With “local unit” o “light branch” we mean to present two solutions useful for companies that want to expand in the Italian market through more flexible structures:
- – representative office: characterized by not having a VAT number and thus being exempt from tax obligations, it is used for preparatory and auxiliary purposes.
- – Operational headquarters of an organization: characterized by having a VAT number and being able to carry out commercial activities.
Below are some characteristics and differences between a representative office and an operational headquarters  :
- – A representative office in Italy can only carry out promotional activities, information gathering, scientific market research, storage, exhibition or delivery of goods or merchandise, purchase of goods and services, excluding commercial activities such as production, sale, or service provision. It has only an auxiliary or preparatory function to facilitate the entry of the foreign company into the Italian market. The operational headquarters, on the other hand, can carry out the company’s commercial activities in Italy and conclude contracts.
- – From a tax perspective, an operational headquarters is classified as a permanent establishment and is therefore subject to tax and accounting obligations in Italy (corporate income tax, VAT, submission of the parent company’s financial statements to the Italian Business Register, prepared in accordance with the laws of the country of incorporation, correctly translated into Italian with a sworn translation, etc.). On the other hand, a representative office is not classified as a permanent establishment and is not subject to any accounting or tax obligations in Italy.
- – Both an operational headquarters and a representative office of a foreign company (a) require registration with the Italian Business Register, (b) can hire employees in Italy, and (c) can open an Italian bank account.
The operational headquarters allows the foreign company to have a stable physical presence in the Italian market, enabling a more direct and effective management of activities in the territory.
Functions of an operational headquarters: tax implications
It is important to note that operational headquarters are subject to corporate income tax based on the profits generated by the organization as a whole, while branches and subsidiaries are subject to local tax laws and regulations, including corporate income tax on profits generated in the country. Representative offices have limited tax obligations (often exempt from corporate income tax).
Steps to establish an operational headquarters in Italy
To establish an operational headquarters in Italy, the following steps are required:
- – appoint a representative whose name will be registered with the Italian Business Register (this can be the same director of the foreign company, and it is not necessary for them to be a resident of Italy)
- – obtain a tax code from the Italian Revenue Agency for both the representative and the company.
- – obtain an Italian VAT number.
- – provide a registered address in Italy (our office can provide the registered address service).
Required Documents and Information
Required Documents and Information
You will need to provide us with the following documents and information:
- – a detailed description of the company’s activity in the jurisdiction of origin on the company’s letterhead;
- – a certificate of incorporation (or similar document) of the company intending to establish an operational unit in Italy, including the company’s articles of association and a list of the names of its shareholders and directors;
- – a copy of a board resolution (or shareholder resolution, if applicable) authorizing the establishment of an operational unit in Italy and indicating the registered address of the Italian operational unit and the name of the representative.
All the above-mentioned documents must be translated into Italian, and the translation must be sworn by our office or a certified translator (please note that for documents in English, German, French, Spanish, or Russian, we can handle the translation internally, while for documents in any other language, we would rely on an external translation agency).
Expenses and timelines
The timeframe required for the establishment of an operational headquarters would be approximately 5 business days from the day we start the process. For details regarding expenses, please refer to our dedicated page.
Therefore, if you are interested in expanding your business and considering the option of an operational headquarters, it could be a strategic choice to consider.
Contact us for further information!