Branch vs Subsidiary SRL in Italy: Which to Choose (2026)

A foreign company that wants a real operating presence in Italy usually ends up choosing between two structures: a branch, which in Italian law is a sede secondaria of the foreign company, or a subsidiary, normally an Italian società a responsabilità limitata (SRL) owned by the foreign parent. Both can hire staff, sign leases, invoice Italian customers and pay Italian tax. The difference is who the legal person in Italy is, and that single fact drives liability, accounting, the way profits come home and how difficult it is to leave.

This guide describes the position applicable on 12 October 2026. It is written for EU, UK and US companies at the decision stage and flags where a UK or US parent lacks access to EU-law reliefs; it does not replace advice on the specific group and treaty position.

The short answer

A branch is the foreign company itself, operating through a registered Italian establishment. It is cheaper and quicker to open, has no share capital of its own and lets the head office control everything directly. In exchange, the foreign company is fully liable for whatever happens in Italy, it has to file its own home-state accounts with the Italian register, and it must produce a separate Italian tax account for the branch every year.

A subsidiary SRL is a new Italian company. It costs more to set up and run and files Italian statutory accounts, but it ring-fences liability and is the structure Italian banks, landlords and customers understand best. Profits leave as dividends, which can bear withholding unless an EU exemption or treaty reduction applies. Both structures pay the same IRES and IRAP rates on the Italian profit, so the real choice is about liability, administration, credibility and the route profits take home.

What an Italian branch actually is

On the civil-law side, article 2508 of the Civil Code subjects a foreign company that establishes a secondary office with permanent representation in Italy to the Italian rules on publicity of company documents, including publication of the identity and powers of its permanent representatives; its Italian documents must show the branch's register office and number. A foreign company of a type that does not exist in Italian law is handled under article 2509. For a capital company governed by the law of another EU Member State, article 2508-bis sets out a digital registration route through an Italian notary and the EU business-register interconnection system.

On the tax side, a registered branch is the clearest example of a stabile organizzazione, a permanent establishment. Article 162 of the Italian income tax code (TUIR) defines a permanent establishment as a fixed place of business through which a non-resident enterprise carries on its business wholly or partly in Italy, and expressly lists a branch (succursale), an office, a workshop and a place of management. Paragraph 2(f-bis) adds a significant and continuous economic presence in Italy built so as not to show a physical presence.

The two notions overlap but are not identical: a foreign company can have a permanent establishment without ever registering a branch (the unintended permanent establishment problem discussed later), while a registered branch will almost always be one.

What a subsidiary SRL is

An SRL is an Italian limited-liability company incorporated by public deed before a notary under article 2463 of the Civil Code. It is a separate legal person, tax-resident in Italy, owned through quotas by the foreign parent (alone or with other shareholders). The ordinary minimum capital is €10,000, but the same article allows capital from €1 upwards, provided contributions are in cash and fully paid, with an accelerated legal-reserve rule until capital and reserve reach €10,000.

Governance follows Italian company law: directors' duties, shareholder decisions, statutory books and, above the article 2477 thresholds, a statutory auditor or control body. The non-resident incorporation guide covers formation in detail.

Liability: where the real difference lies

A branch has no legal personality separate from the foreign company. Contracts signed in Italy are the foreign company's contracts, Italian creditors can pursue the foreign company's assets wherever they are, and judgments against the branch are judgments against the company. The Italian courts have long held that setting up a secondary office does not create an autonomous legal subject. In practical terms, the whole group balance sheet stands behind the Italian operation.

There is also a personal-liability trap during set-up. Under article 2509-bis, until the publicity formalities for the branch have been completed, the people who act in the company's name are jointly and without limit liable for the company's obligations. Completing the registration later does not erase liability for obligations already incurred. Nobody should start signing Italian contracts on behalf of an unregistered branch.

A subsidiary SRL, by contrast, answers for its obligations with its own assets under article 2462. That ring-fence is real but not absolute. Where the SRL has a single shareholder, which is the common case for a foreign parent, the sole shareholder becomes liable without limit in the SRL's insolvency for obligations arising while it held the entire company if contributions were not made as required or the sole-shareholder publicity under article 2470 has not been carried out. Where the parent exercises direction and coordination, the SRL must disclose it in its documents and in the register, and under article 2497 the parent can be liable to the SRL's shareholders and creditors, if they are not satisfied by the SRL, when it uses that power in its own interest in breach of the principles of proper management. Parent guarantees given to banks or landlords also cut through the protection. Even so, for a business with meaningful contract, product, employment or regulatory risk in Italy, the subsidiary keeps that risk inside Italy.

Setting up: steps, documents and costs

Opening a branch

A branch registration files the foreign company's constitutional documents, evidence of its home registration and the board resolution opening the Italian office and appointing the permanent representative with defined powers. Foreign-language documents must be accompanied by a sworn Italian translation and must indicate the publicity already carried out in the home state, as required by article 101-ter of the implementing provisions of the Civil Code. Documents issued outside Italy usually need an apostille or legalisation, and they are normally deposited with an Italian notary, who files them with the register.

For an EU capital company, article 2508-bis offers a digital registration route: the documents are deposited with an Italian notary, who signs the application electronically, and if registration cannot be completed within ten days of receiving complete documents, the register must explain the delay. The ordinary deposit remains available to EU companies as well, and a UK or US company follows the general route under article 2508.

The branch then obtains an Italian tax code and VAT number. There is no minimum capital, but for tax purposes the branch is attributed a free capital (fondo di dotazione) consistent with OECD principles.

Incorporating an SRL

An SRL requires a notarial public deed containing the articles of association, followed by registration with the Business Register. The foreign parent signs through its legal representative or an attorney with a notarised and apostilled power of attorney, and the parent and every director need an Italian tax code. The SRL's own VAT number is requested at start-up through the single company-start filing.

On costs, it is safer to describe the components than to quote a single figure. The incorporation deed of an SRL with cash contributions is typically subject to fixed registration tax of €200 and stamp duty of €156, plus Chamber of Commerce fees and the notary's fee, which varies with the complexity of the deed and translation work. Every SRL also pays an annual government concession tax for its corporate books of €309.87 where capital does not exceed €516,456.90, according to the Agenzia delle Entrate. For a branch, the main cost drivers are translation, apostilles and the notarial deposit, on which stamp duty of €156 is also normally collected. In both cases, the recurring accounting and tax compliance cost will usually exceed the one-off set-up cost within the first year.

Taxation of the Italian profit

Same rates, different paperwork

Both structures pay the same two Italian taxes on business profit. The standard IRES rate is 24%. The reduced 20% "IRES premiale" introduced by Law 207/2024 applied only to the 2025 tax period for calendar-year companies and was not renewed for 2026. IRAP, the regional tax on net production value, has a standard rate of 3.9%, which regions can vary within statutory limits.

An SRL computes IRES on its worldwide income, starting from its Italian statutory accounts. A branch is taxed only on income attributable to the Italian permanent establishment. Under article 152 TUIR, that income is determined on the basis of a dedicated profit and loss account and balance sheet for the branch, prepared under the accounting principles that apply to Italian resident companies with the same characteristics. The account must be given a certain date by the deadline for the tax return, for example through a time stamp, and its data are reported in a specific section of the return. Paragraph 2 treats the branch as a separate and independent entity, taking into account functions performed, risks assumed and assets used, and requires its free capital to be determined in line with OECD criteria.

For IRAP, article 12 of Legislative Decree 446/1997 taxes non-residents on the value produced in Italy through a permanent establishment operated for at least three months, again on the basis of the branch's separate account.

Foreign groups often underestimate this: dealings between head office and branch, such as management services, internal financing or the use of group intangibles, must be priced at arm's length, and should be documented, even though no contract between two legal persons exists.

The 2024 reform and the residence test

The international tax reform in Legislative Decree 209/2023 did not change the rates, but two parts matter. From the 2024 tax period a company is Italian tax resident if, for most of the tax period, it has in Italy its registered office, its place of effective management (the continuous and coordinated taking of strategic decisions about the company as a whole) or its day-to-day management on a principal basis (article 73(3) TUIR). A foreign company whose real management sits in Italy risks being treated as Italian-resident outright. The decree also implemented the global minimum tax for groups with consolidated revenues of at least €750 million, which applies whichever structure is chosen.

Getting the profit out: remittance versus dividends

This is where the two structures part ways most clearly.

A branch's profit already belongs to the foreign company, so moving it to the head office is an internal transfer, not a distribution. Italian dividend withholding under article 27 of Presidential Decree 600/1973 is levied by Italian-resident companies and entities on profits paid on participations and similar instruments; a branch is not a resident company and has no shares, so there is no Italian withholding or "branch profits tax" on remittances. What happens next depends on the head office's country, which may exempt branch profits or tax them with a credit for Italian tax.

A subsidiary's profit reaches the parent as a dividend, and the starting point is withholding at source

Parent company	Italian withholding on SRL dividends (position on 12 October 2026)
Non-EU/EEA company, for example a UK or US parent	26% under article 27(3), with a refund of up to 11/26 of the withholding for foreign tax paid on the same dividend; a lower treaty rate may apply if the treaty conditions and procedure are met
EU or EEA company subject to corporate tax, in a State on the information-exchange list	1.20% under article 27(3-ter)
EU company meeting the Parent-Subsidiary Directive conditions	Exemption, or refund, under article 27-bis and Directive 2011/96/EU

For the Parent-Subsidiary exemption, the Agenzia delle Entrate's English guidance and Form E instructions require, among other conditions, that the EU parent has a qualifying legal form, is subject to corporate tax without an exemption, and holds a minimum 10% participation uninterruptedly for at least one year. Supporting certificates must be obtained before payment if the subsidiary is to pay without withholding, and anti-abuse rules apply.

The 2026 Budget Law (Law 199/2025) briefly made the 1.20% rate conditional on a holding of at least 5% or a tax value of at least €500,000. That change was reversed with retroactive effect from 1 January 2026 by article 11 of Decree-Law 38/2026, converted by Law 88/2026, so the 1.20% rate again applies without a minimum holding.

The practical consequence: for an EU parent that qualifies under the Directive, a subsidiary's dividends can be as tax-efficient as a branch remittance. For a UK or US parent, the subsidiary route adds a dividend withholding layer that depends on the treaty, while the branch route does not. You can model the withholding for your parent's country with the Italy dividend withholding tax calculator, and the guide to Italian taxes for foreign-owned companies explains the wider SRL tax picture.

Accounting and filing obligations

The branch has a dual filing life. For company-law publicity, the foreign company files its own annual accounts, as prepared in its home state, with the branch's register: the Turin chamber's guidance confirms that the document filed is the foreign company's financial statements, not a branch balance sheet, with a sworn Italian translation. Where an EU company has several Italian branches, article 101-quater of the implementing provisions allows filing at one register only.

For tax, the branch keeps Italian books. Article 14 of Presidential Decree 600/1973 requires non-residents carrying on business in Italy through a permanent establishment to record the branch's transactions separately and determine its results separately. The branch then prepares the article 152 account and files Italian income tax, IRAP and VAT returns. That account is a tax document and is not published in the register.

The SRL follows the ordinary Italian cycle: shareholder approval and register filing of the annual accounts, income tax, IRAP, VAT and withholding-agent returns, and statutory books. Its accounts are public in Italy, a drawback for some groups and a credibility advantage for others.

VAT

A branch registers for Italian VAT as a permanent establishment and obtains its own Italian VAT number. The direct-identification and fiscal-representative routes described in our fiscal representative guide are designed for non-residents without an Italian permanent establishment, as article 17(3) of the VAT decree makes clear. Once a branch exists, the Agenzia delle Entrate does not allow a second Italian VAT position: under the AA7/10 form instructions, the foreign company cannot use a fiscal representative or direct identification even for transactions carried out directly by the head office, which must flow into the branch's VAT position. Where the head office sells to Italian VAT-registered businesses without any involvement of the branch, the customer normally accounts for the VAT under the reverse charge of article 17(2), which article 17(4) disapplies only for transactions made through the branch.

A subsidiary SRL is an ordinary Italian VAT taxpayer, and supplies between parent and subsidiary follow the normal VAT rules. For the basics of Italian tax codes and VAT numbers for non-residents, see codice fiscale and VAT for non-residents.

Employees

Both structures can employ people in Italy under Italian employment law and collective agreements and run Italian payroll. Article 23 of Presidential Decree 600/1973 includes non-resident companies among the withholding agents, and the Agenzia delle Entrate's practice confines that role to amounts paid through their Italian permanent establishment, so a branch withholds income tax on salaries much as an SRL does. The legal employer differs, though: in a branch it is the foreign company, in a subsidiary it is the SRL, which matters for secondments, intra-group recharges and employment disputes.

Closing down

Leaving Italy is simpler with a branch. The foreign company resolves to close the office, the closure is filed with the Business Register, the VAT position is closed within thirty days of ceasing activity and final income tax and IRAP returns are filed. There is no Italian liquidation procedure; outstanding Italian liabilities remain liabilities of the foreign company.

An SRL has to be dissolved and liquidated under the Civil Code: appointment of a liquidator, realisation of assets and payment of creditors, a final liquidation balance sheet, and cancellation from the register under article 2495. After cancellation, unpaid creditors can pursue the shareholders up to the amounts they received in the liquidation. The process typically takes months, and the tax treatment of the final distribution needs planning.

When a representative office is enough

Some foreign companies need neither a branch nor a subsidiary. Under article 162(4) and (4-bis) TUIR, a fixed place used only for activities such as storing, displaying or delivering the company's own goods, purchasing goods, collecting information or similar activities is not a permanent establishment, provided the activity, and the overall activity of the place, is preparatory or auxiliary.

A representative office (ufficio di rappresentanza) built on that rule can promote the group and carry out market research; it is registered as a local unit in the REA with an Italian tax code. It cannot sell, negotiate contracts or perform the core business; if it does, it is a permanent establishment in substance, whatever its registration says.

The unintended permanent establishment

Many foreign companies discover they already have an Italian permanent establishment only during a tax audit. Article 162 provides several routes. A fixed place of business, such as an office or even premises used regularly at a customer's or partner's site, can qualify without any registration. Under paragraph 6, a person who habitually concludes contracts in Italy in the foreign company's name, or habitually plays the principal role leading to contracts that are routinely concluded without material modification, creates a permanent establishment unless that person is a genuinely independent agent acting in the ordinary course of its own business. A person working exclusively or almost exclusively for closely related companies is not treated as independent. Construction or installation sites lasting more than three months are also a permanent establishment.

An unrecognised permanent establishment means IRES and IRAP on the attributable profit for past years, with penalties and interest, plus VAT and payroll exposure. A sales manager working from home in Italy and closing deals is a classic warning sign; regularising through a branch or an SRL is usually cheaper than defending the position later.

Decision table

Factor	Branch (sede secondaria)	Subsidiary SRL
Legal personality	None; the foreign company acts in Italy	Separate Italian company
Liability for Italian obligations	Foreign company, with all its assets	SRL's assets, subject to sole-shareholder, group-direction and guarantee exceptions
Set-up	Filing of the parent's documents, sworn translations, notarial deposit and register filing	Notarial incorporation deed and register filing
Minimum capital	None at company-law level; a free capital is attributed for tax	€10,000 ordinary, or from €1 with cash contributions fully paid
Italian income taxes	IRES 24% and IRAP 3.9% on profit attributable to the branch	IRES 24% and IRAP 3.9% on the SRL's profit
Profit repatriation	Internal remittance, no Italian dividend withholding	Dividend: 26% for non-EU/EEA parents subject to treaty relief; 1.20% for qualifying EU/EEA companies; exemption for qualifying EU parents
Accounts filed in Italy	Parent's home-state accounts, translated; separate tax account for the branch	Italian statutory accounts of the SRL
VAT	Branch VAT number as a permanent establishment	SRL's own VAT number
Local credibility	Can be lower with banks, landlords and public bodies	Familiar Italian corporate form
Exit	Closure and deregistration, no Italian liquidation	Liquidation and cancellation under the Civil Code

Which structure fits which situation?

A branch tends to suit a foreign company that wants a lean presence, central control and simple repatriation, and is comfortable carrying Italian risk on the group balance sheet: project work, service teams supporting a head office, and UK or US parents for which dividend withholding would be a real cost. It can also help where early losses are expected, if the head office's tax system relieves branch losses.

A subsidiary SRL tends to suit a business that will sign significant contracts, hold stock, employ a larger team, seek Italian bank credit or public funding, or bring in local partners or a future buyer. It is the natural choice when the group wants Italian risk ring-fenced and when an EU parent can use the Parent-Subsidiary exemption. Selling quotas in an SRL is also far simpler than transferring a branch's business.

Neither choice is irreversible. A branch can later be contributed to a new SRL, but that step has company-law and tax consequences and should be planned. The comparison of an Italian SRL with a US LLC and a UK Ltd is a useful companion if the group is also deciding which entity should own the Italian business.

If you would like the choice tested against your group structure, home-country tax rules and Italian plans, request a quote: our Italian accountants work with foreign companies in English and can set out the costs and filings of both routes for your specific case.