Recent reforms in Italy have created a legal environment that meets EU standards and gives companies the desired flexibility to carry out their operations.
For foreign investors, this means they can benefit from various reforms and particularly:
Corporate tax reform
Italian corporate tax reform, in force since 1 January 2004, is creating a favorable tax environment for foreign investors via simplification of procedures and reduction of the tax burden.
For example, the reform brought in a reduction of corporate tax, from 36% to 33% and introduced exemption measures on dividends and participation specifically abolishing the full imputation system on distribution of corporate profits, i.e. the dividend tax credit, and introducing a 95% exemption on dividend distributions.
Company law reform
In 2003, Italian company law underwent wide ranging structural changes. A key driver is the aim to offer companies more flexibility and transparency in doing business, making it easier for them to implement investment projects. Italy also sought to bring its rules on corporate affairs in line with other EU countries.
Overall the 2003 reform successfully introduced:
Changes to the structure of commercial companies (Joint Stock Company, Limited Liability Company)
Simplification and speed up the procedures for establishing a business
New financial instruments for companies to create special categories of shares
New rules providing greater flexibility and choice in corporate governance
Corporate responsibility for groups clarifying issues related to liability, transparency and publicity
Italy has many financial incentives available to foreign investors and they are disbursed either by national or local bodies. Their purpose is to support entrepreneurial development and business creation, to strengthen existing or recently-started initiatives, to provide business-support services, and to promote and integrate research, innovation and training.
The importance of the Automotive sector in Italy is confirmed by the policies supporting investments in the sector, which in recent years have witnessed the simplification of procedures to access available incentives. The sector, in fact, is included in those eligible for support measures to industry, scientific and technological research, training and procedures for the qualification of staff.
These incentives, which are allotted in compliance will the maximum level allowed by EU directives, are proportionate to the size of the company and are accorded when the conditions and objectives for access to EU Structural Funds are met.
Support to industry
This concerns measures for contributions to the costs connected to the realization or expansion of production facilities, which include the purchase of land, construction work, plant or machinery additions, expenses connected to company infrastructure, patent costs, and environmental certification related expenses.
In the Automotive Components sector, the amount of financing provided as a contribution to approved cost may reach:
Up to 45% for small and medium-sized enterprise and up to 35% for large companies present in the areas covered by Objective 1.
Up to 15% for small and medium-sized companies and up to 8% for large companies present in the areas covered by Objective 2.
To further favor heavy investments with a strong regional impact, direct negotiation with the relevant centralized Authorities can be undertaken. Besides this, companies can benefit from further grants which are managed directly by the individual Italian Regions in compliance with Regional Programs in support of industry.
There are also public financial structures in existence which purchase temporary and/or minority stakes in company capital for companies which present proposals for investment in Italy.
Support to Research & Development
Support for R&D is carried out through measures which concern all the phases of production with funds allotted to industrial research and to pre-competitive development (prototypes).
For industrial research, the Ministry of Education, Universities and Research made increased competitiveness and sustainable global development objectives in the PNR - Programma Nazionale per la Ricerca (National Program for Research). With these goals, access to the FAR - Fondo Agevolazioni per la Ricerca (Research Support Fund) is provided through:
Automatic measures (tax credits) which are differentiated in accordance to industry sector.
Measures provided together with the Regions to increase the competitiveness of local technological districts.
The launching of 10 programs for industrial research for small and medium-sized industries and to research spin-off.
One of these is entirely focused on transport including advanced logistics and the info-mobility of persons and goods.
The others are focused on advanced manufacturing systems, low consumption engines with a low environmental impact and the use of advanced materials which also afford interesting potential for returns to the automotive sector.
To support activities more focused on pre-competitive development (prototypes) and therefore closer to market entry, the Ministry of Industry has made available the FIT -Fondo per l'Innovazione Tecnologica (Technological Innovation Fund).
The percentage of aid allowed is up to 50% of costs for industrial research and up to 25% for pre-competitive development (prototypes).
With the 2005 Finance Act, tax deductions were introduced for costs sustained for personnel employed in Research & Development.
Support to Training
Policies to support training and the qualification of personnel have been carried out by Central and Local Administrations. The Regions manage specific measures to finance initiatives promoting the training of competent human resources who are able to confront the new requirements of production and labor organization and who are receptive to and promoters of innovation.