Germany and Italy: A Company Formation Comparison

Both countries occupy a position in the heart of European and are key members of the European Union.

Germany has a world class economy and a strong import and export trade, attracting a huge number of foreign investors to the country every year. Italy has also been successful with achieving foreign investment, and changes to its business environment have created opportunities in the country for a range of business industries.

However, choosing to set up a company also depends on the company formation procedures. This article aims to highlight the similarities and differences between German and Italian company formations.

Types of Company Formation

Each country offers a number of company formation types that cater for different sizes and forms of business.

In Germany, there are four main forms of company to incorporate. These include:

  • Limited Liability Corporation (GmbH)
  • Stock Corporation (AG)
  • Partnerships
  • Sole Proprietor

There are three main forms of Italian company. These include:

  • Limited Liability (SL)
  • Joint Stock Company (SpA)
  • Branch Company

How complicated is the formation process?

Italian legislation is yet to be streamlined and so there are a number of procedures to complete in order to set up a company. These are not particularly complex, but are time-consuming and local knowledge is advised. Company formalities include the preparation and completion of the articles of association and memorandum of association before a public notary, setting up an Italian bank account, registering for VAT and obtaining an Italian tax code and identity document, filing with the Registrar of Companies and obtaining the approval of a local tribunal.

Many of Germany’s domestic policies are associated with EU agreements, and so if you are aware of EU legislation German company formation will be straightforward. German bureaucracy is generally accessible for foreign investors and the requirements for each form of company are manageable. If you want to test the local market in Germany with a short term business vehicle, a Branch will allow you to set up a presence in the country while the parent company retains complete control over all legal and tax matters.

Availability of staff

The recruitment sector in Germany has an abundance of highly qualified skilled workers. The Ruhr region and east of the country has fairly high unemployment so there is no shortage of workers there.

Italy is divided into the wealthy North and poorer south, so the south of the country has a greater availability of workers. The general capability of Italian employees is high, so recruiting motivated and skilled staff is not a problem.

Regulatory Climate

Germany strictly regulates the formation of companies in the countries and compliance with these regulations is necessary for all forms of company. The authorities also regulate banking institutions and activities while most industries are governed by a specialist association.

Italy provides a much more liberal business environment. This has come as a result of the changes to attract foreign investment. Foreign ownership of companies is allowed is all industries bar areas related to defence. The country has a number of double taxation treaties and capital and dividends can be repatriated in line with EU rules.

Financial Incentives

There are a number of financial incentives available in Germany. These vary with location and type of company and include loans and grants. As much as 50% investment grants are available for SMEs, for example. There are also local government incentives on offer.

Italy also offers various incentives. These are focused on areas of high unemployment in the country. Local tax reductions for up to ten years are available, 50% research and development grants, and low interest loans for promoting the export of Italian goods and services.

Both countries can be a successful location for setting up a company. There are advantages for foreign investment in a number of industries and various financial incentives to get your business off to a good start. Germany is a more developed country, with a huge economy and market, while Italy is much more up and coming. When choosing to set up a company, it is advised to take into account geographical position and size as well as regulatory climate and see which country matches up to your business plans.