Most Turkey-based investors set up an Italian S.r.l., which has no minimum share capital and can be incorporated remotely through an apostilled power of attorney. Profits are taxed at 24% IRES plus regional IRAP, standard VAT is 22%, and the practical timetable is three to five weeks — driven by apostille work in Turkey and bank onboarding, not by the registration itself.
Why do Turkey-based groups look at Italy?
Italy is one of the largest economies in the European Union, with a large domestic consumer market and a developed industrial base. Manufacturing, automotive components, machinery, fashion, food processing and business services are among the sectors in which Italian companies operate internationally, and the country’s position between Northern Europe, the Mediterranean and North Africa supports its role as a distribution base. For Turkey-based groups, Italy is regularly assessed as a location for EU market access, for a sales or distribution entity inside the counterpart market, and for holding manufacturing or service operations within the Union.
- Official name
- Italian Republic
- Capital
- Rome
- Population
- ≈ 59 million
- Currency
- Euro (EUR)
- Language
- Italian
- Dial code
- +39
- EU status
- Founding member
Which structure should you choose in Italy?
Indicative routing only. The final choice also depends on liability, exit planning and the group’s existing structure.
Capital divided into quotas. At least one shareholder and one director, neither of whom needs to be resident in Italy.
Shareholders may only be individuals, and only the standard statutory articles of association may be used, without amendment.
With several shareholders, at least 25% of the cash capital is paid in before incorporation; a sole shareholder pays in the full amount.
In an S.n.c. all partners carry unlimited joint and several liability. In an S.a.s. general partners manage and carry unlimited liability, while limited partners are liable up to their contribution.
Not a separate legal entity. Treated as a permanent establishment and taxed in Italy. Keeps its own books, files VAT and income tax returns, and files the parent’s annual accounts with the Companies Register.
Promotion, advertising, information gathering and market or scientific research only. The manager cannot bind the foreign company. May open a bank account in Italy.
An S.r.l.s. may only be held by individuals. Where a Turkey-based company will be the shareholder, this form cannot be used and the structure defaults to a traditional S.r.l.
How much share capital is required?
There is no longer a minimum share capital requirement for an S.r.l. or an S.r.l.s. The company may in principle be incorporated with capital starting from EUR 1. Where capital is set below EUR 10,000, two restrictions apply: contributions in kind are not permitted, so capital must be paid in cash; and 20% of the annual profit is allocated to a legal reserve each year until net assets reach EUR 10,000, the reserve being usable only to increase capital or cover losses.
In practice, capitalisation should be assessed against the operating plan and the bank’s onboarding expectations rather than against the legal minimum alone.
How does the incorporation process work?
- Name clearance and codice fiscaleCompany name checked for availability, and Italian tax identification numbers obtained for directors and shareholders.
- Constitutional documentsDeed of incorporation and articles of association prepared, and a registered address secured in Italy.
- Notarial deedThe deed of incorporation is executed before an Italian public notary.
- Companies RegisterRegistration with the Registro delle Imprese at the local Chamber of Commerce.
- PEC and VAT positionCertified electronic mail activated, and the Partita IVA opened with the Agenzia delle Entrate. VIES registration is added where intra-EU trade is planned.
- Bank accountAccount opening and compliance onboarding.
- Employer registrationsINPS and INAIL registrations completed where staff will be employed.
The deed must be executed before an Italian notary, but the shareholders do not need to attend. The process can be completed through a power of attorney granted to Italian counsel. A power of attorney issued in Turkey is notarised and apostilled; as Turkey is a party to the Apostille Convention, consular legalisation is not required.
Which documents are required?
Individual shareholders
- Passport copy
- Proof of address
- Codice fiscale application
- Notarised and apostilled power of attorney, where the deed is signed by proxy
Corporate shareholders
- Certificate of incorporation and trade registry extract
- Articles of association
- Resolution approving the investment and appointing the signatory
- Signature circular and identification of the legal representative
- Notarised and apostilled power of attorney
- Identification of the ultimate beneficial owners
All documents issued in Turkey require sworn translation into Italian and apostille. Preparing these is frequently the longest item in the timetable, and it can be started before the Italian steps begin.
Do you need a local partner or director?
Foreign investors may hold 100% of the shares of an Italian company. A local partner is not required, and neither shareholders nor directors need to be resident in Italy. A resident director is not mandatory either, although a local point of contact can shorten bank onboarding and the handling of routine correspondence. Where no local premises exist, a registered office service can be used.
Investors from outside the EU and the EEA are in principle subject to the condition of reciprocity, which does not apply where the investor’s country of origin has an international agreement with Italy covering investment. Turkey has bilateral agreements with Italy, and reciprocity can be verified through the country reports published by the Italian Ministry of Foreign Affairs before the notarial appointment is set.
How is an Italian company taxed?
Italian tax resident companies are taxed on worldwide income and capital gains, with relief available against double taxation. IRAP is levied on a base different from IRES, in the region where the productive activity is carried out; where a company operates across several regions, the base is allocated in proportion to personnel costs. The corporate income tax return is filed within twelve months of the end of the accounting period.
VAT and filing frequency
| Item | Position | Rate / threshold |
|---|---|---|
| Standard rate | Goods and services, and imports from outside the EU | 22% |
| Reduced rates | Defined categories of goods and services | 4% / 10% |
| Exports | Zero-rated | 0% |
| Quarterly returns | Annual turnover below the threshold | < EUR 50,000 |
| Monthly returns | Annual turnover above the threshold | > EUR 50,000 |
| VIES | Registered before intra-EU transactions begin | — |
A foreign company without a permanent establishment in Italy may alternatively appoint an Italian VAT representative or register directly for VAT. The VAT representative is jointly liable with the represented company for its Italian VAT obligations, and the appointment is made by a special proxy signed by the legal representative, notarised and apostilled.
Withholding taxes
| Payment | Recipient | Rate |
|---|---|---|
| Dividends | Non-resident companies, general rule | 26% |
| Dividends | EU / EEA companies allowing adequate exchange of information | 1.2% |
| Dividends | Qualifying EU parent, Parent-Subsidiary Directive | Exempt |
| Dividends | Between Italian companies — included in the taxable base at | 5% |
| Interest | Residents and non-residents alike | 26% |
| Interest | Associated EU companies, Interest and Royalties Directive | Exempt |
The agreement caps source-country taxation below the domestic rates. Royalty payments are subject to a maximum rate of 10%, while dividends and interest are subject to the treaty ceilings, which are lower than the 26% domestic withholding rate. Treaty benefits require a certificate of residence and, depending on the item of income, satisfaction of the beneficial ownership and holding conditions. The applicable article and its conditions should be confirmed for each transaction before payment.
Participation exemption, transfer pricing and CFC rules
Capital gains on the disposal of qualifying shareholdings are 95% exempt, subject to continuous holding from the first day of the twelfth month before disposal, classification of the holding as a fixed asset in the first financial statements of the holding period, residence of the subsidiary outside a preferential tax regime jurisdiction, and the conduct of genuine commercial activity. Corresponding capital losses are not deductible.
Transfer pricing rules follow the OECD Guidelines and apply where a control relationship exists in either direction, or where both parties are under common control. A penalty protection regime is available where documentation has been prepared in the prescribed Master File and Country File form. An international ruling with the Revenue Agency, valid for three tax periods, can cover transfer pricing, interest, dividends and royalties. Controlled foreign company rules attribute the income of a controlled foreign entity to the Italian shareholder where the effective foreign tax rate is below 50% of the Italian rate and more than one third of revenues are passive; an advance ruling for exemption is available.
These rules operate alongside the Turkish transfer pricing regime under Article 13 of the Corporate Tax Law. Intra-group pricing, financing terms and service charges should be documented consistently on both sides, so that the same transaction is not supported by two different sets of reasoning.
Group taxation options
| Regime | Main condition | Term |
|---|---|---|
| National consolidation | Parent holds more than 50% of share capital and profits; all participants resident in Italy with the same year end | 3 years |
| Worldwide consolidation | Italian parent consolidates non-resident subsidiaries in proportion to its holdings, subject to prior application | 5 years |
| Tax transparency | All shareholders Italian resident capital companies, each holding 10% to 50% of voting rights and profits | 3 years |
How does Italy compare with Turkey?
Italy
- Corporate income tax
- 24%Plus IRAP, generally around 3.9%
- Standard VAT
- 22%Reduced rates 4% and 10%
- Dividend withholding
- 26%1.2% for qualifying EU and EEA companies
- Minimum capital, LLC
- NoneRestrictions apply below EUR 10,000
- Currency
- EUR
Turkey
- Corporate income tax
- 25%30% for banks and financial institutions; a domestic minimum corporate tax applies
- Standard VAT
- 20%Reduced rates 1% and 10%
- Dividend withholding
- 15%Subject to treaty relief
- Minimum capital, LLC
- Statutory minimum applies
- Currency
- TRY
Rates are subject to legislative change in both jurisdictions and should be confirmed at the date of the transaction.
What are the accounting and audit obligations?
Italian accounting follows national standards aligned with EU accounting directives, with IFRS applying to listed and certain other entities. Electronic invoicing through the Revenue Agency’s exchange system is standard practice, and the PEC address serves as the official channel for legally effective correspondence. Investors familiar with Turkish practice will find the framework broadly comparable in structure, while chart of accounts, documentation and filing formats differ and require local handling.
- Annual financial statements filed with the Companies Register
- Corporate income tax and IRAP returns
- Periodic VAT settlements and returns
- Electronic invoicing and register keeping
- Monthly payroll filings
- Social security declarations
- Intrastat reporting where applicable
- Maintenance of the PEC address
An S.r.l. must appoint a board of statutory auditors (collegio sindacale) or a sole statutory auditor (sindaco unico) where it is required to prepare consolidated accounts, where it controls or is controlled by a company subject to statutory audit, or where it has exceeded statutory size thresholds for total assets, revenues or average headcount for two consecutive financial years. A statutory audit of an S.r.l. is required only where that appointment obligation is triggered; an S.p.A. is always subject to audit. The thresholds are set by law and have been revised over time, so current figures should be checked against the position at the reporting date.
What should you expect in bank account opening?
Bank onboarding is generally the least predictable step for a group structured from Turkey. Structures with several intermediate holding layers, or counterparties in higher-risk jurisdictions, are reviewed in more detail and take longer.
- Documented ultimate beneficial ownership chain
- Evidenced description of the business model and flows
- Source of funds for the capital contribution
- Sanctions and compliance screening of the group
- Screening of principal counterparties
- A local contact person for the bank
When does tax residency or a permanent establishment become an issue?
Where an Italian company is effectively managed from Turkey, its tax residence may be challenged. Equally, a Turkish company operating in Italy without a registered entity may be treated as having a permanent establishment there. These points are planned before incorporation rather than corrected afterwards.
- Where board decisions are taken and documented
- Where directors habitually perform their duties
- Whether staff in Italy habitually conclude contracts
- Substance: premises, personnel, decision-making capacity
- Intra-group service and financing agreements
- Licensing and distribution arrangements
What are the employer’s social security obligations?
Employers register their employees with the Italian social security administration (INPS). All employees and wage earners, including executives and self-employed contributors, fall within the scope of the system, which provides retirement, survivor and disability pensions, healthcare, unemployment benefits and family allowances. Entitlements are calculated by reference to accrued contributions and length of service.
Workplace accident and occupational disease cover is provided through the national institute for insurance against accidents at work (INAIL), covering substantially all employees. Contribution rates are calculated on salary and vary by sector, employee category and risk classification, so employer cost should be modelled for the specific role before an offer is made. Employment terms are also shaped by the applicable national collective bargaining agreement for the sector.
How long does company formation take?
The Italian incorporation steps themselves are short. Once documentation is complete and the notarial appointment is set, incorporation, VAT registration and account opening can be completed within approximately five to six working days for a straightforward structure. The overall timetable is driven by the preparatory and banking steps rather than by registration.
Solid bars are steps under the investor’s or adviser’s control. The dashed bar is the bank compliance review — the least predictable element. Where document preparation in Turkey runs in parallel with the Italian steps, a straightforward S.r.l. is typically operational within three to five weeks from the first instruction.
What goes wrong most often?
- Treating incorporation as the finish line. Registration is one step in becoming operational, not the end of the process.
- Starting apostille work too late. Sworn translation and apostille in Turkey can begin before the Italian steps and often set the overall timetable.
- Underestimating bank compliance. Multi-layer ownership structures extend onboarding considerably.
- Setting capital at the legal minimum. The figure that satisfies the law may not satisfy the operating plan or the bank.
- Selecting S.r.l.s. with a corporate shareholder. The form does not permit it.
- Leaving residency and transfer pricing until later. These are structural decisions, not post-completion adjustments.
- Assuming treaty rates apply automatically. Reduced withholding requires residence certification and supporting documentation.
Frequently asked questions
Can a Turkish company own 100% of an Italian company?
Yes. Foreign investors may hold all the shares, and no local partner is required. Investors from outside the EU and the EEA are in principle subject to the condition of reciprocity, which does not apply where an international agreement covering investment is in place between the investor’s country and Italy.
Is there a minimum share capital for an Italian S.r.l.?
No. An S.r.l. can be incorporated with capital from EUR 1. Below EUR 10,000, contributions in kind are not permitted and 20% of annual profit is allocated to a legal reserve until net assets reach EUR 10,000.
Do the shareholders have to travel to Italy?
No. The deed of incorporation is executed before an Italian notary, but this can be done through a power of attorney granted to Italian counsel. A power of attorney issued in Turkey is notarised and apostilled; consular legalisation is not required.
What is the total tax burden on Italian company profits?
Corporate income tax (IRES) is 24%, and regional production tax (IRAP) applies in addition, generally around 3.9% depending on the region. IRAP is levied on a different base from IRES and is deductible for IRES purposes only up to 10% of the amount paid.
Should a branch or a subsidiary be used?
A branch is not a separate legal entity and is treated as a permanent establishment taxed in Italy, so liability is not ring-fenced from the parent and the parent’s annual accounts are filed with the Italian register. A subsidiary separates liability and simplifies later exit or partner entry. The choice depends on liability tolerance, expected scale and the group’s structure.
Which withholding tax applies on dividends paid to Turkey?
The domestic rate on dividends to non-resident companies is 26%. The Turkey–Italy double taxation agreement caps source taxation below that rate, subject to a certificate of residence and the beneficial ownership conditions. The reduced rates for EU and EEA companies do not apply to a Turkish recipient. The position should be confirmed for each distribution before payment.
As the Ozbek CPA team, we provide support in company formation, tax compliance, accounting organization and corporate governance processes for investments structured between Turkey and Italy. Contact us.
