Accounting and tax in Italy
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Every Italian company is required by law to maintain accounting records sufficient to identify all financial transactions carried out by the company. In addition, every Italian company must file company accounts at the Registrar of Companies (Registro delle Imprese) not later than 4 months after the company’s accounting year end.
While the full company accounts required by company law have to prepared by the director(s) of the company and approved by the members in a general meeting, a company which qualifies as a small or medium sized company (as defined by Article 2435-bis of the Italian Civil Code) may file a shorter set of ‘abbreviated’ accounts at the Registrar od Company (Registro delle Imprese), thereby limiting the amount of information held at the public registry.
A company automatically qualify to file abbreviated accounts unless it exceeds for two accounting years consequently, at least two of the following thresholds:
- Net assets exceeding: € 4,400,000.00
- Turnover exceeding: € 8,800,000.00
- At least 50 employees
The accounts must be accompanied by a Director’s Report (nota integrativa), which is a statement by the director(s), explaining that figures indicated in the accounts and, if the company is audited, by a report prepared by the auditors.
Italian private limited companies (società a responsabilità limitata), which do not qualify to file the abbreviated account or are subject to file consolidated accounts or are part of a group that exceeds the limit shall appoint an internal auditor. Italian public limited companies (società per azioni) regardless of whether their stock are listed in a stock exchange shall appoint an internal board of auditors composed of al least 3 member one of which must be a registered in the Italian Register of Auditors.
In addition, companies that are required to file consolidated accounts shall also appoint an external auditor.
Auditing is required for:
- Joint Stock Limited companies (S.p.A.); and
- Private limited companies (S.r.l.) with exceeding two of the following limits in 2 consecutive years (a)) total assets of: EUR 2 million; (b) sales and services revenues of: EUR 2 million; or (c) average number of employees during the year: 10, or should the S.r.l. control a company subject to statutory audit;
- All companies drawing up consolidated financial statements;
- Listed companies;
- Banks, stock broking companies, fund management companies, regulated financial institutions.
The audit of the financial statements (“revisione legale dei conti”) shall be performed in accordance to the Italian Law (Art. 2409 bis of the Italian Civil Code) and the auditing standards issued by the Italian Institute of Chartered Accountant (CNDCEC, Consiglio Nazionale dei Dottori Commercialisti ed Esperti Contabili) which equate with the International Standards on Auditing (ISAs) issued by the International Federation of Accountants (IFAC).
In addition, before being applicable, the Italian auditing standards need to be approved by the Italian Stock Exchange Authority, CONSOB (Commissione Nazionale per le Società e la Borsa).
In Italy, an audit can be performed by the Board of Statutory Auditors (“Collegio Sindacale”) that may be in charge of both supervision of compliance with the law and the Articles of Association and with the statutory audit of the financial statements.
However, the two tasks can be also split and assigned to two different bodies: the supervision can be given to the Collegio Sindacale and the audit of the financial statements (including the quarterly checks on the accounts) can be given to an audit firm or an auditor.
The separation of these two tasks is compulsory for listed companies and companies required to prepare consolidated financial statements.
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