Top 10 challenges of doing business in Italy

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Italy is a developed economy with a wealth of potential, but cultural characteristics and the many layers of bureaucracy constantly leave businesses feeling bewildered, which is why having local help is a must when doing business in the country. 

With a strategic location and a vast network of businesses, Italy is viewed as an ideal country in which to expand a business internationally. Its modern infrastructure and developed economy is also attractive to overseas firms, as well as its strength in sectors such as life sciences, information and communication technologies, renewable energies, high quality consumer goods, high tech design and engineering products. 

But despite being the fourth-largest economy in Europe and the eighth largest in the world in terms of GDP, the Index of Economic Freedom - compiled by The Heritage Foundation and The Wall Street Journal - ranked Italy as the 87th freest economy in the world, owing to political interference, bureaucracy, corruption, high levels of taxation, a rigid labor market, an ineffective judicial system, a complex regulatory framework and the high cost of conducting business.

In order to better navigate the harsh environment, having local help on board to streamline processes and avoid any potential sticky situations is essential. 

Starting a Business
Businesses starting up in Italy must contend with exhausting governmental procedures and difficulties with decision-making and communication. A company representative has to first deposit at least 25% of the amounts contributed in cash with a bank, before executing a public deed of incorporation and sorting the right accountancy procedures. A government grant tax is also payable at the post office, and registration with Comunicazione Unica and the Labor Office (DPLMO) is necessary. 

Dealing with Construction Permits 
Dealing with construction permits typifies the Italian business system. Although it takes fewer procedures than the OECD average, the time to complete each step is significantly longer, taking 135 days just to obtain a building permit and 30 days with many other departments. 

Getting Electricity
Time is also the major concern when it comes to getting electricity, and the utility provider can take almost 100 days to conduct external connection works. Simply getting an estimate after the application has been submitted takes two months on average. 

Registering Property 
Registering property is a relatively streamlined process, although there are rather steep expenses involved with obtaining an energy certificate (Attestato di Certificazione Energetica, ACE) and getting hold of the necessary certificates for the transaction through Notartel.

Getting Credit and Protecting Investors
The global credit crisis of 2008 struck with particular vengeance in Italy, resulting in restricted capital flows for corporations. According to the World Bank and International Finance Corporation (IFC), Italy has dropped six places for ease of getting credit in a year, largely down to the impact of the financial crisis. In terms of investor protection, Italy ranks 46th in the world, down three places from the previous year. 

Paying Taxes  
Italy’s tax system is painstakingly complex. Companies are required to make 15 payments a year taking 269 hours to deal with. What’s more, the levels of taxation are particularly high, and the private sector is likely to feel the pinch as the government battles its growing budget deficit. 

Trading Across Borders
Trading across borders is another time consuming task, taking 19 days to export and 18 to import. Authorities require ten days to process the required documents, and containers can also get held up by customs clearance and technical control. 

Enforcing Contracts
Italy ranks among the worst countries in the world for enforcing contracts, taking a massive 1,210 days to complete compared to the OECD average of only 510 days. Considering there are 41 procedures to complete this may not seem all that surprising. 

Resolving Insolvency
It takes 1.8 years to resolve insolvency and can cost an average of 22% of the estate. 

Traditions and a sense of history play powerfully on Italian minds and both of these have heavily influenced the Italian approach to business. Trying to reach decisions can be a lengthy process and relationship building is one of the most important aspects to business there is. 

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Italy or just want to streamline your Italian operations, talk to us