REALWorld Law

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

In the main, three types of corporate vehicle are used for investments in real estate in Italy:

• the società a responsabilità limitata (S.r.l.);
• the società a responsabilità limitata semplificata (S.r.l.s.); the S.r.l.s. was introduced in January 2012 and significantly reformed in the summer of 2013; and
• the società per azioni (S.p.A.).

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.) and società a responsabilità limitata semplificata (S.r.l.s.)

Each of these entities is a limited liability company whose corporate capital is divided into quotas rather than shares.

Società per azioni (S.p.A.)

An S.p.A. is a limited liability company whose corporate capital is divided into shares with the same face value.

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.)

The minimum corporate capital required to set up an S.r.l. is fixed at EUR10,000. However, according to section 2463, paragraph 5 of the Italian Civil Code, if an S.r.l. is established with a corporate capital lower than EUR10,000, the following provisions shall apply:

• contributions-in-kind are not permitted;
• cash contributions must be delivered to the directors of the company;
• an amount corresponding to 1/5 of the net income resulting from the relevant financial statements must be allocated to a special legal reserve until the net worth of the company reaches at least EUR10,000; and
• such reserve may be used only for the accrual of the corporate capital or to cover losses, if any.

Furthermore, the corporate capital shall be entirely paid up in case the S.r.l. is incorporated by only one member (so called ‘S.r.l. unipersonale’).

Società a responsabilità limitata semplificata (S.r.l.s.)

The corporate capital required to set up an S.r.l.s. can be between EUR1 and EUR9,999. No corporate entity can qualify as a shareholder of an S.r.l.s.

Società per azioni (S.p.A.)

The minimum corporate capital required to set up an S.p.A. is fixed at EUR50,000.

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.)

Set-up costs are approximately EUR5,000.

Società a responsabilità limitata semplificata (S.r.l.s.)

Below EUR500.

Società per azioni (S.p.A.)

Set-up costs are approximately EUR5,000.

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.)

Approximately 15 days.

Società a responsabilità limitata semplificata (S.r.l.s.)

Approximately one week.

Società per azioni (S.p.A.)

Approximately 15 days.

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.)

Considerable flexibility can be agreed in the by-laws of an S.r.l. and voting and profit rights can be freely allocated. The holders of the quotas into which the corporate capital is divided can appoint and remove directors and may also have approval rights over management decisions. The directors are responsible for day-to-day business decisions. The company can be managed by either a sole director or a board of directors.

The appointment of an Auditing Body is required if the S.r.l.:

• must prepare consolidated financial statements;
• controls a company which must appoint an auditing body; or
• exceeds for two consecutive financial years the maximum thresholds for the drafting of ‘condensed’ (abbreviato) financial statements.

Unless the contrary is stated in the articles of incorporation, the S.r.l. will be audited by an Auditing Body composed of only one effective member. The by-laws can provide that the quota holders may choose among different auditing systems:

• a Sole Statutory Auditor (organo monocratico di controllo);
• a Board of Statutory Auditors; or
• an Auditing Company (which may be in addition to the Sole Auditor/Board of Statutory Auditors, and entrusted with the legal auditing of the accounts).

Società a responsabilità limitata semplificata (S.r.l.s.)

The management of this type of company may be entrusted to directors who are external (i.e., not necessarily shareholders). The deed of establishment follows a standard form, issued by the Ministry of Justice, whose contents are mandatory and may not be modified by the members. If the quota holders intend to set up an Italian limited liability company with a corporate capital of less than EUR10,000 but with specific and tailor-made provisions in the by-laws, the most appropriate solution will be to set up an S.r.l.

Società per azioni (S.p.A.)

Considerable flexibility can be agreed in the by-laws of an S.p.A. and it is possible to create different categories of shares with different rights. There are no restrictions on how voting and profit rights are allocated. In addition, shares where multiple voting rights are allocated to each individual share may now be created.

An S.p.A. can be managed in any of the following ways:

• By a sole director or a board of directors appointed by the shareholders meeting (the traditional system – modello tradizionale). This applies unless the company's articles of association state otherwise.
• If the company's articles of association provide for this, the company can be managed by a supervisory board and a management board. The shareholders appoint the supervisory board, and this then appoints the management board. The supervisory board can be composed of shareholders and non-shareholders and undertakes part of the functions of the board of statutory auditors as well as some functions usually entrusted to the shareholders meeting (in the traditional system), while the shareholders retain a degree of control over the management board (the two-tier system – modello dualistico);
• If the company's articles of association provide for this, the company can be managed by a board of directors appointed by a shareholders' meeting and an executive committee of the board (the one-tier system – modello monistico).

The appointment of statutory auditors is mandatory in the case of an S.p.A.. The shareholders may choose to appoint a board of statutory auditors comprising either three or five permanent members, in which case two alternate members must also be appointed. The legal audit of the accounts is carried out either by a statutory auditor or by an auditing company, if the S.p.A. does not prepare a consolidated balance sheet, the legal audit may be carried out by the board of statutory auditors (who shall be all enrolled with the Register of statutory auditors).

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (S.r.l.) and società a responsabilità limitata semplificata (S.r.l.s.)

Although auditors are only required when certain thresholds (relating to e.g. turnover and the number of employees) are exceeded, the total corporate and accounting costs for an S.r.l. are normally around EUR12,000 plus the cost of internal and external auditors. S.r.l.s. usually avoid having auditors in order to save compliance costs.

Società per azioni (S.p.A.)

The annual corporate and accounting costs for an S.p.A. are approximately EUR20,000 plus the costs of internal auditors (between EUR10,000 and EUR15,000) and external auditors (EUR10,000 or 15,000).

Last modified 13 Mar 2025

Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?

Società a responsabilità limitata (Srl) and Società per azioni (SpA)

An S,r.l., an S.r.l.s. and an S.p.A. in Italy are subject to IRES (corporation tax) payable at the rate of 24% and to IRAP (business activity tax) payable at the ordinary rate of 3.9%. IMU (municipal property tax) is payable on all property held by a business at a rate of between 0.76% and 1.06% of the cadastral value.

Last modified 13 Mar 2025