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Italy: Market Profile

Picture: Italy factsheet
Picture: Italy factsheet

1. Overview

Italy's economy, which ranks among the top 10 largest in the world, is largely diversified and dominated by small- and medium-sized firms which comprise 99% of Italian businesses. Tourism is an important source of external revenue, as are exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food and wine, and textiles and fashion. However, the economy's exporting sector, which has been shifting towards higher value added products, has underperformed compared with its eurozone competitors and this situation is expected to continue because of long-standing competitiveness issues and Italy's rigid labour market. However, government policies, such as the Industry 4.0 programme and labour market and education reforms, have begun to address these problems. Italy's relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centres of excellence in scientific and information technology research remain attractive to many investors.

Sources: Organisation for Economic Co-operation and Development, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

March 2018
The Five Star Movement led by Luigi Di Maio won the most votes in the general election, with the centre-left coalition, led by former prime minister Matteo Renzi, placed third.

June 2018
A coalition government led by the Five Star Movement and the Northern League was agreed. Giuseppe Conte was appointed prime minister. The government took office with an agenda to cut taxes, boost welfare spending, and overhauled European Union (EU) budgets and immigration rules.

October 2018
The EU reported that Biolchim, an Italian manufacturer of organic fertilisers from Bologna, had increased its workforce by 50% thanks to the benefit derived from EU agreements that had reduced customs duties and enabled it to expand trade with Chile, Colombia and Peru.

December 2018
The Government was forced to scale back budget spending plans after EU objections.

January 2019
The Italian economy slipped into recession in the last quarter of 2018.

February 2019
The port of Trieste officially opened its new free trade zone area called FREEeste, linked to the railway station at Aquilinia.

February 2019
The Italian parliament's 18-month moratorium on oil and gas exploration permits, intended to assist with the transition to a low-carbon future, affected 70 pending permits and represented a blow to an already struggling industry. The ban increases Italy's reliance on hydrocarbon imports.

March 2019
The port of Trieste and a company from Mainland China, called the China Communications Construction Company, signed an agreement to develop transport infrastructure that will enable the port of Trieste to join Mainland China's Belt and Road Initiative. The governments of Mainland China and Italy also signed a memorandum of understanding that formalises an expanded role for firms from Mainland China in Italy, especially in infrastructure and the expansion of northern Italy's port facilities.

The government introduced generous subsidies to stimulate the electric vehicle market with a total budget of EUR60 million. However, access to charging station infrastructure remains limited.

April 2019
The economy edged out of recession in the first quarter of 2019, leaving behind two successive quarters of contraction. The expansion, although low (at 0.2%), was supported by the external sector, while domestic demand dragged on growth.

June 2019
The European Investment Fund and Banco BPM signed an agreement allowing Banco BPM to make available EUR330 million in loans to small- and medium-sized enterprises in Italy.

The European Commission (EC) approved, under EU state aid rules, a scheme, with an estimated budget of EUR5.4 billion, to support electricity production from renewable sources in Italy.

July 2019
The EC decided that the Italian government's mid-year budget of July 1 meant that Italy had made an additional fiscal effort to ensure compliance with the Stability and Growth Pact and that progress with structural reforms should ensure higher growth and a decreased debt-to-GDP ratio. That effort meant it was not necessary to open an Excessive Deficit Procedure against Italy.

Sources: BBC Country Profile – Timeline, Ports Europe, Port of Trieste, European Commission, Fitch Solutions

3. Major Economic Indicators

Graph: Italy real GDP and inflation
Note: The estimate in 2018 is for real GDP
Graph: Italy real GDP and inflation
Note: The estimate in 2018 is for real GDP
Graph: Italy GDP by sector (2018)
Graph: Italy GDP by sector (2018)
Graph: Italy unemployment rate
Graph: Italy unemployment rate
Graph: Italy current account balance
Graph: Italy current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: August 20 2019

4. External Trade

4.1 Merchandise Trade

Graph: Italy merchandise trade
Graph: Italy merchandise trade

Source: WTO
Date last reviewed: August 20, 2019

Graph: Italy major export commodities (2018)
Graph: Italy major export commodities (2018)
Graph: Italy major export markets (2018)
Graph: Italy major export markets (2018)
Graph: Italy major import commodities (2018)
Note: Unclassified products account for less than 1% of total product imports
Graph: Italy major import commodities (2018)
Note: Unclassified products account for less than 1% of total product imports
Graph: Italy major import markets (2018)
Graph: Italy major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: August 20, 2019

4.2 Trade in Services

Graph: Italy trade in services
Graph: Italy trade in services

e = estimate
Source: WTO
Date last reviewed: August 20, 2019

5. Trade Policies

  • Italy has been a member of the World Trade Organization (WTO) since January 1, 1995, and a member of the General Agreement on Tariffs and Trade since May 30, 1950.

  • Italy is a member of the EU, which has a common set of tariffs and customs levied on various imports and exports. Trade policy is largely identical to that of the wider regional bloc. The EU updated its trade policy (and, by extension, its import tariffs, customs, duties and procedures) in 2017 and 2018. The EU has an overall simple tariff of 5.1%. Once goods are cleared by customs authorities on entry into any EU member state, these imported goods can move freely among EU member states without any additional customs procedures.

  • Trade bureaucracy and customs delays are a significant hindrance to foreign investors, particularly those outside the EU. Although there are increasing efforts to reduce trade bureaucracy, paper-based procedures remain cumbersome and costs and connectivity issues add to market barriers.

  • As a member state of the EU, Italy incorporates EU regulatory norms. While developing new draft regulations, the Italian government submits a copy to the WTO for review to ensure that the prospective legislation is not inconsistent with its WTO obligations.

  • As a eurozone member, Italy adopted the euro as its legal tender in January 1, 2002.

  • The EU has the largest web of preferential trade agreements in the world, being party to some 70 free trade agreements (FTAs) spanning five continents, and, consequently, access to other markets of the countries concerned is currently mediated through those agreements. The EU's Generalised System of Preferences (GSP) entered into effect on January 1, 2014. Under the scheme, tariff preferences have been removed for imports into the EU from countries where per capita income has exceeded USD4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While Mainland China remains a beneficiary, many of its exports – such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks – have already been graduated from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU's GSP scheme since May 1, 1998.

  • Nine types of goods imported into the EU are subject to licensing. These goods are (broadly) textiles, various agricultural products, iron and steel products, ozone-depleting substances, rough diamonds, waste shipment, harvested timber, endangered species and drug precursors. Currently, no quotas are imposed on textiles and clothing exports or non-textile product exports from Hong Kong and Mainland China.

  • In order to protect domestic industries, a number of products from Mainland China are subject to the EU's anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. For example, in November 2016 the EC imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from Mainland China. The rate of duty is between 43.5% and 81.1% of the net, free-at-union-frontier price before duty, depending on the company. By way of comparison, the rate of duty for similar goods from Belarus is 12.5% of the net, free-at-union-frontier price before duty. As of March 2019, the EU did not apply any anti-dumping measures on imports originating from Hong Kong.

  • In 2018 the EU modernised its trade defence instruments, with a view to shielding EU producers from damage caused by unfair competition. Anti-dumping and anti-subsidy regulations have been amended to better respond to unfair trade practices and to furnish Europe's trade defence instruments with more transparency, quicker procedures and more effective enforcement. In exceptional cases, such as in the presence of distortions in the cost of raw materials, the EU will be able to impose higher duties through the limited suspension of the lesser-duty rule.

  • The EC has introduced an import licensing regime for certain iron, steel and aluminium products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020.

  • To combat the spread of the Asian long-horned beetle, in July 1999 the EU introduced emergency controls on wooden packaging material originating from Mainland China. Wood covered by the measures must be stripped of its bark and be free of insect bore holes greater than 3mm across or have been kiln-dried to below 20% moisture content.

  • For health reasons, the EU has adopted a directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. The EU also adopted a directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from January 16, 2007. In addition, the EU has adopted a directive to prohibit the trading of clothing, footwear, and other textile and leather articles that contain azo-dyes, from which aromatic amines may be derived.

  • The EU has adopted a number of directives for environmental protection, which may have an impact on the sale of a wide range of consumer goods and consumer electronics. A recast Waste Electrical and Electronic Equipment (WEEE) directive entered into force in August 2012. As a result, member states must adhere to higher collection/recycling targets (a 45% collection rate as of 2016 and 65% from 2019). The directive is also wider in scope, covering all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs. The recast Restriction of Hazardous Substances (RoHS) directive was published on July 1, 2011, and entered into force on January 2, 2013. The new directive continues to prohibit electrical and electronic equipment that contains the six dangerous substances as listed in the original RoHS directive. From July 22, 2019, the new directive will widen the current scope by including any electrical and electronic equipment that might have fallen out of the old RoHS directive's scope. Following those recast directives, the EU's new framework directive for setting eco-design requirements for energy-related products (ErP) is now in place. The ErP directive is no longer limited to electrical and electronic equipment, but covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.

  • REACH, an EU regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. It requires EU manufacturers and importers of chemical substances to gather comprehensive information on the properties of these substances produced or imported in volumes of one tonne or more per year, and to register such substances prior to manufacturing in or importing into the EU.

  • In April 2019 the EU and United States' chemical industries proposed an enhanced aligned approach that could serve as a global blueprint for regulatory cooperation to reduce barriers and increase trade in the chemicals sector.

Sources: WTO – Trade Policy Review, European Commission, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

As a member of the EU, Italy is party to the same trade agreements as its 27 peer states. The region negotiates and enters into trade agreements as a collective due to the single-market nature of the union. In total, the EU has approximately 70 preferential trade agreements in place.

6.2 Multinational Trade Agreements


  1. The EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 28 member states of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. As Italy's main trade partners are in the EU, the absence of customs charges with member countries greatly enhances its trade volumes.

  2. European Economic Area (EEA)-European Free Trade Association (EFTA) Agreement: This economic integration agreement entered into force on January 1, 1994. The agreement unites the EU member states, the three non-EU member states of the EEA (Iceland, Liechtenstein and Norway) that are also members of the EFTA and Switzerland, which is a member of the EFTA but not of the EU or EEA, into an internal market governed by the same basic rules. These rules aim to enable goods, services, capital and persons to move freely about the signatory countries in an open and competitive environment, a concept referred to as the four freedoms. While the agreement enhances trade flows between the EFTA countries and the EU, only Switzerland is a fairly major trading partner.

  3. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly one-third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019, after the EU Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products, and it seeks to open up services markets, particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after Mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

  4. EU-Turkey Customs Union: The EU and Turkey are linked by a customs union agreement, which came into force on December 31, 1995. Turkey has been a candidate country to join the EU since 1999 and is a member of the Euro-Mediterranean partnership. The customs union with the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers. Turkey is the EU's fourth-largest export market and fifth-largest provider of imports. The EU is Turkey's largest import and export partner. Turkey's exports to the EU are mostly machinery and transport equipment, followed by manufactured goods. At present, the customs union covers all industrial goods, but does not address agriculture (except processed agricultural products), services or public procurement. Bilateral trade concessions apply to agricultural as well as coal and steel products. In December 2016, the EC proposed the modernisation of the customs union and to further extend the bilateral trade relations to other areas, such as services, public procurement and sustainable development.

  5. EU-Canada Comprehensive Economic and Trade Agreement (CETA): CETA is expected to strengthen trade ties between the two regions, having been signed in October 2016 and entered into force provisionally on September 21, 2017. Some 98% of trade between Canada and the EU is duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

  6. EU-Southern African Development Community (SADC) EPA: An agreement between the EU and a group of SADC countries (Botswana, Eswatini, Lesotho, Mozambique, Namibia and South Africa) was signed on June 10, 2016, with Angola having an option to join the agreement in the future. The agreement provisionally entered into force for most countries on October 10, 2016, but only became fully operational after Mozambique began applying the EPA in February 2018. Nine of the remaining members of the SADC not included in the deal (Comoros, the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, the Seychelles, Tanzania, Zambia and Zimbabwe) have or are seeking economic partnership agreements with the EU as part of other regional trading blocs – such as with East, Central or Southern African communities.

Ratification Pending

  1. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama): An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of July 2019). The agreement has been provisionally applied since 2013.

  2. EU-MERCOSUR Trade Agreement: An agreement between the parties was reached on June 28, 2019. The agreement means that the EU is the first major partner to make a trade pact with the MERCOSUR bloc, which comprises Argentina, Brazil, Paraguay and Uruguay. The agreement will cover a population of 780 million and gives EU-based companies easier entry into a market with an enormous economic potential, saving them EUR4 billion in duties annually. Currently, EU exports in goods and services are worth approximately EUR68 billion. The EU is the biggest foreign investor in MERCOSUR, with stock of EUR381 billion, while MERCOSUR's investment stock in the EU is worth EUR52 billion. The agreement contains specific commitments on labour rights and environmental protection, including the implementation of the Paris climate agreement and related enforcement rules. The EU will not fully open its market for imports of agri-food products, although beef, poultry and honey imports from the MERCOSUR countries will be permitted to increase over a five-year phasing in period.

  3. EU-Vietnam FTA and Investment Protection Agreement (IPA): In October 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam IPA. As of July 2019, the final text of the agreement has been finalised and is awaiting the consent of the European Parliament before being signed and concluded. Once in force, the agreements will provide opportunities to increase trade and support jobs and growth on both sides by eliminating 99% of all tariffs, reducing regulatory barriers and overlapping 'red tape', ensuring the protection of geographical indications, opening up services and public procurement markets and establishing the means to ensure the agreed rules are enforceable.

Under Negotiation

  1. EU-Australia: The EU, Australia's second-largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48.0 billion in 2017, and bilateral trade in services added an additional EUR27.0 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on equal footing with those from countries that have signed up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.

  2. EU-United States (Transatlantic Trade and Investment Partnership): This agreement was expected to increase trade and services, but it is unlikely to pass under the Trump administration in the United States against the backdrop of rising global trade tensions.

Sources: WTO Regional Trade Agreements database, European Commission, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Italy FDI stock
Graph: Italy FDI stock
Graph: Italy FDI flow
Graph: Italy FDI flow

Source: UNCTAD
Date last reviewed: August 20, 2019

7.2 Foreign Direct Investment Policy

  1. Italy is bound by EU laws on foreign direct investment. Italy has an investment promotion agency to facilitate foreign investment. The Italian Trade Agency (ITA) is administered by the Ministry of Economic Development. ITA has offices in 70 countries worldwide and has a unit dedicated to facilitating the establishment and development of foreign companies in Italy, with key sectors identified as aerospace, agri-food, automotives, chemicals and pharmaceuticals, consumer goods, the green economy, electronics, information and communication technology, infrastructure, life sciences, machinery and real estate.

  2. Invitalia, a company wholly owned by the Ministry of Economy and Finance, was created as the central point of reference for businesses wishing to establish themselves in Italy. Invitalia offers a free one-stop shop for foreign investors (helping with permits, location scouting and all aspects of setting up a business) and financial aid in the form of capital grants and soft loans or a combination of the two.

  3. Italy's main business association (Confindustria) aims to retain existing companies in Italy and to support and promote the Made in Italy brand worldwide, from foodstuffs to cruise ships built in Italian shipyards. Confindustria stresses that 85% of its members are small enterprises that have fewer than 50 employees.

  4. Exceptions to foreign participation include access to government subsidies for the film industry (limited to EU member states), capital requirements for banks domiciled in non-EU member countries and restrictions on non-EU-based airlines operating domestic routes. Italy also has investment restrictions in the shipping sector.

  5. To drive economic growth, the Italian government has put in place comprehensive reforms, such as new labour legislation, new financial tools for real estate and dedicated business courts to resolve disputes involving foreign investors. Fiscal incentives include a 25% tax credit for private investment in research and development (R&D) (50% for projects with universities, research institutes or equivalent centres); a patent box regime to promote investment in the R&D of intangible assets (50% tax deduction from corporate income tax (CIT) for income from the direct use or licensing of qualified intangible assets); a 15% tax credit for investment in machinery and capital goods is made widely available to promote investment in industries such as electro-mechanical, tourism, agrifood processing, fashion, life sciences, and chemicals; and a tax regime for new residents to attract high-net-worth individuals (investor visa for Italy) to transfer their tax residence to Italy, thereby enhancing investment in Italy through a range of strategic asset investment incentives.

  6. The Italian constitution permits the expropriation of private property for public purposes, defined as essential services or measures indispensable for the national economy. In such instances, prompt, adequate and effective compensation must be paid to the property holders.

  7. EU and Italian anti-trust laws provide Italian authorities with the right to review mergers and acquisitions on the grounds of market dominance. In addition, the Italian government may block mergers and acquisitions involving foreign firms under the Golden Power Law if the domestic firm involved is determined to be essential to the national economy – for example if the companies are operating in strategic sectors (identified as defence and national security, energy, transport, and telecommunications). The Golden Power Law always applies in cases in which the potential purchaser is a non-company and is extended to EU companies if the target of the acquisition is involved in defence or national security activities.

  8. Although many former monopoly operators have been partially or fully privatised, the state retains a controlling interest, either directly or through the state-controlled national development fund Cassa Depositi e Prestiti.

  9. Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce (Unioncamere). Foreign companies may use the online process. Before registering a company online, applicants must obtain a certified e-mail address and digital signature, a process that may take up to five days. A notary is required to certify the documentation. The precise steps required for the registration process depend on the type of business being registered.

  10. The minimum capital requirement to register a business varies by type of business. Generally, companies must obtain a VAT account number from the Agenzia delle Entrate (the Italian revenue agency), register with the Istituto Nazionale della Previdenza Sociale (INPS – social security agency), verify adequate capital and insurance coverage with the Istituto Nazionale per L'Assicurazione contro gli Infortuni sul Lavoro (INAIL – Italian workers' compensation agency), and notify the regional office of the Ministry of Labour.

  11. Italy is a member of the Organisation for Economic Co-operation and Development, the WTO, and the United Nations Conference on Trade and Development.

  12. Italy has 60 bilateral investment treaties in force, and 12 others are signed but not yet in force.

  13. Italy has treaties with investment provisions in force with 55 individual countries and economic blocs worldwide.

Sources: WTO – Trade Policy Review, ITA, Confindustria, Italian Trade Agency, Invitalia, Ministry of Economic Development, UNCTAD, Agenzia delle Entrate, Unioncamere, Cassa Depositi e Prestiti

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
The Italian government operates two free trade zones: the Free Port of Trieste (northeast of Italy) and the Free Port of Venice.

Both these free zones are control type I, which means goods placed within the well-bound perimeter fence are automatically under the free zone regime and under surveillance by security.
- These zones offer exemptions from VAT for non-EU goods in transit, deferred VAT payment on merchandise imported into the EU, non-discriminatory right of entry for ships and cargos and no customs intervention.

- Exporters are able to defer duties and taxes for 180 days from the time that the goods leave the free-trade zone to enter another EU country, transform goods free of any customs restraints, and obtain exemption from any duties on products coming from a third country.

- The free-trade zone law also allows a company, of any nationality, to employ workers of the same nationality under that country's labour laws and social security.
Other areas- Italy has numerous general warehouses located throughout port areas and cities.

- There are no limitations as to the type or origin of merchandise that can be stored in free trade zones, bonded warehouses or customs warehouses.

- The time limit for such storage is five years.

- Merchandise that deteriorates while in storage can be destroyed without payment of a duty.
Other investment incentives- Incentives include grants, low-interest loans, deductions and tax credits.

- Some incentive programmes have a cost cap, which may prevent otherwise eligible companies from receiving the incentive benefits once the cap is reached.

- The government applies cost caps on a non-discriminatory basis, typically based on the order in which applications were filed.

- Italy provides an incentive for investments by SMEs in new machinery and capital equipment (‘New Sabatini Law’), which is available to eligible companies regardless of nationality.

- Sector-specific investment incentives are also available in targeted sectors.

- The Italian Trade Agency advertises Italy’s attractiveness for foreign direct investment by highlighting a 50% tax relief for people aged under 35 recruited in 2019-2020 if they have never been employed under a permanent contract.

- A 40% tax credit to offset the expense of personnel employed in eligible Industry 4.0 training activities that are aimed at stimulating investment in training people in the use of enabling technologies such as automation and the cloud.

Sources: European Commission, Venice Free Zone, Italian Trade Agency, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: Up to 22%
  • Corporate Income Tax: 22.5%

Source: Italian Agency of Revenue - Agenzia delle Entrate

8.1 Important Updates to Taxation Information

  • The 2019 finance bill reintroduced an updated and tightened version of the digital services tax (DST) or web tax, which was previously introduced in 2018. The tax has been applicable to digital services applicable since January 1, 2019. Corporations are obliged to pay a 3% tax on the value of specified digital services, net of VAT. A taxpayer will be eligible if their worldwide revenue exceeds EUR750 million and the amount realised in Italy is EUR5.5 million or higher.

  • From January 1, 2019, CIT was reduced from 24% to 15% on a portion of income – profits which have been reinvested in certain activities (including new hirings and purchasing instrumental goods). However, in May a decree expected to be converted into law repealed the reduced-rate CIT and proposed a 1.5% overall reduction for 2019 (22.5%), a further 1% for 2020 (21.5%), a further 0.5% for 2021 (21%) and a further 0.5% for 2022 (20.5%).

8.2 Business Taxes

Type of TaxTax Rate and Base
- 22.5% for IRES (corporate income tax) and
- 3.9% for IRAP (a regional production tax that can vary according to the nature of the business, with regional rates varying by 0.92% higher or lower)
Capital Gains Tax
Branch Tax24% (IRES) and 3.9% (IRAP)
Withholding TaxGenerally, the rate for non-residents is 26% on dividend income and interest and 30% on technical service fees and royalties from patents and suchlike. Different rates may apply if a country has a tax treaty. For example, if the country of residence is Hong Kong the rates levied are 10% on dividends, 0% on interest (12.5% on government bonds) and 15% on royalties.
VATThe standard rate is 22%. Reduced rates apply for the supply of some goods and services, such as 4% for listed food, drinks and agricultural products; 5% for some health and transport services; and 10% for electric power supplies and listed drugs. Supplies of specific goods and services are zero rated, including education, insurance services, specific financial services and the leasing of particular immovable property.
Property Tax- 0.76% and 0.1%
- Municipalities impose a real property tax (Imposta Municipale Unica, IMU) payable by the owner of the property, though not applicable to the principal residence, and levied on the property's cadastral value. IMU is currently 0.76%. The municipal services tax (Tassa per Servizi Indivisibili, TASI) is charged to both the property owner and user, with the rate currently 0.1%.
Social security contributionThe total rate of social security contribution is around 40% of the employee's gross compensation, with the employer paying 30% and the employee 10% (the rate can vary depending on the employee's job and the work activity and size of the company).

Source: Italian Agency of Revenue - Agenzia delle Entrate
Date last reviewed: August 20, 2019

9. Foreign Worker Requirements

9.1 Working Permit

Non-EU member citizens require a work permit in order to work in the country; EU member citizens do not require a work permit, but their employer must inform the local Labour Immigration Office about their employment. Once the permit has been obtained by the employer, the would-be employee must apply, within four months, for the work visa at the consulate where they live. Once issued, within 30 days the visa is stamped in the employee's passport and they must sign the employment contract at the Labour Immigration Office within eight days of their arrival in Italy. Citizens of the EEA (the EU member states plus Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in Italy. No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in Italy or have a Blue Card.

9.2 Obtaining Foreign Worker Permits

Employers must first apply for a permit to hire foreign workers. A permit is granted once no suitable candidate can be found in Italy or in other EU member states. The vacant position must be reported to the local district labour office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for a maximum of two years, which can be repeatedly prolonged but always for a maximum of two years, and may be renewed as many times as needed. The permit process takes an average of one month. In April 2019 Italy published its 2019 Immigration Quota Decree, issued annually, which allows non-EU nationals who qualify to obtain a work permit. The total quota level for 2019 is 30,850 permits, allocated among three categories: non-seasonal workers (3,000 permits), the conversion of existing permits (9,850 permits) and seasonal workers (18,000 permits). Employers were instructed to evaluate their need for work permits for non-EU nationals in the appropriate categories and apply as soon as possible.

9.3 Blue Card

The Blue Card is intended for a highly qualified employee. A foreigner holding a Blue Card may reside in Italy and work in the job for which the card was issued or change that job under the conditions defined. A high qualification means a duly completed university education or higher professional education which has lasted for at least three years. Alternatively, a minimum of five years' relevant professional experience relating to the activity for which the work permit is being granted is required. The Blue Card is issued with a term of validity three months longer than the term for which the employment contract has been concluded, for a maximum period of two years. The Blue Card can be extended. One of the conditions for issuing the card is a wage criterion – the employment contract must stipulate a gross monthly or yearly wage that is at least 1.5 times the gross average annual wage.

9.4 Short-Term Work Visa

These can be granted by the embassy on application for a maximum period of 90 days, which must be used within 180 days. The visa must be for the purpose of employment, and the application must be submitted along with general requirements, such as a work permit, an employment contract and proof of securing accommodation.

9.5 Visa/Travel Restrictions

Italy is one of 26 countries in the Schengen Area, which means that there is one common visa and no border controls. All non-EU/EEA/Swiss nationals who wish to stay in Italy for longer than 90 days will need to apply for a long-term visa.

Sources: Ministry of Foreign Affairs and International Cooperation, European Commission, Ministry of Interior, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Baa3 (Stable)19/10/2018
S&P GlobalBBB (Negative)
Fitch Ratings
BBB (Negative)09/08/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness44/6342/6344/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index RankN/A46/20245/202
Short-Term Economic Risk Score
Long-Term Economic Risk Score65.666.467.6
Political Risk Index RankN/A36/20242/202
Short-Term Political Risk Score
Long-Term Political Risk Score77.677.675.3
Operational Risk Index RankN/A41/20142/201
Operational Risk Score63.964.163.7

Source: Fitch Solutions
Date last reviewed: August 20, 2019

10.4 Fitch Solutions Risk Summary

The Italian economy will continue to register a very modest rate of growth over the long term, weighed down by weak credit availability, a subdued external environment, a massive public debt load and waning global competitiveness. Italy's business environment is becoming increasingly uncompetitive as a result of bureaucratic inefficiencies and structural rigidities. Unlike some other eurozone economies, Italy did not take full advantage of the opportunity to enact structural reforms during the global financial crisis and the eurozone debt crisis.

The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors. Italy's economy is struggling to emerge from its longest recession in recent history, and the current government is making slow progress on improving Italy's investment climate.

Source: Fitch Solutions
Data last reviewed: August 21, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Italy short term political risk index
Graph: Italy short term political risk index
Graph: Italy long term political risk index
Graph: Italy long term political risk index
Graph: Italy long term economic risk index
Graph: Italy long term economic risk index
Graph: Italy long term economic risk index
Graph: Italy long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 20, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Italy Score63.7
Developed States Average72.464.671.376.377.4
Developed States Position (out of 27)2624
Global Average49.650.349.849.049.2
Global Position (out of 201)42

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Italy vs global and regional averages
Graph: Italy vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
New Zealand77.473.775.772.188.3
United States77.281.3
United Kingdom76.871.479.078.578.2
Isle of Man65.869.162.449.382.4
Developed Markets Averages72.464.671.376.377.4
Emerging Markets Averages46.948.645.447.4
Global Markets Averages49.650.349.849.049.2

100 = Lowest risk; 0 = highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 20, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Italy

Graph: Major export commodities to Italy (2018)
Graph: Major export commodities to Italy (2018)
Graph: Major import commodities from Italy (2018)
Graph: Major import commodities from Italy (2018)

Note: Graph shows the main Hong Kong exports to/imports from Italy (by consignment)
Date last reviewed: August 20, 2019

Graph: Merchandise exports to Italy
Graph: Merchandise exports to Italy
Graph: Merchandise imports from Italy
Graph: Merchandise imports from Italy

Note: Graph shows Hong Kong exports to/imports from Italy (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: August 20, 2019

Growth rate (%)
Number of Italian residents visiting Hong Kong102,730
 2017Growth rate (%)
Number of Italians residing in Hong Kong6521.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division

Growth rate (%)
Number of European residents visiting Hong Kong1,961,448
 2017Growth rate (%)
Number of developed state citizens residing in Hong Kong65,6801.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Date last reviewed: July 15, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Italian Companies in Hong Kong164
- Regional headquarters39
- Regional offices6214.8
- Local offices63

Source: Hong Kong Census and Statistics Department, Fitch Solutions

11.3 Treaties and agreements between Hong Kong, Mainland China and Italy

  • Hong Kong and Italy have a comprehensive double taxation agreement that has been effective from August 10, 2015.

  • Italy and Hong Kong have an investment promotion and protection agreement that entered into force on February 2, 1998.

  • Italy has a BIT with Hong Kong that entered into force on February 2, 1998, and a BIT with Mainland China that entered into force on August 28, 1987.

  • Italy has a tax treaty with Mainland China that has been applicable since January 1, 1990.

Sources: Inland Revenue Department, Trade and Industry Department, UNCTAD, Fitch Solutions

11.4 Chamber of Commerce or Related Organisations

Italian Chamber of Commerce in Hong Kong and Macao
Address: 19/F, 168 Queen's Road Central, Central, Hong Kong
Email: icc@icc.org.hk
Tel: (852) 2521 8837
Fax: (852) 2537 4764

Source: Italian Chamber of Commerce in Hong Kong and Macao

Italy-Hong Kong Association
Email: italy-hk@hktdc.org
Tel: (39) 2 865 405
Website: www.associazioneitaliahongkong.org
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Consulate General of Italy in Hong Kong
Address: Suite 3201, 32/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
Email: consolato.hongkong@esteri.it
Tel: (852) 2522 0033/4/5
Fax: (852) 2845 9678

Source: Consulate General of Italy in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

HKSAR passport holdes are entitled to a visa-free entry to Schengen countries lasting no more than 90 days in any six-month period from the date of first entry in the territory of the member states.

Source: Consulate General of Italy in Hong Kong
Date last reviewed: August 20, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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