Doing business in ItalyInstruments to be used to establish a presence in the Italian market Cristiano Rizzi Abogado (Ilustre Colegio de Abogados de Salamanca -Spain) “Avvocato Stabilito” (Milano -Italy) LL.M. International Business Law (University of Exeter - UK) LL.M. in Spanish Law (Uni. of Valladolid - Spain) LL.M. in Chinese Law (Peking University –China) Peking University – School of Law This presentation is aimed to provide foreign investors with a general understanding of doing business in Italy. The contents of this presentation are not intended to be exhaustive and is designed to provide information on major issues that foreign investors should consider when investing in Italy
Entering the Italian market: basic information • Italy provides an excellent opportunity both as a market in its own right and as a staging post for those wishing to expand into Europe. • Because Italy follows the principles of the General Agreement on Tariffs and Trade (GATT), and the regulations of the EU customs union and other international agreements, most goods may be freely imported. • Exports are generally unrestricted. Exporters must comply with the requirements to submit a customs office declaration. • Italy is among the seven most industrialized nations and has a highly developed trading activity. • The Italian economy is broad-based, encompassing almost every type of industry, particularly motor vehicles, electronics, fashion products and machinery. It is a mixed economy. • 3 million small businesses operating through various forms of business entities. Most businesses in Italy are owned by a family or a partnership.
Exchange controls and taxation • Italy has adhered to the European Monetary System and the monetary unit is Euro, denoted by the symbol €. • There are no foreign exchange controls in Italy; however, banks and financial institutions are obliged to monitor all inbound and outbound movements exceeding 12.5 K for statistical purposes on behalf of the Italian Exchange Office (Ufficio Italiano Cambi). • There are other controls, but they are aimed at preventing the laundering of money deriving from drug dealing and other criminal actions. Anti-money laundering controls have recently been extended to auditing firms and other professionals. • A company registered in Italy is considered resident there for tax purposes, even though the management or control of the company is exercised abroad. • In this case, the company will be liable to taxation in Italy on a world-wide basis.
Setting-up a business: introduction • Foreign investors who intend to conduct commercial activities in Italy can choose from a wide range of legal entities. (to be discussed) • Effective from April 1, 2010, communications to Tax Authority, Register of Enterprises and Labor Authorities will be made through the so called “Sole Communication” that will grant shortest time to set up a business in Italy. • Corporate law is provided mainly by the Civil Code. • Investments made in Italy by non-EU nationals are subject to certain restrictions. In particular, non-EU nationals may partecipate in Italian entities based on reciprocity (i.e. the country of citizenship of the foreign investor must allow the same benefit to Italian citizens or legal entities).
Registration of intellectual property: general • Through the Central Patent Office (Ufficio Centrale Brevetti), Italian law provides patent protection for novel innovations, such as creative inventions and utility models, which are suitable for industrial application. • Foreign individuals may obtain patents for industrial inventions or utility models on the same terms as Italian citizens. Licensing arrangements • Licensing offers a means of profiting from inventions without the need to invest substantial capital and risk economic failure. • Foreign entities may find licensing arrangements attractive in Italy because the government imposes no exchange control limitations on the transfer of royalties abroad.
Business entities • Legislative Decree no. 6 of 17th January 2003 (effective 1st January 2004) drastically amended the Italian Civil Code, in particular the incorporation and the governance of the two main types of companies: • Limited liability companies (società a responsabilitàlimitata, S.r.l) whose capital is represented by quotas; • Joint stock companies (società per azioni, S.p.a.) whose capital is represented by shares. • The majority of medium size businesses in Italy are set up as limited liability companies. • Other main legal forms of business enterprise are: • Branch of a foreign company • Generalpartnership (società in nome collettivo, S.n.c.) • Limitedpartnership (società in accomandita semplice, S.a.s.) • Sole proprietorship • Joint ventures. • These are not specifically regulated, but Italian law does provide for certain types of contract that can be used to establisha joint venture.
Types of companies: specification (general) • Personal companies without limited liability status: S.n.c. (società in nome collettivo – general partnership): a partnership where all partners are jointly liable for all of the firm’s debts and obligations S.a.s. (società in accomandita semplice – limited partnership): a partnership with two different categories of partners; silent partners (soci accomandanti) ‐ liability is limited to the extent of their per capital contribution; or general partners (soci accomandatari) ‐ jointly liable for all debts and obligations of the partnership. • Companies with legal personality and limited liability status: S.p.A. (società per azioni – corporation): in which the participants’ equity is represented by shares S.r.l. (società a responsabilità limitata – limited liability company): in which the capital stock is represented by quotas and not by shares S.a.p.a. (società in accomandita per azioni – limited partnership by shares): this combines some of the features of both a limited partnership and a limited liability company. It is a company in which at least one member has unlimited liability while the liability of remaining members is limited to the extent of their share capital subscriptions.
Formation (setting-up) of a company • A company may be established by contract or unilateral deed. • To incorporate a new company it is necessary to draw up the by-laws by public deed before a notary, who then has to deposit them within 20 days at the Register of Enterprises (RE, “Registro delle Imprese”) for the place where the company has its registered offices. • Toincorporate a company: • the company’s capital has to be fully subscribed and a minimum of 25% paid in (100% in case of a sole shareholder); • the rules on contributions in kind have to be complied with: this involves having a sworn report drawn up by an expert designated by the President of the local Court (in case of an Spa), containing the description and value of the property contributed, as well as a declaration that the value ascribed is not lower than the nominal value. In case of Srl, those who contribute assets in kind must file an expert’s affidavit containing the same elements as for an Spa; • The authorizations and other conditions required by special laws for the formation of a company in relation to its specific object have to be met.
Registration of the company • On registration with the RE the company acquires legal personality. • For any transactions undertaken in the name of the company before its registration, the individuals who acted towards third parties have joint and unlimited liability. • The company can be formed by one or more shareholders. • In the event of the company’s insolvency during the period when the shares were held by a sole shareholder, this shareholder will be liable to an unlimited extent if the contributions have not been made in accordance with the above conditions or the required public announcement has not been made as prescribed by article 2362 (registration at the RE of the sole shareholder). • Companies or entities that exercise coordination and strategic direction of other companies and which operate in their own interest or in that of another entity in breach of the principles of correct corporate and entrepreneurial management of these companies are directly liable to the shareholders of such companies for any damage caused to the profitability and value of the corporate holding, • as well as to the creditors of the company for any harm caused to the integrity of the company’s assets. • The company must indicate the company or entity that exercises coordination and strategic direction over it in its official deeds and correspondence, as well as through filing in the special section of Register of Enterprises
Subsidiary or controlled companies • The following are considered subsidiary or “controlled” companies: • companies in which another company has the majority of the votes exercisable at an ordinary shareholders’ meeting; • companies in which another company has sufficient votes to exercise a dominant influence at an ordinary shareholders’ meeting; • companies which are under the dominant influence of another company by virtue of particular contractual undertakings with it. • For the purposes of points 1) and 2) above, the votes belonging to subsidiaries, fiduciary companies and nominees are also to be included in the computation: the votes available on behalf of third persons are not included in the computation. • Companies on which another company exercises a considerable influence are considered associated companies. • Such influence is presumed when at least one fifth (1/5) of the votes can be exercised at an ordinary shareholders’ meeting (one tenth if the company has shares listed on a regulated market). • There are no restrictions as to the nationality of the founders or managers.
Limited liability company (S.r.L.) • The minimum capital required for a S.r.l. is 10,000. The participation in such a company is represented by quotas. • This is the more common company type in Italy. • The company is managed by either a sole director or a board of directors elected by the quota-holders’ meeting. • The directors, who do not have to be quota-holders, are appointed either for a fixed term such as three years, or for an unlimited period. • Quota-holders not involved in running the company have the right to receive news on the company’s performance from the directors and to consult the company’s books and documents relating to its management • A board of statutory auditors has to be appointed if the company has the minimum amount of capital required for joint stock companies. • If it appears that the company’s capital has fallen by more than one-third (1/3) as a result of losses, the director or board of directors, have to call a meeting without delay to take appropriate action.
S.r.l. some other features • The law expressly states that quota holders are entitled to vote on the following: • Approval of the financial statements • Appointment of directors • Appointment of statutory auditors or an auditor • Changes to the articles of association • Material change in the company’s purpose. • Quota holders’ meetings are duly constituted if quota holders representing at least half of the capital are present. Resolutions are passed when approved by absolute majority. In the event of changes to the articles of association and resolutions involving a material change in the company’s purpose, resolutions are passed when approved by a number of quota holders representing at least a half of the capital. • Unless differently stated in the by‐laws, a board of statutory auditors or a registered auditor/auditing firm is generally not required if (a) the company’s capital is less than the minimum share capital required for SpA‐type companies, €120,000; or if (b) the company has not exceeded two of the following parameters in the first year of operations or, after that, for two consecutive years: total assets reported in the balance sheet, €4,400,000; revenues from sales and services, €8,800,000; average employees during the year, 50 units.
Financial statements • At the setting up of a limited liability company, the company must define the closingyear‐end date. • Every year, at the end of the accounting period, the directors must prepare the annual financial statements (balance sheet, profit and loss account and explanatory notes), together with a report thereon. • The annual financial statements and the directors’ report must be prepared with the format and timing stated by regulations of the Italian Civil Code. • At least 30 days before the shareholders’ meeting which will discuss them, the directors’ report and the annual financial statements must be communicated to the board of statutory auditors (if existing), and who shall also prepare a report thereon. • The financial statements, together with the directors’ and board of statutory auditors’ reports, must be deposited at the registered office of the company at least 15 days before the shareholders’ meeting and, no longer than 30 days after the meeting, must be filed with the register of commercial enterprises, together with a copy of the shareholders’ resolution of approval, for possible inspection by the public.
Joint stock company (S.p.A.): introduction • The minimum capital required for an Spa is 120,000. The participation in a company is represented by shares and shall be of equal value and confer equal rights to their holders. • However, the by-laws may create categories of shares with different rights, also as far as the losses are concerned. In such cases, the company may freely determine the content of the shares for the various categories. All shares belonging to the same category attribute equal rights. • Shares cannot be issued to the bearer until they have been fully paid in. • If it appears that the company’s capital has fallen by more than one-third (1/3) as a result of losses, the directors or management board, or if they fail to do so, the board of statutory auditors or supervisory board, have to call a meeting without delay to take appropriate action. • If, within the following, the loss has not been reduced to less than one-third of capital, the shareholders’ meeting that approves the annual accounts for that period has to reduce the capital in proportion to the losses that have been ascertained. • If by reason of the loss of over one-third of the capital, it falls below the minimum (i.e. 120,000 € ), the directors or management board or if they fail to do so, the supervisory board have to call a meeting without delay to decide on a reduction of capital and to reconstitute it at an amount not less than the said minimum; alternatively, the company has to be reorganized.
Categories of “S.p.A.” (Joint stock company) • There are two categories of S.p.a. : • Companies that have recourse to the capital market, in which case they issue shares listed on regulated markets (Borsadi Milano); • Companies that do not have recourse to the capital market because owned by a family or partnership (so-called “closed companies”). • Three different governance systems can be chosen by joint stock companies: • the “ordinary” (or “traditional”) system • the “dualistic” system • the ”monistic” system
Governance systems: introduction • Ordinary system Under the ordinary system, the company is managed either by a sole director or by a board of directors elected by the shareholders at a general meeting. Directors do not have to be shareholders. Directors can only be appointed for a three-year period, completing their term of office on the date of the meeting called to approve the financial statements for their third and last year. The board of directors selects the chairman from among its members, unless he is appointed by the shareholders. The board of directors may delegate its functions to an executive committee formed by certain of its members. 2. Dualistic system The by-laws can provide for the company’s management and control to be exercised by a management board and a supervisory board. The management board (“consigliodigestione”) operates in much the same way as the board of directors (see “ordinary system” above), but its members are appointed by the supervisory board within the limits laid down in the by-laws. 3. Monistic system The by-laws can provide for the company’s management and control to be exercised by a board of directors (appointed by shareholders) and by a committee established within the board. The company’s management pertains exclusively to the board of directors, which operates according to the same rules as under the ordinary system. It is up to the board of directors to quantify and appoint the members of the (supervisory) committee.
S.p.A. some otherfeatures • Shareholders’ meetings are classified as ordinary (assemblea ordinaria) or extraordinary (assemblea straordinaria): the difference between these classifications concerns the decisions that can be taken and the legal requirements needed for the taking of such decisions. • In any case, an annual general meeting must be held within 120 days of the company’s financial year‐end. • The normal business of an ordinary meeting is: • Approval of the financial statements • Election of directors and the members and chairman of the board of statutory auditors • Determination of their remunerations, unless already determined by the articles of incorporation • Discussion of all other matters relating to the performance of the company and the responsibility of the directors and statutory auditors. • The ordinary shareholders’ meeting is duly constituted with the attendance of a number of shareholders representing at least half the share capital; resolutions are passed with the absolute majority. • An extraordinary meeting is required to deal with such matters as: • Changes in the articles of incorporation • The issue of bonds • The elections of liquidators. • Resolutions of the extraordinary shareholders’ meeting are passed with the positive vote of a number of shareholders representing more than half of the share capital.
Branch of a foreign company • A branch (“sede secondaria”) may be defined as a permanent place of business having a certain degree of independence in its operations and dealings with third parties but no separate legal existence from the company creating it. • Generally, the corporate formalities required for a branch are less burdensome than those for a subsidiary. • For example, a branch is obviously not required to hold shareholders’ meetings , nor is it required to appoint statutory auditors. • It may also repatriate profits at any time. On the other hand, since the branch and the foreign company of which it is part are considered the same legal entity, the foreign company is not isolated from the liabilities of the branch. • For instance, it may be held liable for damages arising out of the operations of the branch, including product liability claims.
Establishment of a branch • The following documents (together with an application for opening a branch office) must be filed with the Register of Enterprises for the place where the branch office is to be located: • an updated version of the foreign company’s deed of incorporation and by-laws; • the minutes of the foreign company’s shareholders’ (or board) meeting authorizing the establishment of the branch; • the names of the people representing the foreign company in Italy on a “permanent” or ongoing basis i.e. the branch manager(s), together with their notarized signatures • While carrying on business in Italy, the branch is subject to all Italian laws on bookkeeping and taxes, in the same way as a limited liability company. • The branch will therefore need its own books (separate from those of the foreign company) and will have to draw up its own annual financial statements and income tax return. The branch will also be required to file a translation of its head office’s financial statements with the Register of Enterprises
Partnership • There are two main types of partnership: • a general partnership (società in nomecollettivo, s.n.c.) in which the partners are jointly liable for the partnership's obligations without limit; • a limited partnership (società in accomanditasemplice, s.a.s.) composed of at least one partner with unlimited liability (usually the managing partner) and at least one partner with liability limited to the amount of capital that they have paid in. • The partnership contract between the partners (at least two) must be drawn up before a notary. • Partnerships do not have a body called the "general meeting", as partners are free to meet whenever they want and to take decisions even on matters not included on the agenda. Their decisions are taken unanimously, but the by-laws can indicate certain matters on which decisions can be taken by a majority of the partners
Reporting requirements & accounting principles • An annual general meeting must be held by an S.p.a.or S.r.l. within 120 days of each year end to approve the financial statements. Under particular circumstances, companies are allowed to hold their general meeting within 180 days of the year end. • The financial statements have to be filed with the Register of Enterprises within one month of approval. • The financial year cannot last more than twelve months. A company is allowed to have shorter financial years under specific and exceptional circumstances. The year end is established in the by-laws and can be altered by an extraordinary shareholders' meeting. Companies usually close their financial year either on December 31st (which coincides with the tax year) or June 30th, but this is not compulsory. • Italian accounting law complies with the EU's fourth directive. Moreover, the Stock Exchange Market Authority (Consob) prescribes that all public companies, banks and insurance companies are obliged to comply with the International and Financial Statements Principles (IAS/IFRS). It is envisaged, in the near future, that the above obligation will be extended to all company legal forms.
Taxation of business operation: general introduction • A company is resident in Italy for tax purposes when it is registered or when it has its administrative offices or main scope of business in Italy. • As a rule, corporate income tax (called IRPEG up to 2004, IRES thereafter) is applicable to all resident companies on income from any source, whether produced in Italy or abroad (“world-wide basis”). • Non-resident companies are subject to IRES only on income earned in Italy. IRES is normally charged on the net of revenues less business costs, except for some non-deductible expenses. • Anti-tax-haven legislation is applied to prevent the use of tax haven jurisdictions. In particular, costs and expenses are not deductible if they arise from transactions with companies resident in a non- European Union Member State with a preferred tax regime. • The Ministry of Finance has issued a list of states and territories with a preferred tax regime. The deduction is allowed, however, if the resident company can prove that the non-resident company actually and primarily carries out a business activity, or the transaction have a business purpose and in fact been concluded.
Taxation of resident companies • Resident companies are those that for the greater part of the tax year have had their legal headquarters, place of effective management or main business purpose in Italy. At a glance: (Corporate profits are subject to two taxes, i.e. IRES and IRAP). Partnerships other than Limited Partnership by shares are treated as transparent entities and are not subject to IRES, however they are subject to IRAP. • Resident companies must file their corporate income tax return electronically via Internet within 7 months of the end of the financial year • Corporate income tax (IRES, a state tax): 27,5% • Regional tax on productive activities (IRAP): 3,9% • IRES taxable income: worldwide income • IRAP taxable income: added value produced in Italy • Domestic consolidation: allowed • Branch profit tax: not applicable
Taxation of non-resident companies • Non-resident companies are those that for the greater part of the tax year do not have their legal headquarters, place of effective management or main business purpose in Italy. • Non-resident companies and entities of each kind (including partnership are subject to corporate income tax (IRES) only on income derived from Italy. • Non-resident companies and entities of each kind (including partnership) are also subject to the Regional tax on productive activities (IRAP) if they maintain a permanent establishment in Italy for at least 3 months. • Business income is taxable in Italy only if derived through a permanent establishment. • If a non-resident company does not have a permanent establishment in Italy, it is taxed separately on all sources of income derived from Italy.
Domestic and Worldwide Consolidation • Both domestic and worldwide consolidation is available. • Both the controlling company and the controlled companies included in the consolidation must exercise the option for domestic consolidation. Once exercised, the option is irrevocable for a period of 3 fiscal years. • In order to exercise the option, the fiscal year of the consolidated controlled companies must be the same as that of the controlling company. • The effect of the domestic consolidation is that all taxable income of the controlled companies is aggregated and taxed at the level of the controlling company (with certain adjustments). • The tax authorities may disallow the tax advantages achieved by any act or transaction that is carried out, without valid economic reasons, to avoid obligations contained in Italian law and obtain a tax saving. This applies only if the tax advantage results from (among others): • Mergers, division, transformations,, transfers of assets and exchange of shares voluntary winding-ups and distributions to shareholders of reserves not consisting in profits; • Contributions to the capital of companies and transactions concerning branches of activity • Transfer abroad of the registered office of an Italian company • Transactions concerning securities and financial instruments • Transactions between resident entities and their affiliates resident in tax havens
Mergers and Divisions • The merger of two or more companies is tax neutral and does not constitute either the realization or distribution of capital gains or capital losses by the merged companies. • The division of a company is tax neutral and does not constitute either the realization or distribution of capital gains or capital losses by the divided company.
Value Added Tax: general overview • The Value Added Tax (IVA in Italian) is a general tax on consumption that is applied in Italy and all other European Union states. • A transaction is subject to VAT in Italy only if it is deemed to take place in Italy. • A VAT invoice must be issued for all taxable transactions, for which an invoice is required, at the time the transaction takes place. • The buyer pays the VAT to the supplier in addition to the cost of the goods or services acquired. • In case of imports, the VAT is paid to customs.
Bankruptcy and proceedings for distribution among creditors • According to the Italian bankruptcy law, an individual entrepreneur or a company, which is in a state of insolvency (i.e. when due to nonperformance and/or other external factors, he appears to be unable to regularly fulfil his obligations), is declared bankrupt by the court of the place where the enterprise has its main office. • A bankruptcy procedure consists of the liquidation of the bankrupt’s assets and subsequent integral or partial paying off of creditors. • This procedure, however, does not apply to small entrepreneurs (i.e. persons, individually or jointly carrying out trade, who, also alternatively, did not make investments for over three hundred thousand euros and / or did not obtain average gross earnings of the last three years for a total amount of over two hundred thousand euros and/or did not hold liabilities, even if not expired, for a total amount of euro five hundred thousandeuros). • The bankruptcy adjudication deprives the bankrupt administration of its assets. When bankruptcy involves companies, the law lays down provisions for the behaviour of directors, general managers, and the members of control bodies, liquidators and shareholders. • An arrangement with creditors may be reached during (“concordatofallimentare”) or before the bankruptcy procedure (“concordato preventivo”).
Employment in Italy: general information • Employees’ wage cannot be lower than the minimum laid down in the pertinent collective labour contract. • Employees usually have to be hired under a labour contract “with no time limit”. But flexible contracts, such as part-time or for single projects, are also possible. • Employees cannot be dismissed without sound objective reasons. • All employees are entitled to a fully paid annual vacation period whose length varies according to their contract and rank. • Pregnant women are entitled to two months leave before the birth. • Parents are entitled to three months fully paid leave and a further six months leave at half-pay (or additional hours leave each day). • Italian law prohibits any discrimination between sex or race. • Accident insurance is compulsory and paid for entirely by the employer; the premium varies according to the risk profile of the job
Working conditions: some specifications • Minimum wages are fixed by nationwide collective bargaining agreements between unions, the Association of Italian Enterprises and the government. • The resulting contracts, which have force of law, establish minimum wages for entire industries, whether or not a particular employer or employee was party to the negotiations. In addition to national contracts, companies also negotiate their own terms (contratti integrativi), usually in the year after national contracts are negotiated. • A 40‐hour working week is considered standard for all employees. • Overtime is generally permitted, but is limited by law to two hours a day and must be authorised by the company’s personnel department.. • Overtime rates must exceed normal rates and companies must pay the national social security system a 15% wage penalty for hours from 41 to 48 per week and 20% for hours exceeding 48. • In addition to 10 national holidays, each city celebrates the feast day of its patron saint. Italy also has four non‐specific holidays, which workers may take at their convenience, with certain limitations to ensure the smooth running of the factory, and two days worked, but paid at special rates. • Three weeks of vacation are compulsory during the first two years of employment. Thereafter, four weeks are usually given to both office and factorypersonnel.
Termination of employment • The statutory notice to be given on termination of employment varies considerably according to seniority and the category of the employee. • The minimum notice period varies from 15 days to six months. The statutory notice must also be observed by the employee, who must give notice to the employer in accordance with the periods provided by law. If the employee leaves employment without giving proper notice, the employer may retain an indemnity proportional to the notice period. • Dismissal is possible in cases of serious misconduct, but in practice it is difficult to establish that such misconduct has occurred. • If a court finds that a dismissal was unfair, the employer concerned must either reinstate the employee or pay additional compensation. Disputes concerning termination of employment can prove difficult and expensive. • All employees are entitled by law to receive deferred compensation payable at the end of their employment relationship. • The compulsory social security insurance scheme managed by the National Institute for Social Security (INPS) covers all employees and their families, including foreigners. • There is a compulsory public insurance for employees, called INAIL (Istituto Nazionale Assicurazioni Infortuni sul Lavoro). Ratesnormallyapplicable to a trading company vary from 0.5–1.3% of the gross annual salaries, depending on the degree of risk incurred by the employee. For example, employees who have to use a car for their job pay a higher premium.
Work VISA • Residents of EU countries have the same rights as Italian residents, so they do not require a visa. • Visas are required for most non-EU citizens and are generally issued for tourism, education, work or family reunion. • Non- EU citizens wishing to work in Italy, either temporarily or permanently, must be provided with a work permit obtained by the prospective employer, and must get a visa from the Italian Consular authorities before coming to Italy. • The granting of the work visa is dependent on a particular work capacity, e.g. Knowledge of the local language of the investor and specific market or technical knowledge. • The foreign company that wishes to get a work permit for one of its employees must first set up its Italian subsidiary, branch, or another business entity- • The Italian entity may then apply for the work permit
Personal Income Tax: general overview • The income tax applicable to individuals is IRPEF, a State tax. • IRPEF is a progressive individual income tax that applies to the aggregate total income of the taxpayer. • IRPEF applies to both resident and non-resident individuals. Resident individuals are subject to tax on their worldwide income and credit is provided for taxes paid abroad. • For income tax purpose, residents of Italy are those person, whether national or not, who for the greater part of the tax period are registered in the Civil Registry or who are resident or domiciled in Italy as defined in the Civil Code. • Non-resident individuals are subject to IRPEF on income that is considered to be originated in Italy.
IRPEF rate structure • The current IRPEF rate structure is as follows: • Up to euro 15000: 23% • From euro 15001 to euro 28000: 27% • From euro 28001 to euro 55000:38% • From euro 55001 to euro 75000: 415 • Over euro 75000: 43% The above rates must be increased by a regional surtax ranging from 0,9% to 1,4%. The rate may be further increased by the municipal and provincial surtax, determined by each municipality and province at an aggregate rate of up to 0,8%
Antitrust: general introduction • Free competition is protected (as well as the provisions of the Rome Treaty) by the rules dictated by the Italian antitrust law, which is modelled after the European provisions. • The enforcement of said Italian law is ensured by an “ad hoc” Authority (namely “Autorità Garante della Concorrenza e del Mercato”). • Other Authorities have been created in order to control the compliance with antitrust law provisions in specific sectors (i.e. telecommunications, energy).
Merger control in the EU • In the EU as M&A cases increase in number, size, and complexity, the European Commission must increasingly adhere to strict criteria and guidelines when treating these cases. The Commission is fully entitled to review all transactions between EU companies as well as mergers between non EU companies as long as their activities have an appreciable impact in the EU. • In the EU, the most relevant definition of M&A is contained in the Council Regulation 139/2004 (replacing Council Regulation 4064/89) on the control of concentration between undertakings (the EC Merger Regulation), Article 3(1) states that: • “A concentration shall be deemed to arise where a change of control on a lasting basis result from: (a) the merger of two or more previously independent undertakings or parts of undertakings, or, (b) the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings”. • On 1 May 2004 Council Regulation 139/2004, the “EC Merger Regulation”, comes into effect, which introduces significant changes to merger review in Europe. In the EU Regulation 139/2004 establishes the exclusive competence of the European Commission’s Competition Directorate, which is responsible for reviewing mergers and acquisitions, looking into allegations of price-fixing and investigating companies charged with antitrust activities, with respect to the concentration having Community dimension. In case where the Regulation 139/2004 is not applicable because the transaction does not have “Community dimension”, the acquisition is capable of being reviewed under the competition law (and Authorities) of the single member state
Merger control II • It is often disputed whether all M&A transactions should be allowed according to the free market principles or if a certain institutional body should have the competence to control them for the purpose of preserving the competition and protecting the consumers. • The EU took this second path, in fact the EU’s choice for the latter originates from the EC Treaty where it is worded that its main goal is not only free market development but also to promote social progress and high level of employment, along with all the others objectives mentioned in article 2 of the Treaty • However, there are numerous legal issues that are still fairly unclear in the EU because it can be complicated to determine whether the European supranational bodies are competent to rule a matter or if it is up to Member states to regulate. The EC Merger Regulation seems to have solved most of the controversial issues as regards the M&A competition playing field
Concept of “dominant position” • Merger control in the EU has been built on the concept of dominance. Notified concentrations are appraised according to substantive test. • Under the old Council Regulation (EEC) No. 4064/89 on the control of concentrations between undertakings the substantive test had as its cornerstone the creation or strengthening of a dominant position. • Initially, this referred only to single dominant positions, but it soon became evident that there was a need to extend the scope to cover situations where two or more undertakings would engage in collusive market behavior, which enabled them to act independently of other market factors to considerable extents. • This led to the introduction of the concept of collective dominance in the EC merger control. The above mentioned new Merger Regulation (EC Regulation 139/2004) changes the test for prohibition from ‘the creation or strengthening of a dominant position’ to a ‘significant impediment to effective competition’. In other words, the reform led to the rewording of the test of compatibility with the common market in Article 2(3). The new substantive test is supposed to cover more efficiently all anti-competitive effects of concentrations. • The development of the doctrine of “collective dominance” (by undertakings) has significantly strengthened the Commission’s competence to intervene in concentrations that are leading to noticeable threats to competitive environment.
Reporting concentration in the EU • The European Commission (Competition Directorate) currently intervenes in M&A transactions in several situations. In fact, under article 1 Regulation 139/2004 a concentration has Community dimension and it is subject to prior mandatory filing with the European Commission if: • the combined worldwide turnover of all parties involved is more than EUR 5 billion, and • the EU turnover of each of at least two of the parties totals more than EUR 250 million . • If a merger does not fall into these thresholds, the European Commission may still become involved if: • the combined worldwide turnover of all parties exceeds more than EUR 2.500 (2.5 billion), and • in each of at least three Member States, the combined aggregate turnover of all undertakings concerned is more than EUR 100 million; • in each of at least three Member States included for the purpose of point (b), the aggregate turnover of each of at least two of the undertakings concerned is more than EUR 25 million; and • the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 100 million
Submission of the filling • European instruments dealing with M&A are focused on cross-border M&A. This kind of transactions in the EU can be problematic due to differences in national legislation and market cultures. • The submission of the filing is subject to a pre-notification phase with the Commission’s offices which may last 15 working days or more, depending upon the difficulty of the case and the amount of information to be provided. Usually, no final filing is submitted before the Commission gives its green light. • The implementation of the Transaction is suspended until clearance is issued. • If a transaction does not reach Community dimension under Article 1 ECMR but is subject to filing with the antitrust authorities of at least three EU Members States, the selected bidder(s) might decide to apply for referral to the European Commission under Article 4.5 of the ECMR before notifying to the competent national authorities
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