Opening a company abroad: the preliminary guide

Opening a company abroad represents a fundamental strategic component in the processes of internationalization of companies. However, this choice requires an in-depth multidisciplinary analysis that includes not only financial aspects, but also legal, fiscal and organizational ones. Insufficient or inadequate planning could expose the company to significant risks, including disputes related to esterovestizione, a phenomenon in which the company, although registered in a foreign country, actually operates in Italy, contravening the national tax law. This aspect is regulated by Article 73 of the Consolidated Law on Income Taxes (TUIR) and represents an area of growing attention by tax authorities.

In addition to tax compliance, it is essential to structure an organizational plan that takes into account the'operational efficiency and compliance with local regulations. Internationalization requires specific skills in commercial law, in-depth knowledge of labor regulations and adequate human capital management. Failure to harmonize internal operating models and local practices can compromise the effectiveness of expansion, generating economic and reputational inefficiencies.

Opening a company abroad: the fundamental aspects to know

In the panorama of options available for international expansion, corporate structures are mainly divided into branches, representations, partnerships and corporations, each characterized by specific legal and tax implications.

Branches and Representatives

Branches are extensions of economic activity in another State and are subject to taxation in the country in which they operate, in accordance with the principle of “permanent establishment” established by international treaties against double taxation (for example, the OECD Model Tax Convention). It is crucial to verify the presence of a local tax base deriving from continuous activities or from the appointment of a tax representative.

Partnership

Partnerships, such as general partnerships and limited partnerships, have different management characteristics and legal responsibilities. In general partnerships, partners have unlimited liability for company obligations, while in limited partnerships liability is modulated based on the capital invested. Furthermore, the methods of transferring shares vary significantly between the two types, influencing the flexibility of corporate governance.

Capital companies

Capital companies, such as limited liability companies (SRL) and joint stock companies (SPA), are legal entities separate from their members, with a limited liability regime. In Italy, Article 25 of Law 218/1995 determines the applicable law based on the registered office of the company, unless the effective management is located in Italy, in which case Italian law applies. Significant differences between SRL and SPA include the minimum share capital required and the management and control methods, making it necessary to carefully evaluate the choice of the corporate vehicle in relation to the strategic objectives of the company.

In a global context characterized by ever-changing regulations, the assistance of professionals experienced in international corporate law, transnational taxation and strategic planning is an essential element to ensure a solid business expansion that complies with local and international regulations.

The conditions for a company formation outside national borders 

When you decide to open a company abroad, it is essential to verify whether you meet the necessary requirements to avoid tax problems such as the increasingly widespread corporate foreign investment. According to theart. 73 of the TUIR, two conditions are crucial:

1. The company's administrative headquarters must be physically located abroad. This implies that the offices and decision-making bodies must be operational in the country where the tax residence is to be established.
2. The company's business must be effectively carried out in the country of tax residence. If the company is incorporated abroad but the business is carried out in Italy, the tax residence will be in Italy.

These are the basic requirements, but there are also specific conditions that must be verified to avoid the presumption of esterovestizione, as provided for by art. 73, co. 5-bis of the TUIR.

Many entrepreneurs mistakenly believe that online businesses, being without a physical location, can be easily set up abroad without tax implications. In any case, even the digital export through a ecommerce, must comply with the requirements described above. If the headquarters is foreign but the site is intended for the Italian market, the activity could be considered as carried out in Italy, with the related tax implications.

Foreign real estate and holding companies

The same rules of foreign investment also apply in the case of foreign real estate companies and holding companies, which require special attention to avoid tax issues related to this phenomenon. One option to avoid the risk of foreign investment is the creation of a multinational group, where the entrepreneur entrusts the management of the business to a manager resident in the country where the company headquarters is located. In this way, the entrepreneur remains a capital partner, but does not directly manage the business.

This solution, although effective, can be more challenging to sustain for new businesses, which may not have sufficient resources to face the costs associated with creating a multinational group. Therefore, it is considered a strategy more suitable for already established businesses.

The steps to follow for open a company abroad

To identify the best country for a process of internationalization of the company, it is essential to take the following aspects into consideration:

1. 1. Planning and research through market research:  It is important to conduct amarket analysis to assess demand and competition in the target country.
   2. Legal and tax aspects:  It is advisable to consult figures who are experts in tax and legal practices related to exports, to orient yourself among the laws and regulations of the foreign country. At the same time, it is important to find out about any double taxation agreements between the country of origin and the foreign country (such as those in force for nations such asSaudi Arabia) to avoid double taxation on the same income.
   3. Management and Operations: Understanding the labor laws, cultural habits, and employee expectations in the destination country is essential for effective management. Equally important is assessing how geographic location will impact the supply chains and shipping costs.

When to set up a company abroad: timing and considerations

Opening a company abroad It is a choice that therefore requires careful study. In fact, more and more companies are trying to expand into new international markets, and this can be achieved by opening a foreign branch, while maintaining their operational base in Italy. This scenario represents an ideal context for starting an export process, which usually takes place when the company already has a solid base in the national market.

In particular, theinternationalization becomes a natural step when the company has reached a certain maturity and can invest resources to expand abroad, either with a subsidiary or with branches. The corporate maturation phase is, therefore, a fundamental prerequisite for the success of this operation.

Transfer, merger and dissolution of companies

For entrepreneurs who wish to transfer, merge or dissolve a company, it is important to know the European legislation, such as EU Directive 2019/2121, which facilitates the transfer of economic activities between EU countries, and the EU Directive 2017/1132, which regulates cross-border mergers. Cross-border splits, on the other hand, do not have uniform regulation and are still the subject of discussions.

Establishing a company abroad can certainly bring fiscal and operational advantages, and seize all the opportunities that the international context offers. It is therefore an option that many Italian companies are pursuing, to penetrate more effectively the market of target countries. 

Octagona, leader in internationalization strategies, offers personalized consultancy aimed at ensuring the most suitable paths for open a company abroad, and full compliance with ever-evolving international regulations. For more comprehensive information, please visit contact us through the appropriate form.