Setting up a Sole Trader in Italy

Updated on Thursday 13th June 2019

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A foreign entrepreneur who wants to go to Italy and start a small business, with low expenses, may choose to become a sole trader. Any EU citizen is allowed to work as a sole trader in Italy, after he or she registers with the local authorities. Our team of Italian lawyers can offer an extensive presentation on the characteristics of a sole trader and may also assist with advice on the documents that have to be prepared when registering this structure.

In Italy, there are a few requirements to meet if you need to be self-employed. Firstly, you have to be a permanent resident and hold a residence certificate and then you can be authorized to work as a freelancer, self-employed in the field you choose or sole trader.

The documents required for a sole trader in Italy

The document you need in order to work as a sole trader is a work and residence permit (called “Permesso di soggiorno per lavoro autonomo/indipendente”, in Italian). According to the type of business you want to perform in Italy, you must register with the appropriate organization that may be the Trade Register, the local tax office etc.

For certain types of activity, you will need to register for VAT. When registering as a sole trader, you need certain certificates that prove your qualifications in that field. If you start working without the authorizations required by the Italian laws, you may be fined and the amount for these type of penalties is large. Also, the Italian authorities may confiscate your tools and they can ban you from working in Italy for the next years.

More details on the Italian sole trader are available in the video below:

What are the main steps in opening an Italian sole trader?

Although the sole trader in Italy represents the simplest way to operate a business in this country (and the simplest way to register a business here), the company’s representative will need to follow a set of steps. Some of the main aspects refer to the registration with the local Italian institutions.

However, this business structure does not need to certify its documents through a public notary, which means that the registration procedure will take less time and it will also cost less compared to the registration of other Italian company entities. Our team of lawyers in Italy can assist businessmen with advice on the following procedures:

• registration of a the sole trader with the Business Register, an institution which operates under the Italian Chamber of Commerce;
• notification on the beginning of activities – this is done through the Economic Administrative Index;
• the above mentioned procedure can be done on the online platform available for investors in Italy (the procedure must be completed in a period of maximum 30 days since the sole trader began its business operations);
• provided that the economic field in which the sole trader will operate needs authorization, the owner of the business must apply for specific business licenses and permits;
• the issuance of the business permits and licenses in Italy is done through the Productive Activity One-Stop Desk, an online platform where investors can request the issuance of various authorization documents.

What is the tax system available for a sole trader in Italy?

Since there is no legal distinction between the sole trader and its owner, the tax system applicable to this structure is different than the one available for corporate entities, such as the limited liability company. The sole trader is not imposed with the corporate tax; instead, it is necessary to pay the personal income tax, which can vary between 23% to 40% of the company’s income.

Provided that the sole trader has a revenue of up to EUR30,000, the company is entitled to apply for a lower income tax rate, of only 15%; our law firm in Italy can offer more details on the manner in which a sole trader can benefit from lower taxes.

Besides this, the sole trade is legally required to register for social security contributions; the annual contributions for the social security system in Italy can have a minimum value of approximately EUR 3,000 and this is the case of sole traders developing commercial activities.

In the case of sole traders that are set up as businesses that offer consultancy services or those registered by professionals (lawyers, health specialists, etc.), the social contributions can be imposed at a fixed rate. The Italian tax system also provides reduced taxes in the case of those who want to set up a business in their own name and who have an age below 30 years old.

The responsibility for the debts of a sole trader in Italy

The sole trader is responsible for its debts, no matter if they are personal or professional and the owner can be declared bankrupt, if he/she is not able to pay the sole trader's debts. Sometimes, it is recommended to open a limited liability company instead of becoming a sole trader. If you need to know which type of business is more appropriate for you, it is advisable to address to an Italian lawyer, who will help you on this matter.

As a general rule, the sole trader is changed into another business form, usually the limited liability company, once the business develops; this is done for the purpose of protecting the investor against the liability of the business, but also due to various tax advantages that the limited liability company has compared to the sole trader.

The sole trader is a good choice for foreign entrepreneurs who want to spend as little as possible on the registration procedure; it has a simple accountancy system and the owner can use the money gained as wanted. On the other hand, if you can’t pay your debts, the creditors are allowed to take parts of your personal wealth even if it is in other country.

How many businesses are in Italy?

With a population of over 60 million citizens, Italy represents a developed economy of the European Union (EU). The Italian economy is based on activities such as: tourism, manufacturing, agriculture, the services sector and trade, but it is also one of the leading economies at a global level for the production of wine, considering that the country has a suitable climate for this type of crop.

Local businesses operate in a wide range of economic sectors, the highest number of businesses being registered in the Southern region of the country. Italy accounts for more than 5 million businesses (both local companies and foreign companies operating on the local market); in 2017, their distribution was the following:

• the Southern region and the Italian islands have the highest number of companies, of more than 2 million;
• the Northwestern region accounted for more than 1,5 million companies;
• the central region of Italy registered more than 1,3 million businesses;
• the Northeast region of Italy had the lowest number of businesses, of only 1,1 million.

For more information about setting up a sole trader and the differences between this type of business and others, such as limited liability company or joint stock company, you may contact our law firm in Italy. Our attorneys in Italy will advise on the advantages and disadvantages of every type of company and they will help you register the form of business you choose for starting your economic activity in Italy.