This blog post is intended to provide a high level overview of the types of business structures available to investors in a business to be carried on in Italy. This blog post applies to the situation where the investors are individuals – separate and different considerations will apply where the investor is a corporate body.
It should be remembered that in considering the structure to be used, capital required to fund operations can in some cases be injected in the form of a loan to the entity. Separate tax considerations to the lending flows. Providing start-up capital can in certain circumstances optimize tax flows, albeit in the context of limits on the tax deduction of interest and anti tax avoidance rules.
The costs (in terms of professional fees, notary, attorney and accountancy/tax compliance) of setting up and annual maintenance of some of the entities covered below can be expensive compared to the overhead cost in “Anglo Saxon” countries, and those costs may in themselves be an element in the choice of business vehicle.
VAT (value added tax) consequences also need to be considered especially in the contact of real estate and export ventures.
Some standard choices of business structures
Below you can find some (but certainly not all) of the usual business structures utilised for a business in Italy beyond simply setting up as a sole proprietor. Click on the drop down arrow in each case for more information.
Note that in the Italian language the “Società” is used both to describe partnership type structures (società di persone) and corporate entitles (società di capitale).
Legal Form: Partnership (società di persone)
Liability: All partners have unlimited and joint liability for the company’s obligations.
Management: Typically managed directly by the partners.
Taxation: Transparent—profits are taxed in the hands of the partners, not at the entity level.
Use Case: Suitable for small businesses with high trust between partners and low risk exposure.
Think of it as a tightly-knit business where everyone shares responsibility and risk.
Legal Form: Partnership (società di persone)
Liability:
General partners (accomandatari): Unlimited liability and management authority.
Limited partners (accomandanti): Liability limited to their investment; no management role.
Taxation: Transparent for general partners; limited partners may be taxed only on distributions depending on structure.
Use Case: Ideal when some investors want to contribute capital without being involved in daily operations or exposed to full liability.
A hybrid model—some partners steer the ship, others just fund the voyage.
Legal Form: Corporation (società di capitali)
Liability: Shareholders’ liability is limited to their capital contribution.
Management: Managed by directors or a board;
Corporate Governance: more formal governance. NB Italy’s minimum capital requirements – possible obligation for shareholders to to inject further capital, in case of losses
Taxation: Opaque—profits taxed at the corporate level (IRES (24% of tax profits) and IRAP 3.9% (generally) of gross margin, then again when distributed as dividends.
Use Case: Best for medium to large ventures, or where liability protection and formal structure are important.
This is Italy’s go-to structure for scalable businesses with multiple investors.
Legal Form: Corporation with branch registered as Italian Business Registry (Camera di Commercio)
Liability: Shareholders’ liability is limited according to the foreign jurisdiction rules
Management: Managed primarily by a director or a board of directors at foreign company level who delegate day to day operational powers to authorised representatives or representatives at the Italian level (who take on most of the liabilities and obligations of a director of an Italian Srl);
Corporate Governance: less formal governance at the Italian level after set up.
Taxation: Opaque—profits taxed at the branch (IRES and IRAP), but not on repatriation distributed as dividends.
Use Case: Best for small or medium sized ventures (although the structure is also used by larger multinational coporations. Can create tension between the “tax fiction” that the branch is treated for tax purposes as if it were a legal entity separate from the head office company, and the fact that the branch does not have legal personality from the head office company
Offers foreign investors the possibility of more familiar business structure and possibility of repatriating profits without Italian withholding tax.
It is not a company, but a contract under Articles 2549–2554 of the Italian Civil Code.
One party (the associante) runs the business or project.
The other (the associato) contributes capital, work, or assets in exchange for a share of profits (and possibly losses).
No registration with the Companies Register is required.
The associato has no liability to third parties and no management powers, though they may have audit rights.
It is often used for short-term ventures, silent partnerships, or project-based collaborations.
Legal Form: Partnership (società di persone)
Liability: All partners have unlimited liability, though the structure allows flexibility in internal arrangements.
Management: Managed directly by the partners, with minimal formalities and no requirement for corporate governance structures.
Taxation: Transparent—profits are taxed in the hands of the partners, not at the entity level.
Use Case: Commonly used for agricultural ventures, family-owned farms, and holding agricultural property. Also favored for succession planning and asset preservation.
Think of it as a quietly powerful tool—simple on the surface, but highly effective for managing rural assets and long-term family interests without corporate complexity and reduced reprting requirements.
Summary of main entities
The table below is intended to provide a high level summary of the tax treatment of taxation flows across the different entities.
Note that we cannot and do not offer advice in respect of non Italian taxes. Our mention of possible U.S. and UK tax scenarios, which anyway will depend on the individual position of the investor, should be seen simply as placeholder for further advice and confirmation from qualified licensed professionals or the relevant tax agency.
| Feature | SNC Società in nome collettivo |
SAS Società in accomandita semplice |
SRL Società a responsabilità limitata |
Associazione in partecipazione | Filiale / Sede Secondaria (Italian Branch) |
|---|---|---|---|---|---|
| Legal Form | Partnership | Limited Partnership | Corporation | Contractual Arrangement | Permanent Establishment |
| Separate Legal Entity | No | No | Yes | No | No |
| Liability | Unlimited (all partners) | Unlimited (general partners); limited (others) | Limited to capital contribution | Associante liable; associato not liable | Parent company liable |
| Management | All partners | General partners only | Directors or board | Associante manages; associato may audit | Managed by appointed representative |
| Italian Tax Treatment | Transparent | Transparent (general partners); limited partners taxed on distributions | Corporate tax on profits; shareholders taxed on dividends | Transparent | Corporate tax on branch profits |
| U.S. Tax Treatment | Partnership (transparent) | Partnership (transparent) | Corporation (opaque) unless elected otherwise | Partnership (transparent) | Branch income taxable as foreign source |
| UK Tax Treatment | Taxed on arising basis | Taxed on arising basis | Taxed on distributions | Taxed on arising basis | Taxed on arising basis |
| Governance Formality | Low | Moderate | High | Low | Moderate |
| Use Case | Small ventures with active partners | Passive investment with active management | Scalable businesses with liability protection | Temporary or flexible collaboration | Foreign company operating in Italy |
| Withholding Tax on Distributions to Non-Residents | None (transparent) | None for general partners; 26% for limited partners unless reduced by treaty | 26% standard rate; reduced under DTT or EU Directive | 26% on profit share unless reduced by treaty | No withholding; profits taxed at branch level |
Cross-Border Considerations – Distribution of Profits
U.S. Tax Implications for a U.S. Citizen
The U.S. taxes its citizens on worldwide income, regardless of residence.
Entity classification matters:
- SNC and SAS are generally treated as partnerships (transparent) for U.S. tax purposes. Profits are taxed in the year they arise.
- SRL is typically treated as a corporation (opaque) unless a check-the-box election is made to treat it as a disregarded entity or partnership.
- Foreign tax credits may be available to offset double taxation.
UK Tax Implications for a UK Tax Resident
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UK residents are taxed on worldwide income, subject to domicile and remittance basis rules (or whatever is going to replace them).
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SNC/SAS: Income is taxed when earned, not when distributed.
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SRL: Taxed on dividends when received.
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The UK–Italy tax treaty may help mitigate double taxation.
- Foreign tax credit (for Italian withholding tax on dividends) may be available to offset double taxation.
Remuneration as Director or Manager
Taxation
- Directors (Amministratori): Remuneration taxed as income from employment income (IRPEF and additional Regional Municipal tax progressive rates) subject to 20% payroll withholding. Remuneration is tax deductible for the company (IRES) only when paid. accruals for remuneration at year end are not deductible until the remuneration is paid.
- Managers (Dirigenti): Treated as employees. Income taxed at IRPEF and additional Regional Municipal tax progressive rates with employer withholding.
Social Security
- Directors: If not covered by another mandatory Italian social security scheme, subject to INPS Gestione Separata (approx. 26% contribution). Profits due to working partners after remuneration has been paid to a director or manager may be liable to social security contributions
- Managers: Covered by standard INPS employees scheme. Total contributions ~40% (employer ~30%, employee ~10%). Additional mandatory contributions to sector-specific funds (e.g., PREVINDAI, FASDAC).
Cross-Border Considerations
- U.S. Citizens: Worldwide income taxable. Foreign tax credits may be available. The Italy–U.S. Social Security Agreement may prevent double social security contributions.
- UK Tax Residents: Income from Italian directorships generally taxable in the UK. UK–Italy tax treaty may provide relief or exemption depending on duties and residence.
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