Вы находитесь на странице: 1из 33

Doing Business in Italy

2010

Contents
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction................................................................................................... 2 Businessenvironment .................................................................................. 3 Foreigninvestment....................................................................................... 6 SettingupaBusiness.................................................................................... 9 Labour .......................................................................................................... 18 Taxation........................................................................................................ 23 Accounting&reporting............................................................................. 28 UHYfirmsinItaly ...................................................................................... 32 UHYofficesworldwide ............................................................................. 32

Copyright2010UHYInternationalLtd

1.

Introduction

UHYisaninternationalorganisationprovidingaccountancy,business managementandconsultancyservicesthroughfinancialbusinesscentres inover70countriesthroughouttheworld.Businesspartnerswork togetherthroughthenetworktoconducttransnationaloperationsfor clientsaswellasofferingspecialistknowledgeandexperiencewithintheir ownnationalborders.Globalspecialistsinvariousindustryandmarket sectorsarealsoavailableforconsultation. Thisdetailedreportprovidingkeyissuesandinformationforinvestors consideringbusinessoperationsinItalyhasbeenprovidedbytheofficeof UHYrepresentatives: FiderConsultS.r.l. ViaBirmania,81 I00144Rome,Italy Phone: +39065917469 Website: www.fiderconsult.com Email: p.lenzi@fiderconsult.com YouarewelcometocontactDrPaoloLenziforanyinquiriesyoumay have. Informationinthefollowingpageshasbeenupdatedsothattheyare effectiveatthedateshown,butinevitablytheyarebothgeneraland subjecttochangeandshouldbeusedforguidanceonly.Forspecific matters,investorsarestronglyadvisedtoobtainfurtherinformationand takeprofessionaladvicebeforemakinganydecisions.Thispublicationis currentatFebruary2010. WelookforwardtohelpingyoudobusinessinItaly.

FiderConsultS.r.l.isamemberofUHY,aninternationalassociationofindependent accountingandconsultancyfirms,whoseorganisingbodyisUrbachHackerYoung InternationalLimited,aUKcompany.EachmemberofUHYisaseparateandindependent firm.ServicesdescribedhereinareprovidedbyFiderConsultS.r.l.andnotbyUrbach HackerYoungInternationalLimitedoranyothermemberofUHY.NeitherUrbachHacker YoungInternationalLimitednoranymemberofUHYhasanyliabilityforservices providedbyothermembers.

Copyright2010UHYInternationalLtd

2.

Business environment

TheItalianconstitutionandgovernment Italyisarepublicdividedintoregions,provincesandmunicipalities.The ParliamentisthelegislativebodyoftheRepublicandconsistsofaSenate andChamberofDeputies.Itsmembersareelectedbypopularvotetofive yeartermsofoffice. ThepresidentoftheRepubliciselectedforasevenyearperiodby parliamentandmustbeanItaliancitizenofatleast50yearsofage.The presidenthasmanypoliticalduties,butminimalpoliticalpower. Thegovernmentofministersholdsexecutivepowerandparliamentmay delegatelegislativepowertoitforspecificmatterswithindefinedlimits.In emergencies,thegovernmentofministersmayissuetemporarydecrees, whicharesubjecttoparliamentaryratificationorveto. Theregionalgovernmentshavelegislativepowerincertainareas,suchas healthandhospitalservices,localtaxes,urbanplanningand transportation. TheDomesticMarket Population Italyhasapproximately57millioninhabitants,withanaveragepopulation densityof189peoplepersquarekilometre(490persquaremile).The populationispredominantlyRomanCatholic. Area Thecountrycoversanareaof301,266squarekilometres(approximately 116,300squaremiles).Romeisthecapitalcity.Otherlargecitiesinclude Milan,Naples,TurinandGenoa.MilanandTurinandVenetoregionare themainindustrialcentresofthecountry. Theeconomy Italyseconomyisbasedprimarilyonthetransformationofrawmaterials, whichareusuallyimported,intofinishedproductstosatisfydomesticand foreigndemand.Investmentopportunitiesareencouragedandthe government,regionsandprovincesofferinvestmentincentives,manyof whichencourageindustrialisationinthesouthernpartofthecountry. Italyseconomicdevelopmentvariesgreatlyfromregiontoregion.The northishighlyindustrialisedwithagoodinfrastructureandahighly

Copyright2010UHYInternationalLtd

trainedworkforce.Thesouthrankslowinthosecharacteristicindicators andsignificantincentivesareofferedtoinvestorstodevelopinthearea. TheItalianeconomyconsistsofthreemajorsectors:largeprivate companies,thepublicsectorandthesmallbusinesssector. Essentialindustries Italyranksamongthesevenmostindustrialisedcountriesintheworld. Italianindustryconsistsofafewlargecompaniesandmanysmalland mediumsizedenterprisesspecialisedinavarietyofactivities.Industryis presentlydecliningduetohighlabourcostscomparedtothoseofless industrialisedcountries,whileserviceactivitiesareexpanding. Serviceactivitiesrepresentabout60%ofgrossdomesticproduct(GDP) andincludecommerce,transportation,communications,propertyrental, bankingandinsurance. Themanufacturingindustryrepresentsabout30%ofGDPandincludes construction,textilesandapparel,machinery,chemicals,pharmaceuticals, nonmetalmineralsandtransportationvehicles. Theagricultureindustryrepresentsabout4%ofGDP;itsprincipal productsarewheat,riceandothercereals,vegetables,fruits,wine,oliveoil anddairyproduce. Employmentenvironment TheItalianlabourmarketischaracterisedbyashortageofskillsinsome sectorsandnotableunemploymentinothers.Thelevelofemployment variessignificantlybetweenregions,althoughofficialstatisticsdonot reflectthesituationaccuratelyduetothehighlevelofunofficial employment(theofficialaverageunemploymentratefor2009is8.5%of theactivepopulation). Employeesareclassifiedbylawintofourcategories:workers(operai);low rankingwhitecollarworkers(impiegati);highrankingwhitecollar workers(quadri);andexecutives(dirigenti).Thelawspecificallyprotects lowerrankingemployees. Pricesandinterestrates ItalyseffortstomeettheMaastrichtconvergencecriteriafortheEuropean MonetaryUnion(EMU)haveresultedinastabilisationofpricesanda decreaseininterestratestohistoricallows. Theinflationrateasat31December2009was1%.

Copyright2010UHYInternationalLtd

Foreigntradeandthebalanceofpayments ItalyisamemberstateoftheEUandalsoadherestotheEMU.Thecountry isasignificantnetimporterofenergy,chemicalsandferrousandnon ferrousmetals,andisasignificantnetexporterofmanufacturedgoodsand textiles. Italysforeigntradeinmerchandiseshowsalowsurplus,whileservices andtransfersproduceconsistentsurpluses. Financialsystem Thecentralbank,theBankofItaly,stabilisesthemoneysupplyand supervisesbankingandcreditinstitutions. Historically,theBankofItalysprimaryconcernwastoassurethestability ofthecreditsystem.Itcurrentlyencouragesthemergerofthesmallest bankinginstitutionswithlargerinstitutionsandpromotesthe technologicalevolutionofbanks,assistingtheminthemodernisationof thepaymentsystem. Thebankingsystem,supervisedbytheBankofItaly,consistsprimarilyof: Ordinarybanks,whichincludeprivatecompaniesandthe subsidiariesandbranchesofforeignbanksand Cooperativepeoplesbanks(banchepopolari),whichare generallyactivewithinprovincesorregions.

ABankDepositInsuranceFund(FondoInterbancariodiGaranziadei Depositi)wascreatedin1987tocoverdepositsinmeasuresappropriateto differentbalances.Banksthatparticipateinthefundhold99%ofItalys customerdeposits.Theymustmeetstandardsofcapitaladequacy,asset qualityandbaddebtratiossetbythefund. Banksarecompetingbyengaginginnewactivitiesandacquiringinterests inotherfinancialactivities,suchasmerchantbanking,leasing,factoring, managementofinvestmentportfolios,paymentservicesandinformation technology.

Copyright2010UHYInternationalLtd

3.

Foreign investment

Italyencouragesforeigninvestmentbyofferingforeignownedentitiesthe sameincentives,primarilysubsidisedloans,cashgrantsandtaxcredits, availabletoentitiesownedbyItaliannationals.Financialassistanceand adviceareavailablefrombanks,specialcreditinstitutions,stateagencies andspecialisedconsultants.Foreigninvestorsmayobtainotherincentives fromlocal(regionalandprovincial)authoritiesandtheEU. Exchangecontrols ForeignexchangerestrictionsandcontrolswereabolishedinMay1990 followingtheimplementationoflegislationintendedtoalignItalian regulationswiththeEUdirectiveonthefreemovementofcapital. Forstatisticalpurposes,banksfiledetailsofforeignexchangetransactions forinboundandoutboundmovementsoffundswiththeFinancial InformationCenter(UnitdiInformazioneFinanziaria)controlledbyBank ofItaly.Transactionsoflessthan15,000areaggregatedwithother transactionsforreportingpurposes,whilethoseabovethisamountare reportedseparately. Individualsandlegalentitiesareclassifiedasresidentsornonresidents forexchangecontrolpurposes.Thefollowingareregardedasresidents: ItaliancitizenshavingtheirhabitualabodeinItaly,aswellas corporatebodies,associationsandorganisationshavingtheir centreofactivityinItaly Italiancitizenshavingtheirhabitualabodeabroadiftheyare employedinItalyorcarryoutbusinessorprofessionalactivitiesin Italymorethanoccasionally ForeigncitizenshavingtheirhabitualabodeinItalyiftheyare employedinItalyorcarryoutbusinessorprofessionalactivitiesin Italymorethanoccasionally Corporateentities,associationsandorganisationshavingtheir centreofactivityabroadiftheyhaveapermanentestablishmentin ItalythroughwhichtheycarryoutactivitiesinItaly.

Entitiesthatmaintaincurrentaccountsordepositswithbanksmustnotify themofchangesintheirresidenceclassification. Nonresidentsmayenterfreelyintothefollowingtransactions: Transferpaymentsforexports,creditinstruments,securitiesand otherassetsdenominatedinEurosorinforeigncurrencies

Copyright2010UHYInternationalLtd

MaintainwithbankstransferableaccountsanddepositsinEuros andforeigncurrencies(theseaccountsanddepositsareknownas contiesteri) SellcertainfinancialproductsandservicesinItaly.

Investmentincentives Thenumerousandvariedincentivesaregenerallydirectedtoenhancethe economicdevelopmentofthecountryand,inparticular,toacceleratethe industrialisationofsouthernItaly,includingSicilyandSardinia (Mezzogiorno),andofcertainlocalitiesincentralandnorthernItalythat arerecognisedasdepressedareas.Incentivesarealsoavailableto encouragetechnologicalinnovationandtoassistinthedevelopmentof exports.Incentivestaketheformofsubsidisedloans,cashgrants,leasing assistance,taxcreditsandsubsidisedlabourcosts. Industrialenterprises,tradingcompanies,serviceenterprises,artisans, consortia(groupsofentities)andwholesaletradecentresareeligiblefor incentivestoinvestintheconstructionofnewplants,theexpansionof existingplants,thedevelopmentofabandonedfactories,plant modernisation,companyreorganisations,industrialconversions,services, researchprojectsandinnovativeinitiatives.Mostincentivesareobtained throughspecialcreditbankdepartmentsandstateagencies,whichassess thefeasibilityofbusinessplansandthecreditworthinessofthe entrepreneurs. Manyincentivesarespeciallydesignedtoassistinvestmentsinthe Mezzogiorno.Incentivesavailableinotherregionsarenotasextensiveas thoseintheMezzogiorno.Recently,incentivestotheMezzogiornoareas arebeingdiminishedduetoEUrules. Sourcesoffinanceforforeigninvestors ThesourcesoffinanceusedbyItalianentitiesarealsoavailabletoforeign investors.Theprimarysourcesoffinancefornewenterprisesare subsidisedloansandmediumtermloansatfixedorvariablemarketrates. Importingandexporting BecauseItalyfollowstheprinciplesoftheGeneralAgreementonTariffs andTrade(GATT),andtheregulationsoftheEUcustomsunionandother internationalagreements,mostgoodsmaybefreelyimported.Existing restrictionsareintendedtoprotecttheEUeconomy,sothatthe importationofcertainitemsrequiresadvanceauthorisation. Exportsaregenerallyunrestricted.Exportersmustcomplywiththe requirementstosubmitacustomsofficedeclaration.

Copyright2010UHYInternationalLtd

SpecialexportinsuranceisavailablefromtheAgencyforExportCredit Insurance(SACE)forexportsofdurablegoodsmachinery,equipment andtransportvehiclesaswellasforservices,studiesanddesignprojects, andforcivilengineeringworkscarriedoutabroad. Toencouragesuchexports,fundingisavailablefromspecialcreditbank departmentsandstateagenciesintheformofmediumtermloansatlow interestrates. Registrationofintellectualproperty ThroughtheCentralPatentOffice(UfficioCentraleBrevetti),Italianlaw providespatentprotectionfornovelinnovations,suchascreative inventionsandutilitymodels,whicharesuitableforindustrialapplication. Foreignindividualsmayobtainpatentsforindustrialinventionsorutility modelsonthesametermsasItaliancitizens. Licensingarrangements Licensingoffersameansofprofitingfrominventionswithouttheneedto investsubstantialcapitalandriskeconomicfailure. ForeignentitiesmayfindlicensingarrangementsattractiveinItalybecause thegovernmentimposesnoexchangecontrollimitationsonthetransferof royaltiesabroad.

Copyright2010UHYInternationalLtd

4.

Setting up a Business

ForeigninvestorswhointendtoconductcommercialactivitiesinItalycan choosefromawiderangeoflegalentities.EffectivefromApril1,2010, communicationstoTaxAuthority,RegisterofCompaniesandLabour AuthoritieswillbemadethroughthesocalledSoleCommunicationthat willgrantshortesttimetosetupabusinessinItalywithrespecttothe currentsituation.Wedescribebelowthestructureofthemostcommon businessentities. Personalcompanieswithoutlimitedliabilitystatus: Snc(societinnomecollettivogeneralpartnership):apartnership whereallpartnersarejointlyliableforallofthefirmsdebtsand obligations Sas(societinaccomanditasemplicelimitedpartnership):a partnershipwithtwodifferentcategoriesofpartners;silent partners(sociaccomandanti)liabilityislimitedtotheextentof theirpercapitalcontribution;orgeneralpartners(soci accomandatari)jointlyliableforalldebtsandobligationsofthe partnership.

Companieswithlegalpersonalityandlimitedliabilitystatus: SpA(societperazionicorporation):inwhichtheparticipants equityisrepresentedbyshares Srl(societaresponsabilitlimitatalimitedliabilitycompany):in whichthecapitalstockisrepresentedbyquotasandnotbyshares Sapa(societinaccomanditaperazionilimitedpartnershipby shares):thiscombinessomeofthefeaturesofbothalimited partnershipandalimitedliabilitycompany.Itisacompanyin whichatleastonememberhasunlimitedliabilitywhilethe liabilityofremainingmembersislimitedtotheextentoftheir sharecapitalsubscriptions.

LtdtypeSpAandSrl BothSpAandSrlhavealegalpersonality.ThesharesofaSpAmaybe quotedonthestockexchange;thequotasofaSrlmaynot.Thesharesofa SpAaregenerallyfreelytransferable;thequotasofaSrlmayberestricted bythearticlesofincorporation.TheannualfinancialstatementsofaSpA andaSrlmustbepublished. TheminimumcapitalstockforaSpAisEuros120,000,whileforaSrlitis Euros10,000.

Copyright2010UHYInternationalLtd

Singleowner BothSpAandSrlcanbeformedbyasoleshareholder.Thesole shareholder,whetheralegalornaturalperson,usuallyhaslimitedliability forthecompanysobligations.However,thelimitedliabilitybenefitislost ifcertainformalitiesarenotmet.Therefore,itisnormallyadvisableto haveaminimumoftwoshareholders. Corporatelaw CorporatelawisprovidedmainlybytheCivilCode. TheSpAtypecompanywillbeabletochoosefromamongthreedifferent modelsofcorporategovernancebasedonagroupofthreebodies: managementbody,managementcontrolbodyandauditbody: 1. Atwolevelordualisticmodel,wherebytheconductofthe businessrestswiththeBoardofManagement(Consigliodi gestione)andcontroliscarriedoutbytheBoardofSurveillance (Consigliodisorveglianza),thathassomeattributionsofthe generalmeetingofaSpaadoptingthetraditionalmodel(i.e. approvalofthefinancialstatements).ThemembersoftheBoardare appointedbytheshareholders; 2. Aonelevelormonisticmodel,wherebytheconductofthe businessrestswiththeBoardofDirectors(Consigliodi Amministrazione),appointedbytheshareholders;controlis carriedoutbytheManagementControlCommittee(Comitatoper ilcontrollosullagestione),composedofthemembersoftheBoard andappointedbythelatter. Inbothcases,accountsarecontrolledbyanauditingcompanyor auditor; 3. Atraditionalmodel:thefollowingisasummaryofthemost relevantprovisionsunderthetraditionalmodel,whichisbyfar themostusedinpractice;i.e.theSrltypecompany(themost commoncompanytypeinItaly)willbeabletoapplyonlythe traditionalmodel. SpA Underthetraditionalmodel,thecorporatestructureismadeupas follows: Boardofdirectors Boardofstatutoryauditors Registeredauditor/auditingfirm.

Copyright2010UHYInternationalLtd

10

BoardofDirectors(ManagementBodyOrganodigestione) ASpAcanbeadministratedbyasoledirectororbyaboardofdirectors. Inthislattercase,oneofthemisappointedaschairman.Itis recommendedthatatleastoneofthedirectorsappointedisalocal resident,asitmaysimplifyanumberofprocedures(eg.signatureof annualtaxreturnandsocialcontributionreturns).Otherwisealocalproxy holdermustbeappointed. Thedirectorsneedtobeindividuals.Withtheexceptionofthose appointedwiththearticlesofincorporation,directorsareelectedbythe shareholdersresolutions.Adirectorstermofofficemaynotexceedthree years,butitmayberenewed. Intheinstanceoftheresignationofthemajorityofdirectors,thewhole boardisvoidandashareholdersmeetingmustbecalledtoappointanew board.Directorscanberemovedbyaresolutionoftheshareholders. Aboardmeetingisdulyconstitutedifthemajorityofdirectorsarepresent, unlessthearticlesofassociationprovideforalargerquorum.Underthe bylaws,attendancemaybepermittedviatelecommunications. Resolutionsarepassedwhenapprovedbythesimplemajorityofthose presentunlessprovidedotherwise.Directorsmaynotvotebyproxy. Thedirectorsremunerationorcompensation,includingapossibleshareof theprofits,isnormallysetoutinthearticlesofassociationorfixedbythe shareholdersinageneralmeeting. Managingdirectors Theboardofdirectorscandelegatesomeofitsmemberstoperform specifictasks.Ifthedelegationisgiventooneorafewdirectors,theyare appointedasmanagingdirectors. Thefollowingpowersmaynotbedelegatedinanyinstance: Todrawupthefinancialstatements Toincreasethesharecapital Tocalltheshareholdersmeetinginthecaseoflosseshigherthan onethirdofthesharecapitalandtoaskthecourttoreduceshare capital Topreparemergerordemergerprojects.

Themanagementstructureofthecompanyoftenincludesgeneraldirectors (direttorigenerali).Theseareemployeeswhoassisttheboardofdirectorsin theexerciseofitsfunctionsandareempoweredtorepresentthecompany. TheCivilCodeextendstheregulationsontheresponsibilityofthe directorstothegeneraldirectors.

Copyright2010UHYInternationalLtd

11

Legalrepresentative Thearticlesofincorporationappointthedirectorswhomayrepresentthe company.Failingthis,thecompanyisrepresentedbythedirectors appointedbytheshareholdersmeeting.Ifnosuchappointmenthasbeen made,theboardofdirectorsmayspecifywhoisentitledtorepresentthe companyormayreservethisrighttoitself.Usually,however,the chairmanandthemanagingdirectorsareentitledtobelegal representatives. StatutoryAuditors(ManagementcontrolbodyOrganodicontrollo sullagestione) Theboardofstatutoryauditors(collegiosindacale)iscompulsoryforaSpA. Itcomprisesthreeorfiveeffectivemembers(sindaci)andtwoalternates. Thememberscannotbeemployeesordirectorsorcloserelativesof directors;theycannotbestatutoryauditorsofsubsidiaries,parent companiesorcompaniesunderjointcontrol. Theremunerationofthemembersoftheboardisdeterminedeitherinthe articlesofassociationorbytheshareholdersinageneralmeeting.Thefirst membersoftheboardareelectedforthreeyearsandtheycannotbe removedbytheshareholdersmeetingunlessthereisfaircause. Theboardofstatutoryauditorsmustmeetevery90days,optionallyvia telecommunications.Theboardofstatutoryauditorsisdulyconstitutedif themajorityofstatutoryauditorsarepresent,andresolutionsarepassed whenapprovedbytheabsolutemajorityofthosepresent. ThemostspecificdutyoftheboardofstatutoryauditorsinaSpAisto controlthemanagementofthecompanyinrespectofthelawandits articlesofassociation;however,articlesofassociationofSpAs,whichare notlistedandarenotrequiredtoprepareconsolidatedfinancial statements,mayprovidethattheboardofstatutoryauditorsisalso performingtheperiodicalAccountingcontrol(everythreemonths)and theexaminationoftheannualfinancialstatementsinaccordancewith recommendedauditingstandards,withaviewtoexpressanopinion thereon. RegisteredAuditor/Auditingfirm(AuditbodyOrganodicontrollo contabile) Unlessotherwiseprovidedbythearticlesofassociationandaspermitted bythelaw(seeabove)themostspecificdutyoftheRegisteredAuditor/ AuditingfirmistoperformtheAccountingcontrolasdefinedabove.

Copyright2010UHYInternationalLtd

12

TheAuditbodyisappointedbytheshareholdersmeetingaftertheboard ofstatutoryauditorshasreported.TheShareholdersMeetingsetsthe remunerationtobepaidfortheentiretermofoffice. Ineligibilityrulesdescribedinrespectoftheboardofstatutoryauditors alsoapplytoindividualcomponentsoftheAuditbody. Thetermofofficeisthreeyearsandcanberenewednomorethantwice. Generalmeeting Shareholdersmeetingsareclassifiedasordinary(assembleaordinaria)or extraordinary(assembleastraordinaria):thedifferencebetweenthese classificationsconcernsthedecisionsthatcanbetakenandthelegal requirementsneededforthetakingofsuchdecisions. Inanycase,anannualgeneralmeetingmustbeheldwithin120daysofthe companysfinancialyearend. Thenormalbusinessofanordinarymeetingis: Approvalofthefinancialstatements Electionofdirectorsandthemembersandchairmanoftheboard ofstatutoryauditors Determinationoftheirremunerations,unlessalreadydetermined bythearticlesofincorporation Discussionofallothermattersrelatingtotheperformanceofthe companyandtheresponsibilityofthedirectorsandstatutory auditors.

Theordinaryshareholdersmeetingisdulyconstitutedwiththe attendanceofanumberofshareholdersrepresentingatleasthalftheshare capital;resolutionsarepassedwiththeabsolutemajority. Anextraordinarymeetingisrequiredtodealwithsuchmattersas: Changesinthearticlesofincorporation Theissueofbonds Theelectionsofliquidators.

Resolutionsoftheextraordinaryshareholdersmeetingarepassedwiththe positivevoteofanumberofshareholdersrepresentingmorethanhalfof thesharecapital. Srl ThisisthemorecommoncompanytypeinItaly.Thetraditionalmodel describedabovegenerallyappliesalsotoaSrl,withanumberof simplificationsinrespectofaSpAandalargedegreeofflexibilityas regardstheinternaldecisionmakingprocessandtheallocationof responsibilitiesbetweenquotaholdersanddirector(s).

Copyright2010UHYInternationalLtd

13

However,thelawexpresslystatesthatquotaholdersareentitledtovote onthefollowing: Approvalofthefinancialstatements Appointmentofdirectors Appointmentofstatutoryauditorsoranauditor Changestothearticlesofassociation Materialchangeinthecompanyspurpose.

Quotaholdersmeetingsaredulyconstitutedifquotaholdersrepresenting atleasthalfofthecapitalarepresent.Resolutionsarepassedwhen approvedbyabsolutemajority.Intheeventofchangestothearticlesof associationandresolutionsinvolvingamaterialchangeinthecompanys purpose,resolutionsarepassedwhenapprovedbyanumberofquota holdersrepresentingatleastahalfofthecapital.Otherparticularfeatures regardingSrlsarelistedbelow: Boardofdirectorsandquotaholdersresolutionscanbetakenby consentexpressedinwriting,withoutaformalmeetingbeing held; Directorscanbeappointedforanundefinedperiod; Unlessdifferentlystatedinthebylaws,aboardofstatutory auditorsoraregisteredauditor/auditingfirmisgenerallynot requiredif(a)thecompanyscapitalislessthantheminimum sharecapitalrequiredforSpAtypecompanies,120,000;orif(b) thecompanyhasnotexceededtwoofthefollowingparametersin thefirstyearofoperationsor,afterthat,fortwoconsecutiveyears: totalassetsreportedinthebalancesheet,4,400,000;revenues fromsalesandservices,8,800,000;averageemployeesduringthe year,50units; Bothmanagementcontrolandauditfunctionsarenormallycarried outbytheboardofstatutoryauditors,ifrequired; Nodistinctionexistsbetweenordinaryandextraordinary shareholdersmeeting.

Minutes Allofthemeetingsheldbyshareholdersorquotaholders,theboardof directorsandstatutoryauditorsmustbeprintedinspecificbooksprovided bylawandproperlystampedbeforetheiruse.Determinationofasole directormustbeprintedinaspecificbooktoo. Jointventures SeveralformsofjointventuresmayoperateinItaly.Examplesrangefrom participating(unincorporated)associationstoconsortiaforspecial

Copyright2010UHYInternationalLtd

14

purposestothemostflexibleformoftemporarycooperationamong enterprisesjoinedbycontracttocarryoutprojectsordeliverservices. Branchesofforeigncorporations AforeigncorporationthatformsanItalianbranch(sedesecondaria)is subjecttoItalianlawbecauseabranch,unlikeasubsidiary,isnotanentity separatefromthecompanythatisresponsibleforitsobligations.Atthe timethatthebranchisformed,theforeigncompanymustnotifythelocal courtandprovidethenamesoftheresidentpersonsrepresentingthe companyinItaly.Itmustfilespecifieddocumentsrelatingtothecreation ofthebranchwiththeRegisterofEnterprises.Registrationwiththelocal chamberofcommerceisalsorequired. Antitrustlaw Freecompetitionisprotected(aswellastheprovisionsoftheRome Treaty)bytherulesdictatedbytheItalianantitrustlaw,whichismodelled aftertheEuropeanprovisions. TheenforcementofsaidItalianlawisensuredbyanadhocAuthority (AutoritGarantedellaConcorrenzaedelMercato). OtherAuthoritieshavebeencreatedinordertocontrolthecompliance withantitrustlawprovisionsinspecificsectors(telecommunications, energy,etc.). Privacylaw Theprotectionofpersonaldataprovidedbyaprivateindividualora companyhasbeenintroducedbyaLegislativedecree,calledPrivacy Code. TheCodestatesthattheconcernedpartyisentitledtotheprotectionof rightsthatrefertotheexistenceandcommunicationofpersonaland sensitivedata,theknowledgeofdataprocessingprocedures,theinvention andaccesstoitsowndataand,finally,theobjectionoftheirprocessing. Theprocessingofpersonaldatadestinedtosystematiccommunicationor spreadingmaybeentrustedtoaperson,company,publicadministration andanyotheragency,associationorbody. Dataprocessingmustbecarriedoutbyadoptingsuchsafetymeasuresand technicalmeansasmayguaranteesafetyandconfidentiality.These measuresincludetheProgrammaticDocumentonSafety(socalled DPS),bywhichthepersoninchargeoftheprocessingdefinesitspolicies forthesafetyandprotectionofpersonaldata,byindicatingthesafety measuresalreadyadoptedandthosetobeadopted,inordertoguaranteea suitablelevelofprotectionofpersonaldata.

Copyright2010UHYInternationalLtd

15

Failuretoadoptthesafetymeasuresisanoffencewithaspecificpenalty system. Administrativeliabilityoflegalentities TheDecree231/2001hasintroducedintheItalianlegalsystemtherulethat liabilityarisesnotonlyontheheadoftheindividualandactual perpetratoroftheoffence,butforlegalentitiesaswell. BeforetheenforcementoftheDecree,entitiescouldbeheldliableonly underthecivilgroundandchargeabletopayfinesintheeventofthe perpetratorinsolvency. TheDecreesetsforthasortofliabilityexemptioninfavouroftheentities abletoprovetohaveadoptedandeffectivelyimplementedthe appropriateorganisational,managementandcontrolmodelsinorderto preventoffencesastheoneoccurred. Thecontrolsystem,assetforthbythenorm,isoptionalandnot compulsory.However,itisevidentthatintheeventofanadversesentence underthecriminalcodetheentitycouldbepunishedwithsanctionsas providedforbytheDecree,while,ontheotherhand,shareholderscould takeactionagainstthecompanysdirectorsfornegligenceintheprior arrangementoftheorganisation,managementandcontrolmodelinorder totakeadvantageoftheexemptionclause. Therepresentativeassociationsofentitiesdrawupguidelinesonwhich eachentitymaystarttoimplementitsspecificorganisational,management andcontrolModel. Bankruptcyandproceedingsfordistributionamongcreditors AccordingtotheItalianbankruptcylaw,anindividualentrepreneurora company,whichisinastateofinsolvency(i.e.whenduetonon performanceand/orotherexternalfactors,heappearstobeunableto regularlyfulfilhisobligations),isdeclaredbankruptbythecourtofthe placewheretheenterprisehasitsmainoffice. Abankruptcyprocedureconsistsoftheliquidationofthebankruptsassets andsubsequentintegralorpartialpayingoffofcreditors. Thisprocedure,however,doesnotapplytosmallentrepreneurs(i.e. persons,individuallyorjointlycarryingouttrade,who,alsoalternatively, didnotmakeinvestmentsforoverthreehundredthousandeurosand/or didnotobtainaveragegrossearningsofthelastthreeyearsforatotal amountofovertwohundredthousandeurosand/ordidnothold liabilities,evenifnotexpired,foratotalamountofeurofivehundred thousandeuros). 16

Copyright2010UHYInternationalLtd

Thebankruptcyadjudicationdeprivesthebankruptadministrationofits assets.Whenbankruptcyinvolvescompanies,thelawlaysdown provisionsforthebehaviourofdirectors,generalmanagers,andthe membersofcontrolbodies,liquidatorsandshareholders. Anarrangementwithcreditorsmaybereachedduring(concordato fallimentare)orbeforethebankruptcyprocedure(concordatopreventivo). Inthearrangementduringthebankruptcyprocedure,theproposalmaybe submittedbyoneormorecreditors,byathirdpartyorbythebankrupt company.Suchproposalsmayprovideforthesubdivisionofcreditorsinto classes;differenttreatmentsforcreditorsbelongingtodifferentclasses, indicatingthereasonforsuchdifferentiation;therestructuringofdebts andthesettlementofcreditsinwhateverform;areportofabusiness consultanthastobeattachedtotheplansconcerningtherestructuringof debtsandthesettlementofcredits.

Copyright2010UHYInternationalLtd

17

5.

Labour

Employmentenvironment TheItalianlabourmarketischaracterisedbyashortageofskillsinsome sectorsandnotableunemploymentinothers.Thelevelofemployment variessignificantlybetweenregions,althoughofficialstatisticsdonot reflectthesituationaccuratelyduetothehighlevelofunofficial employment(theofficialaverageunemploymentratefor2009is8.5%of theactivepopulation). Employeesareclassifiedbylawinfourcategories:workers(operai);low rankingwhitecollarworkers(impiegati);highrankingwhitecollarworkers (quadri);andexecutives(dirigenti).Thelawspecificallyprotectslower rankingemployees. Employersmaychoosetorecruitworkersiftheyhaveregisteredwitha locallabouroffice(ufficiodicollocamento)andappearonalocal unemploymentlist. Toenterprisesemployingmorethan35people,thelawrequiresthehiring ofaspecifiedproportionofdisabledworkers. Duringthelastyearsamajorreformofemploymentandthelabourmarket wasintroducedandwasaimedatexpandingemploymentandovertaking restrictionsandthestiflednatureofthelabourmarket. Themainfeaturesprovidethefollowingadditionalformsofemployment: Joboncall:thejoboncallcontractisanemployeecontract,and canbeoneitheratermorpermanentbasis.Thiscanbeusedfor discontinuousorintermittentworkperformedaccordingtoneeds identifiedincollectivecontractsor,provisionally,bytheLabour Ministry; Jobsharing:thejobsharingcontractisdefinedasonewhereby twoworkersassumejointandseveralliabilityforasingleand identicalworkobligation; Staffleasing:withincertainlimitsandundercertainconditions, companiescannowusetheservicesofpeoplewhoarenottheir ownemployees.Astaffleasingcontractcanbeenteredintobyany userwhorequestspersonnelfromanauthorisedprovider.The agencyisrequiredtopaythemandatorysocialsecurity,healthcare andworkerscompensationcontributions,butthelandlordand thelesseearejointlyandseverallyliablefortheworkerswages andsocialsecuritytreatment;

Copyright2010UHYInternationalLtd

18

Entrylevelcontracts:thepurposeofthiscontractistoenable certainkindsofpeopletoenterorreenterthelabourmarketvia anindividualtrainingorretrainingproject; Apprenticeshipcontracts:underthisschemetheemployerssocial securitychargeisreducedbyafixedpercentage.

Themaincharacteristicsoftheabovecontractsaretheflexibilityinthestaff managementand,insomecases,thereducedsecuritychargebelow normallabourrelationships. Workingconditions Wagesandsalaries Minimumwagesarefixedbynationwidecollectivebargainingagreements betweenunions,theAssociationofItalianEnterprisesandthegovernment. Theresultingcontracts,whichhaveforceoflaw,establishminimumwages forentireindustries,whetherornotaparticularemployeroremployee waspartytothenegotiations.Inadditiontonationalcontracts,companies alsonegotiatetheirownterms(contrattiintegrativi),usuallyintheyear afternationalcontractsarenegotiated. Annualsalariesarepaidin13or14instalments,dependingonwhich nationalcollectivecontractapplies.The13thinstalmentispaidattheend ofDecemberandthe14th,ifdue,ispaidinJune. Workinghours,holidaysandvacations A40hourworkingweekisconsideredstandardforallemployees. Overtimeisgenerallypermitted,butislimitedbylawtotwohoursaday andmustbeauthorisedbythecompanyspersonneldepartment.These limitsmaybereducedbycollectivebargainingagreements. Overtimeratesmustexceednormalratesandcompaniesmustpaythe nationalsocialsecuritysystema15%wagepenaltyforhoursfrom41to48 perweekand20%forhoursexceeding48. Inadditionto10nationalholidays,eachcitycelebratesthefeastdayofits patronsaint.Italyalsohasfournonspecificholidays,whichworkersmay takeattheirconvenience,withcertainlimitationstoensurethesmooth runningofthefactory,andtwodaysworked,butpaidatspecialrates. Threeweeksofvacationarecompulsoryduringthefirsttwoyearsof employment.Thereafter,fourweeksareusuallygiventobothofficeand factorypersonnel.

Copyright2010UHYInternationalLtd

19

Terminationofemployment Thestatutorynoticetobegivenonterminationofemploymentvaries considerablyaccordingtoseniorityandthecategoryoftheemployee.The minimumnoticeperiodvariesfrom15daystosixmonths.Thestatutory noticemustalsobeobservedbytheemployee,whomustgivenoticetothe employerinaccordancewiththeperiodsprovidedbylaw.Iftheemployee leavesemploymentwithoutgivingpropernotice,theemployermayretain anindemnityproportionaltothenoticeperiod. Dismissalispossibleincasesofseriousmisconduct,butinpracticeitis difficulttoestablishthatsuchmisconducthasoccurred.Ifacourtfinds thatadismissalwasunfair,theemployerconcernedmusteitherreinstate theemployeeorpayadditionalcompensation.Disputesconcerning terminationofemploymentcanprovedifficultandexpensive. Allemployeesareentitledbylawtoreceivedeferredcompensation payableattheendoftheiremploymentrelationship.Theemployermust annuallyaccrueanamountthatcanbealternativelymaintainedbetween companysliabilitiesor,uponemployeesrequest,paidinto supplementarywelfarebodies.Theannualaccrualamountstothe employeesyearlytotalcompensationdividedby13.5.Theunpaidbalance isincreasedineachofthesubsequentyearsatarateof1.50%plus75%of thecostoflivingindex.Thisamount,knownasTrattamentodiFine Rapporto(TFR),mustbepaidwithinsixmonthsoftheterminationof employment.Theemployeemayrequestanadvancepaymentofaportion ofTFRtobuytheirfirsthomeorforcertainextraordinarymedical expenses. Tradeunions ApproximatelyhalfofallItalianworkersbelongtosometradeunion.The percentagevaries,however,fromsectortosector.Therighttoformunions andtherighttostrikeareconstitutionallygrantedprerogatives. Thethreemainunionsare:ConfederazioneGeneraleItalianadei Lavoratori(CGIL);ConfederazioneItalianaSindacatiLavoratori(CISL); andUnioneItalianadelLavoro(UIL). Eachunionusuallyrepresentsapoliticalpartyandhastheopportunityto negotiatedirectlywiththegovernmentandtheAssociationofItalian Enterprises(Confindustria)fornationalcollectiveagreements,whichare validforanentireindustry.

Copyright2010UHYInternationalLtd

20

Specialrequirementsforforeigners Prospectiveemployerswhohireforeignersmustsecureworkpermitsfrom theLabourMinistryandsupplyproofthattheforeignemployeehas certainqualificationsnotpossessedbyunemployedItalians.Managersand otherexecutivesofforeignownedcompaniesaregenerallyassumedto havethosequalifications. Itmaytakethreeorfourmonthsforaforeignertoobtainaworkpermit fromanItalianembassyabroad.Employerswhohireforeigners(aswellas Italians)withoutworkpermitsmaybesubjecttomonetaryorcriminal penaltiesorboth. EUcitizenssecondedtoItalydonotrequireworkpermits.Aworkpermit forsecondmentisgenerallyrequestedfornonEUcitizens.However, internationalagreementsmaymodifythisrequirement. Socialsecurity Thecompulsorysocialsecurityinsuranceschememanagedbythe NationalInstituteforSocialSecurity(INPS)coversallemployeesandtheir families,includingforeigners,withawiderangeofbenefits.Thefollowing aretheprimarybenefitsofferedtoallworkers: Oldagepensionafteratleast20yearsofcontributions (pensionableageis65formenand60forwomen),disability pensionandsurvivingdependentspension Unemploymentbenefits Sicknessbenefits Maternitybenefits Statesubsidisedmedicalcare Insuranceagainstaccidentsandoccupationaldiseases Subsidiesintheeventoflabourredundancyresultingfroma temporaryfinancialcrisisorsimilarsituation.

ContributionstotheNationalMedicalInsuranceScheme,whichprovides medicalassistancetoemployeesandtheirfamilies,ispaidaspartoflocal taxdueonincome(IRAP).Medicalassistance,dependingonthe employeesincome,covershospitalisationinapublichospital,afamily doctor,somemedicinesandcertainmedicaltestsandexaminations.The NationalMedicalInsuranceSchememayalsoreimbursemedicalcosts sustainedabroadifapprovedinadvance. Socialsecuritycontributionratesvarydependingonthetypeofbusiness andthecategoryoftheemployee.Somecontributionsarepayableontotal grosssalariesandothersaresubjecttoawageorsalaryceiling;theaverage

Copyright2010UHYInternationalLtd

21

contributionisapproximatelybetween36.19%to42.27%dependingonthe typeofbusiness.Ofthisapproximately8.89/9.19%ispaidbythe employee. Withafewexceptions,thecontributionsarebasedongrossearningspaid incashorinkind. INPScontributionsmustbepaidonthe16thdayofeachmonth. Insurance Thereisacompulsorypublicinsuranceforemployees,calledINAIL (IstitutoNazionaleAssicurazioniInfortunisulLavoro).Ratesnormally applicabletoatradingcompanyvaryfrom0.51.3%ofthegrossannual salaries,dependingonthedegreeofriskincurredbytheemployee.For example,employeeswhohavetouseacarfortheirjobpayahigher premium. TheINAILcontributionispaidonceayearon16February.Managers fundsarepaidonaquarterlybasisonthe10thdayofthefollowingmonth thereferenceperiod. AforeignerenteringItalywithaworkpermitissubjecttotheItaliansocial securityscheme:EUregulationsandinternationalbilateralagreements, however,maymodifythisobligation.

Copyright2010UHYInternationalLtd

22

6.

Taxation

Italiantaxationcanbeunderstoodbyexaminingthetaxationofboth companiesandindividuals. Corporationtaxes IncometaxesapplicabletoalimitedliabilitycompanyinItalyincludethe followingtaxes: IRES(ImpostasulRedditodelleSociet):nationalcorporateincometaxwas setat27.5%.Lossescanbecarriedforwardanddeductedfromfuture profits,normallyforfiveyears,exceptforlossesrealisedinthefirstthree yearsfromtheincorporationofthecompany,whichcanbecarried forwardwithoutanylimitationoftimeduringthelifeofthecompany. IRAP(ImpostasulRedditodelleAttivitProduttive):regionaltaxon productiveactivitiesat3.9%.Itischargedonthenetvalueproductionin commerceandmanufacturing.Thenetvalueofproductionisdetermined bythegrossturnoverplustheincreaseinstocktradeandworkinprogress lessexpensesofproduction(depreciationincluded).Animportantfeature ofthistaxisthatbothtaxinterestspaidandpayrollcostsarenot deductible.10%ofIRAPcanbedeductedforIRESpurposes. Thefollowingtaxreturnsmustbefiled: Taxpaymentsaredueassetoutbelow: Incometaxesduebythecompany:twoadvancepaymentsplusabalance payment.Thebalancepaymentandthefirstadvanceareduewithinthe 16thdayofthesixthmonthfromtheendofthefinancialyear.Thesecond advanceiswithintheeleventhmonthofthefinancialyear.Asof31 December2009,advancesarecalculatedon100%ofIRESandIRAPfrom thefiscalyear2005.Thefirstadvanceamountsto40%ofthetotal,while thesecondamountsto60%. VAT:monthlyorquarterly,dependingonturnover,onthe16thdayof eachmonth. AnnualVAT(ImpostasulValoreAggiunto)basedatareturn AnnualVATreturn Annualincomereturn AnnualIRAPreport Annualreturnofpaymentssubjecttowithholdingtax Intrastatreport:monthly,quarterlyorannually,dependingonthe amountoftransactions.

Copyright2010UHYInternationalLtd

23

Withholdingtaxesandsocialcontributionsonsalaries,commissionsand professionalfeespaid:monthly,onthe16thdayofeachmonth. Stamptaxonacompanysbooks(ImpostasulleVidimazioni):annuallyby16 March(309.87ifstockcapitalislowerthan516,456.90;otherwise, 516.46). TaxandsocialsecuritypaymentsduebyVATregisteredentitiesare requiredtobemadeelectronically,whateverornotanintermediaryis involved. Grossincome Grossincomefortaxpurposesconsistsofincomerecordedinthe companysfinancialstatements,adjustedforrequirementsofthetaxlaw. Businessincome Businessincomeincludesincomefromatrade,interest,royalties, dividendsandcapitalgains. Capitalgains Capitalgainsaredefinedasthesaleproceedslessnetbookvalue.Thereis anonfavourabletaxrateforcorporationsearningcapitalgainsthatmay beincludedintaxableincome;however,eitherentirelyintheyearrealised orinequalannualinstalmentsoverafiveyearperiod,atthetaxpayers discretion.Nointerestisdueonthedeferralofthetaxliability. Participationexemption Undercertainconditions,the95%ofcapitalgainsrealisedindispositionof participationsheldincompaniessubjecttoIRESisexcludedfromtaxable income. Rents Taxableincomefromrealproperty,includingfarminglandandbuildings notusedforbusinesspurposes,iscomputedbasedonacadastralsystem (catasto),inwhichalllandandurbanbuildingsareclassifiedaccordingto theirestimatedordinaryaverageincome.Thedeemedincomeiscalculated bymultiplyingthebasicvaluesassignedinthecadastralrecordsby applicablerates,whichareperiodicallyrevised. Dividendsfromresidentcompanies 95%ofdividendsreceivedbyaresidentcompanyfromanotherresidentor nonresidentcompanyareexcludedfromtaxableincome.

Copyright2010UHYInternationalLtd

24

Dividendsfromnonresidentcompanies Dividendsfromsubsidiariessituatedincountriesthathaveprivilegedtax systemsarefullytaxableforIRES. Interestandroyalties Interestandroyaltiesreceivedbycorporationsfromanysourcemustbe reportedattheirgrossamountbeforewithholdingtaxisdeducted. Otherforeignsourceincome Otherforeignsourceincomeisincludedintaxableincomeforcorporate incometaxpurposes. Treatmentofgroupsofcompanies Theoptionforgrouptaxationisirrevocableforaminimumperiodofthree years.Theoptionmustbeexercisedbythecontrollingcompanyandbyits subsidiariesandissubjecttovariousobligationsandcovenants. Worldwidegrouptaxationhasalsobeenintroducedandisapplicableto Italiancontrollingcompaniesquotedonthestockexchangeorownedby shareholdersnotcontrollingothercompanies. TaxTransparency Theoptionforthetaxtransparencyisirrevocableforaminimumperiodof threeyears.Theoptionmustbeexercisedbythecontrollingcompanies andbytheirsubsidiary. Whetherlimitedcompanies(residentornonresidentundercertain conditionsprovidedbythelaw),controllingaresidentlimitedcompany, maketheoptionforthetaxtransparency,theshareholderswillbesubject toincomestaxation,carelessaboutadividendsdistribution. Theoptioncanbechosenonlyifallpartnersarelimitedcompanies,with participationnotlowerthan10%,andnothigherthan50%. Nonresidentcompanies NonresidentcompaniesareliabletoItaliantaxationonlyonincome arisingwithinItaly. ThefollowingcategoriesofincomearedeemedtobefromItaliansources: Incomefrombusinessactivitiesconductedthroughapermanent establishmentinItaly,whichincludescapitalgainsorlossesonthe dispositionofgoodsorassets,includingshares,employedin,orin

Copyright2010UHYInternationalLtd

25

anywayrelatedto,thebusinessactivitiesconductedinItalyeven ifnotearnedthroughtheItalianpermanentestablishment; IncomefromlandandbuildingslocatedinItaly; Incomefromcapital,suchasdividendspaidbyItaliancompanies, interestpaidbyindividualsandentitiesresidentinItaly,and incomepaidbytheItalianpermanentestablishmentsofnon residents; IncomefromprofessionalorartisticactivitiesperformedinItaly; IncomefromItalianpartnerships,whetherornotsuchincomeis distributed; Royaltiesfromthelicensingoftrademarksortradenames, industrialinventions,creativeworkandsuchotheritems,when suchroyaltiesarepaidbyItalianresidentsorbytheItalian permanentestablishmentofnonresidents.

Branches Abranchofaforeigncorporation(sedesecondaria)issubjecttoIRESand IRAPonallincomearisingordeemedtohavearisenwithinItaly. AlthoughabranchisgenerallytaxedunderthelawsapplicabletoItalian corporations,thetaxlawprovidescertainadvantagesanddisadvantages forabranch.Themainadvantageisthatprofitsmayberemittedtothe foreigncompanyfreeofwithholdingtax. Individuals Asof1January2007,personalincometaxisappliedtoindividualsona progressivebasis,withratesrangingfrom2343%.Taxdeductionsare alsoavailable.Inaddition,aregionaltaxofupto1.4%andalocal communaltaxofupto0.8%areappliedonallindividualsincome. InordertoensurethepaymentofIRPEF(individualstaxation),thelaw establishesarulewherebyallemployershavetowithholdpartofthe salaryandpayittotheTaxAuthoritiesonbehalfoftheiremployeesand onaccountofthetaxeventuallyduebythelatter. Dividendsreceivedbyindividualsareincludedinthetaxableincometo theextentof49.72%oftheamountdistributed. Taxationofexpatriatesandnonresidents Foreignersaregenerallytaxedaccordingtotheirresidentstatus.Ifthey meetthecriteriaforresidencyinanyfinancialyear,theyaretaxedon worldwideincome.Individualsnotconsideredresidentaretaxedon Italiansourceincomeonly.

Copyright2010UHYInternationalLtd

26

Copyright2010UHYInternationalLtd

27

7.

Accounting & reporting

Accountingprinciples Italianaccountingrequirementsaregovernedbycivillaw.Theregulations ofApril1991,andsubsequentmodifications,prescribethepresentationof atrueandfairviewofthecompanysfinancialandeconomicsituation. TheCivilCodeprovidesdetailedguidanceconcerningtheclassificationof accountsandtheformatoffinancialstatementsaswellasageneral guidanceconcerningaccountingprinciplestobeadopted. Withinthiscontext,theConsigliNazionalideiDottoriCommercialistiedei Ragionieri(NationalCouncilsofDoctorsofCommerceandofAccountants) haveundertakentoestablishaccountingprinciples,whichnormally conformtointernationalgenerallyacceptedaccountingprinciples,by issuingaseriesofpronouncementsthatexpandontherequirementsofthe CivilCodeandcovermattersnotcontainedinthecode.The pronouncementsdonotestablishprinciplesorencouragepracticesthatare prohibitedbytheCivilCode. Areviewofthesepronouncementsstartedin2004alongsidethe introductionofthecorporatereformlaw. TheaboveCouncilsaremembersoftheInternationalAccounting StandardsCommittee(IASC).

Yearendfinancialstatements
Atthesettingupofalimitedliabilitycompany,thecompanymustdefine theclosingyearenddate. Everyyear,attheendoftheaccountingperiod,thedirectorsmustprepare theannualfinancialstatements(balancesheet,profitandlossaccountand explanatorynotes),togetherwithareportthereon.Theannualfinancial statementsandthedirectorsreportmustbepreparedwiththeformatand timingstatedbyregulationsoftheItalianCivilCode. Atleast30daysbeforetheshareholdersmeetingwhichwilldiscussthem, thedirectorsreportandtheannualfinancialstatementsmustbe communicatedtotheboardofstatutoryauditors(ifexisting),andwho shallalsoprepareareportthereon. Thefinancialstatements,togetherwiththedirectorsandboardof statutoryauditorsreports,mustbedepositedattheregisteredofficeofthe companyatleast15daysbeforetheshareholdersmeetingand,nolonger than30daysafterthemeeting,mustbefiledwiththeregisterof

Copyright2010UHYInternationalLtd

28

commercialenterprises,togetherwithacopyoftheshareholders resolutionofapproval,forpossibleinspectionbythepublic. Condensedyearendfinancialstatements Unlesstheyhaveissuedsecuritiesmarketedonregulatedmarkets, companiesmaypreparetheirfinancialstatementsincondensedform, whentheyhavenotexceededtwoofthefollowingrequirementsinthe firstyearofoperationsor,afterthat,fortwoconsecutiveyears: Totalassetsreportedinthebalancesheet:Euro4,400,000 Revenuesfromsalesandservices:Euro8,800,000; Averageemployeesduringtheyear:50employees.

InternationalAccountingStandards AlawdecreeissuedinFebruary2005hasintroducedtheapplicationof IASaccordingtothefollowingsimplifiedscheme: Entity Required financial statements


Ordinary Consolidated

FromFY2006

Listedcompanies Issuersoffinancial instrumentsamongthe public

IAScompulsory IAScompulsory

Banksandotherfinancial intermediaries Insurancecompanies Ordinary Consolidated Companiesauthorisedto Ordinary presentcondensed financialstatements Others Ordinary Consolidated IAScompulsoryif listed IAScompulsory ExcludedfromIAS

ExcludedfromIAS IASfacultative

Copyright2010UHYInternationalLtd

29

Otheraccountingandcompanylawrequirements Thefollowingcompanybookshavetobemaintained: Shareholders Minutesoftheshareholdersmeeting Minutesoftheboardofdirectors Minutesoftheboardofauditors Annualaccountsbook.

Thefollowingaccountingbooksmustbekept(otherbooksmaybe requestedbyspeciallegislation): Generalledger VATsalesregister VATpurchasesregister Depreciableassets.

Auditing Ingeneralterms,auditactivitycanbesplitintotwodifferentcategories:(i) Accountingcontrolsexaminationoftheannualfinancialstatementsin accordancewithrecommendedauditingstandards,withaviewtoexpress anopinionthereon,and(ii)ManagementcontrolsorCorporate surveillancereviewofthecompanysbusinesswithrespecttothelaw andthestatutes. Underthetraditionalcorporatemodel(section4,Settingupabusiness), theauditactivitycanbecarriedouteitherbyaboardofstatutoryauditors orbyaregisteredauditor/auditingfirmoracombinationoftheseentities. Companies,whicharenotlistedandarenotrequiredtoprepare consolidatedfinancialstatements,may,asageneralrule,appointthe boardofstatutoryauditorstoperformbothfunctions(i)and(ii);inother cases,theAccountingcontrolsfunctionisallocated,bylaworbyarticles ofassociation,toregisteredauditors/auditingfirms. Listedcompanies,statecontrolledcompanies,municipalitycontrolled companies,largeconsortia,insurancecompanies,brokers,(securities traders),publishingcompaniesandothersmustbeauditedbyaspecial classofauditingfirmsregisteredwiththeNationalCommissionfor Companies&StockExchange(CONSOB).Theauditingfirmisappointed bytheshareholdersforthreeyearsandmaybereappointedonlyfortwo successivethreeyearterms. Auditorsarerequiredtobeindependent.Theyarepersonallyliableforthe accuracyandtruthfulnessoftheirstatementsand,withthedirectors,are jointlyliableforthedirectorsactionsoromissionswheneveritcanbe shownthatalosscouldhavebeenavoidediftheauditorshadperformed theirdutiesproperly.

Copyright2010UHYInternationalLtd

30

Pleaserefertosection4aboveforotherdetails. Auditorsreports Accountingcontrols ReportsonAccountingcontrolsfollowasimilarformattothoseadopted internationallybyallmajorindependentauditingfirms. Managementcontrols ReportsonManagementcontrolswhichunderthetraditionalmodel areissuedsolelybytheboardofstatutoryauditorsnormallyfollowa specialformatrecommendedbythenationalaccountingbodies.

Copyright2010UHYInternationalLtd

31

8.

UHY firms in Italy

FiderConsultS.r.l.offices: Rome viaBirmania81 I00144,Roma Italy Phone: +39065917469 Website: www.fiderconsult.com Fax: +39065913582 Contact: DrPaoloLenzi Email: p.lenzi@fiderconsult.com WithadditionalofficesinFlorenceandMilan

9.

UHY offices worldwide

For contact details of UHY offices worldwide, or for details on how to contacttheUHYexecutiveoffice,pleasevisitwww.uhy.com

Copyright2010UHYInternationalLtd

32