Starting a Business in Italy as a Foreigner – Part 1

Introduction

Starting a business in Italy as a foreign national is an accessible process, but it requires a solid understanding of the country’s legal, tax, and social security frameworks.

There are many opportunities, and the procedures vary depending on the nationality of the person wishing to pursue this path, the type of business they intend to start, and other equally important factors.

In this first article, we will focus on the main forms a business can take in Italy, and then delve deeper into tax, social security, and property systems.

Differences Between Italian, EU, and Non-EU Citizens

Italian citizens and those from European Union (EU) or European Economic Area (EEA) countries are treated equally in terms of freedom of enterprise.

EU or EEA citizens, in fact, benefit from the principle of freedom of establishment, enshrined in Articles 49 and 54 of the Treaty on the Functioning of the European Union (TFEU). This means they can establish a business, start a self-employed activity, or form a company in Italy under the same conditions as Italian citizens, without the need for special permits.

The situation is different for non-EU citizens, who must first obtain a residence permit for self-employment or entrepreneurial purposes. This permit is issued pursuant to the Consolidated Law on Immigration (Legislative Decree 286/1998) and its implementing regulation (Presidential Decree 394/1999). Specifically, to obtain it, one must demonstrate: the availability of adequate financial resources to start the business; compliance of the business with the requirements set forth by Italian law (licenses, authorizations, mandatory registrations); and the existence of suitable housing and health insurance coverage.

Once the permit is obtained, the non-EU citizen can proceed like any other entrepreneur or self-employed worker, whether Italian or from the EU.

Business or self-employment: two different models, but increasingly similar

The first substantial difference to consider is that between a business and self-employment, as it determines different legal, tax, and social security treatments.

A business, as defined by the Civil Code (Art. 2082), involves the organization of resources and personnel for the production or exchange of goods and services. It is therefore an externally organized activity where the owner’s intellectual contribution is secondary to other factors of production. Self-employment (Art. 2222 of the Civil Code), on the other hand, is an activity carried out primarily on a personal basis and without a relationship of subordination, as is the case with freelancers. Depending on the activity carried out and the complexity of organizing resources and personnel, one may fall into one category or the other.

The business must be registered with the relevant Business Registry and will subject the owner (or the partners in the case of a company) to the appropriate tax and social security system. The professional, on the other hand, may operate with an individual VAT number, and must simultaneously enroll in a specific professional pension fund (e.g., Inarcassa for engineers and architects, Cassa Forense for lawyers, etc.) or, if no dedicated fund exists, in the Separate Pension Scheme managed by INPS. They may also qualify, if they meet the requirements, for certain preferential tax regimes currently in effect.

In upcoming posts, we will delve deeper into social security systems for foreigners and tax structures for the first few years of business under both economic activity models, with practical examples and regulatory updates.