident foreign operator with no permanent establishment in our country does not have the status of withholding agent.

For social security purposes, the foreign company shall appoint a social security representative for the fulfilment of social security and welfare obligations in its name and on its behalf in a manner comparable to that of a representative office.

4. Overview: characteristics and obligations



Representative office


Possibility of hiring staff in Italy

It may hire personnel for promotional activities and/or market analysis.

It may hire personnel for commercial and/or production activities.

Need for Notary Public and Share Capital

Notary Public or Share Capital not required.

Notary Public or Share Capital required.

Need for tax code and VAT number

A tax code is required for both the company and the legal representative.

VAT number not required.

A tax code is required for both the company and the legal representative.

VAT number required

Appointment of a welfare representative



Economic and Administrative Index (REA)



Fiscal Aspects

No obligations

Subject to both direct and indirect taxation.

Accounting Aspects


Ordinary accounting/bookkeeping

Labour, social security and payroll obligations

1)     Employment letter

2)     INAIL

3)     INPS

4)     Employment Centre

5)     Payroll processing

6)     Unique Certification (CU)

7)     770 Model

1)     Employment letter

2)     INAIL

3)     INPS

4)     Employment Centre

5)     Payroll processing

6)     Unique Certification (CU)

7)     770 Model


These are just some of the questions answered in this article. If you are planning to open a branch or representative office in Italy or simply to hire employees in Italy, it is important to look more closely at the specific requirements and regulations.

Would you like to know more about various steps involved in opening a branch or representative office in Italy? Feel free to contact us, we will gladly offer our support.

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