Italy (English & Chinese)

The Italian government is seeking to attract COI in many key sectors, such as infrastructure, energy, manufactory machineries, brands and, in general, market and strategic assets.

In order to attract overseas investments, the Italian government is approving and implementing a number of relevant reforms with the declared goal of boosting the Italian market. These reforms mainly relate to the Italian judicial and labour system, taxation and the digitalisation of public administration, including but not limited to: the possibility for foreign companies to apply for standard international tax ruling preliminary to the investment; 50% corporate tax credits on expenses for employees operating in research and development activities; reduced taxes on real estate transactions between VAT payers; simplification of the authorisation procedures for enterprises; reduction of energy costs for enterprises and provisions favouring energy saving and efficiency of buildings; reform of the labour laws applicable to the hiring and firing of personnel (so﹣called jobs act); and reorganisation of rules and regulations governing local public services (waste, urban transport, lighting, water, etc.) that will also favour investments by foreigners.

b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?

The entities responsible of driving foreign investment in Italy, including COI, are Invitalia and ICE or the Italian Trade Promotion Office.

Invitalia is the national agency for investment promotion and enterprise development and provides foreign investors wanting to set up or expand their business in Italy with information regarding local business opportunities and partners. Apart from support services during the investment process, the agency provides strategic analysis to identify the best business solution and offers an overview of the legal and tax system, the labour market and the national incentive system.

ICE, jointly with the Ministry of Economic Development's department of internationalisation, provides information, support and advice to Italian and foreign companies through a large network of Trade Promotion Offices linked to Italian embassies and consulates. In order to facilitate the connection between Italian and foreign businesses it works closely with local authorities and businesses to facilitate the identification of possible business partners and organise bilateral trade meetings with Italian companies, as well as providing information, support and advice as necessary.

Section 2: Investment vehicles

a. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?

The limited liability company (Srl) is the most common legal vehicle used for doing business in Italy, if the capital is owned by a small number of members. Srl companies cannot be listed on the stock market or issue debentures or other negotiable instruments, though they can issue debt notes which can be purchased by qualified investors. Depending on the value of the transaction and the number of investors, the joint stock company (SpA) vehicle may be more appropriate. The SpA's capital is represented by shares.

The incorporation's procedures to be followed for an Srl or an SpA are substantially the same and require the assistance of an Italian notary. The company can be operative in a week starting from the date of receipt of the required documents.

b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?

There are no specific requirements for establishment and operation of these vehicles which are relevant to COI or foreign investors in general, unless for specific sectors (see below). For instance, directors do not need to be Italian citizens or tax residents but only require an Italian tax code.

Section 3: Investment approval

a. For foreign investment approval (including any national security review) explain the approval process and timing.

The regulator is basically the government – each of the Ministries specifically concerned (Defence, Finance, Economic Development, Foreign Affairs or Internal Affairs) play a crucial role depending on the sector at stake. All decisions are objective and non-discriminatory. And since the interests involved are prominent public interests, a high degree of discretion is given to the regulator.

Further to a 2012 reform, ownership caps to foreign investments have been abolished and replaced by the granting of certain powers to the regulator, such as the right to object and/or veto and/or impose conditions on the execution of certain extraordinary transactions.

The holder of a strategic asset must notify the government about any resolution/act concerning a proposed extraordinary transaction within 10 days or before it is implemented. The purchaser must also notify the regulator of the acquisition within 10 days. The notice should include, as the case may be, the company resolution or the information relating to the project of acquisition, the buyer and the business of the buyer. The regulator, which may request additional information, may exercise its veto powers, object or impose conditions within 15 days from the receipt of the notice (the term is suspended if additional information is requested, which must be delivered within 10 days). The transaction cannot be implemented before the terms to exercise the above powers have elapsed without any veto, objection or conditions. Any veto decision or decision imposing specific conditions may be appealed before the Italian Administrative Courts where a fast-track procedure will apply.

b. Briefly explain the investment restrictions for any specially regulated/restricted sectors (natural resources, financial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors.

In the defence and national security sector the government may: (i) impose, to the purchaser of shares in strategic companies, conditions related to the security of supplies, the security of information, technological transfers and the control of exportations; (ii) exercise veto powers in relation to resolutions of strategic companies on extraordinary subject matters; or (iii) object to the acquisition of a shareholding in strategic companies which could jeopardise national security.

In the energy, transport and TLC sectors the government may: (i) exercise veto powers or impose conditions in relation to resolutions/acts/transactions involving changes in the ownership, control, availability or use of the strategic assets; or (ii) impose specific conditions or, in extraordinary cases, object to the acquisition of controlling shareholding in the strategic companies by non-EU parties.

c. Which authority oversees competition clearance, when is notification mandatory, and what is the merger clearance process (including whether pre- or post-closing)?

The Italian Competition Agency oversees concentration clearance processes. The Italian competition law requires prior notification of all mergers and acquisitions when:

• the aggregate turnover of the undertaking in Italy exceeds €489 million; and

• the aggregate turnover of the undertaking in Italy to be acquired exceeds €49 million.

“Concentrations” are meant to be the transactions where, by means of a merger, the acquisition of control of the whole or part of another undertaking, or the setup of a joint venture, leads to a permanent change in the structure of the participating undertakings.

The notification can be either pre or post-closing, as it is not a condition precedent. Nonetheless, parties generally prefer to notify after signing but before closing, to avoid the risk of the reversal of the operation due to prohibition and/or imposition of remedies. The concentration review takes up to 30 days with a possible extension up to 45 days from the notification.

d. Are there any unique processes that potentially could block a foreign investment, e.g. consent from labour unions?

In general, there are no processes that could block foreign investors, however, the government may de facto request certain conditions for transactions that involve a large number of employees.

e. Are there approval requirements when a foreign investor increases or exits its investments?

In general, there are no restrictions to investments in Italian companies. However, the acquisition of shareholdings in one of the following companies may be subject to duties of disclosure and/or authorisation: by (i) Italian-listed companies; and (ii) Italian banks, insurance companies, financial intermediaries and asset managers.

Section 4: Tax and grants

a. Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country?

Italy has an extensive tax treaty network with over 70 tax treaties in force. Moreover, under the EU directives, payments of dividends, interest or royalties to companies resident in other EU member states are exempt from withholding tax under certain conditions.

b. What are the applicable rates of corporate tax and withholding tax on dividends?

Italian companies and Italian permanent establishments of foreign entities are subject to a corporate income tax rate of 27.5% and to a regional tax on productive activities of 3.9%.

Under domestic law, dividends distributed to non-resident shareholders are subject to the following tax treatment:

• as a general rule, dividends distributed to non-residents are subject to withholding tax at the rate of 26%. Non-resident shareholders may file a claim with the Italian tax authorities for the refund of Italian taxes up to 11/26 of the amount withheld, provided that they are able to prove that they paid taxes on the dividends in their country of residence;

• dividends distributed to companies resident in a EU member state are subject to a withholding tax rate of 1.375%, provided that the companies are subject to tax in their state of residence;

• in compliance with the EU Parent-Subsidiary Directive, dividends distributed to companies resident in an EU member state are exempt from withholding tax if certain conditions are met (including, inter alia, 10% minimum participation and a one-year minimum holding period).

Moreover, the 26% dividend withholding tax can be reduced if a tax treaty is applicable.

c. Does the government have any FDI tax incentive schemes in place?

A tax exempt investment scheme is the regulated investment fund. Also, under certain conditions, profit distributions from regulated investment funds to non-resident investors can be fully exempt from withholding tax.

d. Other than through the tax system, does the government provide any other financial support to FDI investors? If so, please provide an overview.

In the case of foreign investment in companies under restructuring and with a large number of employees, the government may support and/or incentivise the investor, by signing specific development programs granting social security benefits or other advantages.

e. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors?

Italy and China entered into a tax treaty effective from January 1 1991, based on the OECD model convention. Under this treaty, dividends or interest paid from an Italian company to a Chinese investor (provided the investor is the beneficial owner of the dividends or interest) are subject to a withholding tax of 10%.

Section 5: Forex controls and local operations

a. What foreign currency or exchange restrictions should foreign investors be aware of?

There are no foreign currency or exchange controls in Italy, except for cash. However, any person entering or leaving the EU (including Italy) must file a declaration with customs in the event that he imports/exports either €10,000 or more in cash or an equivalent amount in other currencies or in easily convertible assets (e.g. bonds, shares, traveller's cheques). Failing to submit a declaration, as well as submitting false declarations, may cause the seizure of the cash/assets and result in a penalty.

b. Are there any legal restrictions on bringing in foreign workers and how difficult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice?

As for non-EU nationals, the quotas of foreign employees to be admitted within the Italian territory are established every year by the Italian government. The following documents are required for their employment:

• authorisation to hire a non-EU citizen requested by an employer at the prefect's office;

• The prefect's authorisation to be forwarded to the Italian consular office for the issuance of the visa;

• A visa from the Italian consulate established in the country of origin;

• A permit to stay to be obtained by the worker from the police authorities upon execution of the employment agreement between the employer and the worker before the police authorities.

In general, due to the quota system, the procedure to secure expatriate visas for shareholder representatives, senior managers and workers is quite complicated.

The procedure, however, is simplified and the quota system can be derogated for the following cases:

• employees of non-EU companies that are seconded to Italy for a limited period;

• highly qualified workers that present a higher education qualification and a valid work contract or a binding job offer. Such workers can apply for clearance and a visa at the Italian embassy in their home country and then obtain, upon execution of the employment contract, an EU Blue Card;

• executives or highly specialised personnel of companies domiciled in Italy;

• university lecturers and university professors who are expected to have an academic position;

• translators and interpreters;

• family collaborators employed abroad full time for at least a year;

• individuals authorised to stay for reasons of training/specific tasks within the scope of employment;

• maritime workers;

• artistic and technical personnel for opera, theatre, concert or ballet;

• foreign journalists employed by a foreign press company;

• diplomats; or

• professional nurses hired by public and private health structures.

In these simplified cases, the procedure to secure expatriate visas for shareholder representatives, senior managers and workers is quicker and easier.

Specific visas and permits to stay are available for Chinese citizens who purchase personal real estate in Italy, under certain conditions.

Lastly, as far as start-ups are concerned, a new type of visa has been introduced for self-employed people, who are “foreign citizens for the incorporation of innovative start-up companies” and have resources dedicated to the start-up amounting to at least €50,000. The evaluation of the request is carried out in a very short timeframe of 30 days.

Section 6: Dispute resolution

a. Does your jurisdiction have a bilateral investment protection treaty with China or other jurisdictions commonly used for investing into the country?

Starting from the 1980s, Italy and China have signed several investment agreements, among which are: (i) the Agreement on Promotion and Protection of Investments (1985); (ii) the Agreement to avoid double taxation (1986); (iii) the Treaty on Judicial Assistance on Civil Matters (1991); and (iv) the Cooperation Agreement on Intellectual Property (2004).

More recently, Italy and China executed: (i) a Memorandum of Understanding on cooperation for bilateral investments between InvestInItaly and the Agency for Investment Promotion of the Chinese Minister of Commerce (2005); and (ii) a Plan of Action 2010-2013 to strengthen economic cooperation (trade and investment, cooperation in finance and financial services, science and technology, innovation, intellectual property protection and the environment (2010)).

The EU also started a first round of negotiations with China for an EU-China investment agreement in January 2014.

b. How efficient are local courts' enforcement and dispute resolution proceedings, and are there any procedural idiosyncrasies foreign investors must be aware of?

Commercial disputes in Italy can be efficiently resolved by Italian courts (either through ordinary or summary proceedings) or, if agreed upon by the parties, through arbitration.

The court usually decides a case – in first instance – in about three to four years and – in second instance – in about four to five years, while the length of arbitration proceedings is generally shorter (about one year), since it depends on the parties' terms of engagement and the governing arbitration rules.

That said, the costs of arbitration proceedings are higher than the costs required for court proceedings.

c. Do local courts respect foreign judgments and are international arbitration awards enforceable?

Foreign judgments are recognised and enforced in Italy through different procedures depending on whether the judgment was issued by a court of an EU member state or by an extra-EU member state court.

In particular, any judgment, decision and measure which meets certain requirements, issued by a court of an EU member state and enforceable in that state is automatically recognised in the Italian jurisdiction without any special procedure and/or any declaration of enforceability being required, pursuant to the Regulation (EU) no 1215/2012, Regulation (EC) no 44/2001 and the Brussels and Lugano II conventions, when applicable.

Furthermore, for judgments specifically issued by an extra-EU member state court, there are a number of bilateral conventions relating to the recognition and enforcement of judgments in civil matters. Italy and China signed the Treaty on Judicial Assistance on Civil Matters between China and Italy (1991) which provides that the decision will be automatically recognised and enforced in Italy, unless one of the following circumstances occurs:

• the court that issued the foreign judgment had no jurisdiction over the case according to Article 22 of the Treaty;

• the foreign judgment is not final pursuant to the law of the party where the judgment was issued;

• the writ of summons/claim was not properly served upon the defendant or, in the case of an incompetent defendant, it was not duly represented in court pursuant to the law of the party where the judgment was issued;

• another final judgment among the same parties and concerning the same matter was issued by the court of the party where the judgment must be recognised, or the latter has already recognised a decision issued by a court of a third country among the same parties and concerning the same matter;

• a litigation proceeding is pending among the same parties and concerning the same matter before the court of the party where the judgment must be recognised and started before the notification of the writ of summons of the other proceedings; or

• the foreign judgment may jeopardise the sovereignty and safety of the party that is required to recognise it or is contrary to public policy.

As for international arbitration awards, in 1969 Italy signed the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. As a consequence, Italy recognises foreign arbitral awards as binding and enforces them in accordance with Italian procedural law under the conditions laid down in the New York Convention.

Therefore, in order for a foreign arbitration award to be enforced in Italy, it must be filed with the Court of Appeal of the place of residence of the other party (if it is in Italy) or with the Court of Appeal in Rome (if the other party resides abroad). In this case, the Court of Appeal will only check that the formal requirements of the award are respected, without entering in the merits of the dispute. The court will then issue an enforcement order, where the award becomes equivalent to a judgment capable of enforcement.

d. Are local judgments and arbitration awards from your jurisdiction generally enforceable in other jurisdictions?

The possibility to enforce Italian judgments and arbitral awards may vary based on the jurisdiction.

In particular, Italian judgments are enforceable abroad pursuant to the EU Regulation, Brussels or Lugano Convention, when applicable.

As mentioned above, Italy is also party to the New York Convention, which is based on the reciprocity principle for the recognition and enforcement of arbitration awards made in the territory of another contracting state. Therefore, an award rendered in Italy is enforceable in foreign jurisdictions that are party to the New York Convention.

Author biographies

Ernesto Pucci

Ernesto Pucci is a partner and co-head of the firm's Europe-China desk and focuses on the internationalisation of enterprises, corporate and commercial transactions, mergers and acquisitions, private equity and insurance.

He advises Italian and foreign companies and multinational groups acting in the financial, insurance, tobacco, energy and health care industries as well as the general commercial and industrial sectors. He provides assistance on company reorganisations, M&A and the drafting and negotiating of SpAs, shareholders' agreements and international commercial agreements. He also provides expert advice on the procedures of extraordinary administration of large enterprises and on matters of financial law, such as the implementation of laws and regulations by the authorities to Italian and financial intermediaries and securitisation transactions pursuant to law No 130/99 and its subsequent amendments. He also advises insurance and reinsurance companies operating in Italy.

Ernesto has been a research fellow in Insurance Law at the Faculty of Economics and Commerce at the University of Rome “La Sapienza” from 2007. He is a member of the IBA and Association for International Insurance Law [Associazione Internazionale Diritto delle Assicurazioni]. He speaks Italian, English, French and Spanish.

Shenkuo Wu

Shenkuo Wu is the co-head of the firm's Europe-China desk and his practice areas include corporate and commercial transactions as well as intellectual and industrial property.

Shenkuo concentrates on international investment and commercial transactions and provides legal advice to numerous clients on cross-border activities between China and Italy.

He obtained his law degree at the Zhongnan University of Economics and Law in 2004 and his LLM at the East China University of Politics and Law in 2007. He also earned his PhD in law at the University of Verona in Italy in 2011. He speaks Chinese, Italian and English fluently.