Forming New Horizons – Expanding into Italy

Country Spotlight:

GDP – $2.05 trillion

Population – 58.678 million?

Competitiveness Ranking? – 41 out of 64 (IMD)

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The Commercial Brief:

Italy’s economy is heavily driven by three economic sectors: Services at 64.3%, Industrials at 23.82%, and Agriculture at 1.81%. Last year, Italy was the 10th largest economy in the world, making it a major economy. Its forecasted GDP growth for 2024 is 1.51%. During the recent spate of price increases, inflation peaked in 2022 at 8.74% but has since declined to 2.61% which is encouraging. In Italy, the corporate income tax (IRES) rate is 24%, and the regional production tax (IRAP) rate is 3.9%. The Employer Social Burden is amongst the world’s highest and can fetch approximately 48% plus additional fixed costs.?

Italy is culturally renowned for its rich history in art, music, fashion, and cuisine, home to legendary artists like Leonardo da Vinci and Michelangelo. Its contributions to literature, opera, and the Renaissance movement are globally celebrated. Economically, Italy is known for its influential automotive, fashion, and manufacturing sectors, as well as being a major wine producer. Its diverse economy includes tourism, driven by its iconic landmarks such as the Colosseum and the canals of Venice, contributing significantly to its GDP.

Italy is not traditionally known for vast natural resource wealth like fossil fuels or precious metals. However, it has significant agricultural, marble, and geothermal resources, contributing to its sectors such as food production, high-quality marble exports, and renewable energy. Italy's real wealth lies in its cultural heritage, tourism, and diverse industrial sectors, including fashion, automotive, and machinery.

Companies expanding to Italy will find it has a strong talent pool in several industries, notably in fashion, automotive manufacturing, and design. The country is world-renowned for its high-quality craftsmanship in luxury fashion and leather goods. Additionally, Italy's automotive industry, with brands like Ferrari and Lamborghini, showcases its excellence in engineering and design. Italy also excels in food and wine production, benefiting from its rich agricultural heritage and culinary traditions.

In summary, Italy is a good destination for global business expansion, particularly in traditional industries. Nevertheless, organisations should carefully consider employment costs due to the very high Employer Social Burden. The IMD World Competitiveness Center has ranked the country 41/64 for competitiveness in 2023!?

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Challenges of Expanding into Italy

In our experience setting up a permanent overseas entity in Italy without Global EOR support can take up to 6-8 months, including the entity incorporation, setting up the bank account and concluding the local registrations. From an employment perspective employees are divided into four categories, Dirigente (Executive), Quadro (Middle Manager), Impiegato (White-Collar), Operaio (Blue-Collar). These categories will determine the terms and conditions of employment and the applicable minimum wage. Collective agreements are also crucial when determining the employment conditions. Salaries cannot be lower than the mandated minimum wage as per the Collective Agreement. These will vary based on the industry and economic sector in question. Generally speaking, the collective agreements also differentiate white-collars and blue-collars into levels, depending on their level of professionalism and skills.?

Since the proliferation of working from home, Italy has since passed legislation to regulate working from home arrangements. Among other requirements, the employer has to ensure the telecommuter, as well as all other employees, under mandatory government schemes by notifying the National Institute for Accidents at The Place of Work that the employee will be working from home.?

One point to consider is the requirement to have appropriate health and safety policies and procedures for both remote and on-site employees, always keeping in mind the different employment categories.?

It is, therefore, essential for employers to familiarise themselves with the above. To avoid complications and business risk and enter the market quickly and compliantly, utilise a Global EOR in Italy that has dedicated and extensive in-country personnel, HR, Legal, Payroll, Compliance & Immigration teams that can support you and your organisation directly.?

Peter Dixon & Laura Isaza

Velocity Global

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If you have any questions pertaining to this article please drop a comment or feel free to directly message us, we will do our best to help.?

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