Italy’s economy, the eighth largest in the world, is fully diversified, and dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. Italy is an original member of the 19-nation Eurozone. Germany, France, the United States, the United Kingdom, Spain, and Switzerland are Italy’s most important trading partners, with China continuing to gain ground. Tourism is an important source of external revenue, as are exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food, and wine, as well as textiles/fashion. Italy continues to attract less foreign direct investment than many industrialized nations. Italy does not share a bilateral investment treaty with the United States.
Italy’s relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research, remain attractive to many investors. The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors. The Italian government’s efforts to implement new investment promotion policies to position Italy as a desirable investment destination have been undermined in part by Italy’s slow economic growth and lack of consistent progress on structural reforms that could reduce lengthy and often inconsistent legal and regulatory procedures, unpredictable tax structure, and layered bureaucracy.
|TI Corruption Perceptions Index||2018||53 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report “Ease of Doing Business”||2018||51 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2018||31 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country (M USD, stock positions)||2017||$30,708||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$31,020||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Italy welcomes foreign direct investment (FDI). As a European Union (EU) member state, Italy is bound by the Union’s treaties and laws. Under the EU treaties with the United States, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.
EU and Italian antitrust laws provide Italian authorities with the right to review mergers and acquisitions for market dominance. In addition, the Italian government may block mergers and acquisitions involving foreign firms under the “Golden Power” law if the transactions appear to raise national security concerns. This law was enacted in 2012 and further implemented with decrees in 2015, 2017, and 2019. The Golden Power law allows the Government of Italy (GOI) to block foreign acquisition of companies operating in strategic sectors (identified as defense/national security, energy, transportation, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology). On March 26, 2019 the GOI issued a decree expanding the Golden Power authority to cover the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. Per Italian law, Parliament must confirm the decree within 60 days. The GOI’s Golden Power authority always applies in cases involving the sectors above in which the potential purchaser is a non-EU company; it is extended to EU companies if the target of the acquisition is involved in defense/national security activities. In this respect, the GOI has a say regarding the ownership of private companies as well as ones in which the government has a stake. This law replaced the “Golden Share” which the GOI previously held in former state-owned firms that were partially privatized in the 1990s and 2000s. The law also allows the State to maintain oversight over entire strategic sectors as opposed to individual companies, and by replacing the Golden Share legislation, has enabled Italy to address accusations the Golden Shares violated European treaties. An interagency group led by the Prime Minister’s office reviews acquisition applications and prepares the dossiers/ recommendations for the Council of Ministers’ decision.
According to the latest figures available from the Italian Trade Agency (ITA), foreign investors own significant shares of 12,768 Italian companies. These companies employed 1,211,872 workers with overall sales of EUR 573.6 billion. ITA operates under the umbrella of the Italian Ministry of Economic Development.
The Italian Trade Agency (ITA) operates Invest in Italy: The Foreign Investments Attraction Department is a dedicated unit of ITA for facilitating the establishment and the development of foreign companies in Italy. As of April 2019, ITA maintained a presence in 65 countries to assist foreign investors.
Invitalia is the national agency for inward investment and economic development, owned by the Italian Ministry of Economy and Finance. The agency focuses on strategic sectors for development and employment. It places an emphasis on southern Italy, where investment and development lag in comparison to the rest of the country. Invitalia finances projects both large and small, targeting entrepreneurs with concrete development plans, especially in innovative and high-added-value sectors. For more information, see . The Ministry of Economic Development also has a program to attract innovative investments:
Limits on Foreign Control and Right to Private Ownership and Establishment
Under EU treaties and OECD obligations, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.
EU and Italian antitrust laws provide Italian national local authorities with the right to review mergers and acquisitions over a certain financial threshold. The Italian government may block mergers and acquisitions involving foreign firms if national security concerns are raised or on the principle of reciprocity if the government of the foreign firm applies discriminatory measures against Italian firms. Foreign investors in the defense or aircraft manufacturing sectors are more likely to encounter resistance from the many ministries involved in reviewing foreign acquisitions.
Italy maintains a formal national security screening process for inbound foreign investment in the sectors of defense/national security, transportation, energy, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology under its “Golden Power” legislation, and where there may be market concentration (antitrust) issues. Italy’s Golden Power legislation was expanded on March 26, 2019 to include the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. (Per Italian law Parliament must confirm the law within 60 days for it to remain in force.) To our knowledge, U.S. investors have not been disadvantaged relative to other foreign investors under the mechanisms described above.
Other Investment Policy Reviews
Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce: The online business registration process is clear and complete. Foreign companies may use the online process. Before registering a company online, applicants must obtain a certified e-mail address and digital signature, a process that may take up to five days. A notary is required to certify the documentation. The precise steps required for the registration process depend on the type of business being registered. The minimum capital requirement also varies by type of business. Generally, companies must obtain a value-added tax account number (partita IVA) from the Italian Revenue Agency, register with the social security agency Istituto Nazionale della Previdenza Sociale (INPS), verify adequate capital and insurance coverage with the Italian workers’ compensation agency Istituto Nazionale per L’Assicurazione contro gli Infortuni sul Lavoro (INAIL), and notify the regional office of the Ministry of Labor. According to the World Bank Doing Business Index 2018, Italy is ranked 67 out of 190 countries in terms of the ease of starting a business: it takes six procedures and six days to start a business in Italy. Additional licenses may be required, depending on the type of business to be conducted.
Invitalia and the Italian Trade Agency’s Foreign Direct Investment Unit assist those wanting to set up a new business in Italy. Many Italian localities also have one-stop shops to serve as a single point of contact for potential investors and provide advice in obtaining necessary licenses and authorizations. These services are available to all investors.
Italy neither promotes, restricts, or incentivizes outward investment nor restricts domestic investors from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
BITs or FTAs
The United States and Italy do not share a bilateral investment treaty (BIT).
Albania, Algeria, Angola, Argentina, Armenia, Bahrain, Bangladesh, Barbados, Belarus, Belize (signed, not in force), Bolivia, Bosnia and Herzegovina, Brazil (signed, not in force), Cameroon, Cape Verde (signed, not in force), Chad, Chile, China, Congo, Cote d’Ivoire (signed, not in force), Cuba, Democratic Republic of Congo (signed, not in force), Djibouti, Dominican Republic, Ecuador, Egypt, Eritrea, Ethiopia, Gabon, Georgia, Ghana (signed, not in force), Guatemala, Guinea, Hong Kong, Iran, Jamaica, Jordan, Kazakhstan, Kenya, DPR of Korea (signed, not in force), Republic of Kuwait, Lebanon, Libya, Macedonia FYR, Malawi, Malaysia, Malta (signed, not in force), Mauritania, Mexico, Moldova, Republic of Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Senegal, Serbia (signed, not in force), South Africa, Sri Lanka, Sudan (signed, not in force), Syrian Arab Republic, Tanzania, United Republic of Tunisia, Turkey, Turkmenistan (signed, not in force), United Arab Emirates, Uruguay, Uzbekistan, Venezuela (signed, not in force), Vietnam, Yemen, Zambia, Zimbabwe (signed, not in force).
Bilateral Taxation Treaties:
Italy ranked 51 out of 190 countries in the World Bank’s 2018 Ease of Doing Business Report. Several U.S. multinationals have sought U.S. Embassy assistance in dealing with Italy’s tax enforcement, with some expressing concerns that the Italian Revenue Agency unfairly targets large companies. According to the companies, Italian tax investigations may question corporate accounting practices deemed legitimate in other EU Member States, creating inconsistencies and uncertainty.
3. Legal Regime
Transparency of the Regulatory System
Regulatory authority exists at the national, regional, and municipal level. All applicable regulations could potentially be relevant for foreign investors. Regulations are developed at the national level by the GOI and individual ministries, as well as independent regulatory authorities. Regional and municipal authorities issue regulations at the sub-national level. Draft regulations may be posted for public comment, but there is generally no requirement to do so. Final national-level regulations are in general published in the Gazzetta Ufficiale (and only become effective upon publication). Regulatory agencies may publish summaries of received comments. No major regulatory reform was undertaken in 2018. Aggrieved parties may challenge regulations in court. Public finances and debt obligations are transparent and are publicly available through banking channels such as the Bank of Italy.
International Regulatory Considerations
Italy is a member of the European Union (EU). EU directives are brought into force in Italy through implementing national legislation. In some areas, EU procedures require member states to notify the European Commission (EC) before implementing national-level regulations. Italy has on occasion failed to notify the EC and/or WTO of draft regulations in a timely way. For example, in 2017 Italy adopted Country of Origin Labelling requirements for a range of products including rice, wheat used to make pasta, and certain tomato-based products. Italy’s Economic Development Minister and Agriculture Minister publicly stated these measures would support the “Made in Italy” brand and make Italian products more competitive. Though the requirements were widely regarded as a Technical Barrier to Trade (TBT), Italy failed to notify the WTO in advance of implementing these regulations. Italy is a signatory to the WTO’s Trade Facilitation Agreement (TFA) and has implemented all developed-country obligations.
Legal System and Judicial Independence
Italian law is based on Roman law and on French Napoleonic Code law. The Italian judicial system consists of a series of courts and a body of judges employed as civil servants. The system is unified; every court is part of the national network. Though notoriously slow, the Italian civil legal system meets the generally recognized principles of international law, with provisions for enforcing property and contractual rights. Italy has a written and consistently applied commercial and bankruptcy law. Foreign investors in Italy can choose among different means of alternate dispute resolution (ADR), including legally binding arbitration, though use of ADR remains rare. The GOI has over recent years introduced justice reforms to reduce the backlog of civil cases and speed newly filed cases to conclusion. These reforms also included a new emphasis on ADR and methods to make collecting judgments easier.
Regulations can be appealed in the court system.
Laws and Regulations on Foreign Direct Investment
Italy is bound by EU laws on FDI.
Competition and Anti-Trust Laws
The Italian Competition Authority (AGCM) is responsible for reviewing transactions for competition-related concerns. AGCM may examine transactions that restrict competition in Italy as well as in the broader EU market. As a member of the EU, Italy is also subject to interventions by the European Commission Competition Directorate (DG COMP).
Expropriation and Compensation
The Italian Constitution permits expropriation of private property for “public purposes,” defined as essential services or measures indispensable for the national economy, with fair and timely compensation. Expropriations have been minimal.
ICSID Convention and New York Convention
Italy is a member state of the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID convention). Italy has signed and ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Italian civil law (Section 839) provides for and governs the enforcement of foreign arbitration awards in Italy;
Italian law recognizes and enforces foreign court judgments.
Investor-State Dispute Settlement
Italy is a contracting state to the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (entered into force on 28 April 1971).
Italy has had very few investment disputes involving a U.S. person in the last 10 years. The U.S. Embassy identified less than five such active disputes at the time of the drafting of this report. No cases have been terminated or resolved; all remain pending. Italy does not have a history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
Italy is a party to the following international treaties relating to arbitration:
- The 1927 Geneva Convention on The Execution of Foreign Arbitral Awards (entered into force on 12 February 1931);
- The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (entered into force on 1 May 1969); and
- The 1961 European Convention on International Commercial Arbitration (entered into force on 1 November 1970).
Italy’s Code of Civil Procedure (Book IV, Title VIII, Sections 806-840) governs arbitration, including the recognition of foreign arbitration awards. Italian law is not based on the UNCITRAL Model Law; however, many of the principles of the Model Law are present in Italian law. Parties are free to choose from a variety of Alternative Dispute Resolution methods, including mediation, arbitration, and lawyer-assisted negotiation.
Italy’s bankruptcy regulations are somewhat analogous to U.S. Chapter 11 restructuring, and allow firms and their creditors to reach a solution without declaring bankruptcy. In recent years, the judiciary’s role in bankruptcy proceedings has been reduced in an attempt to simplify and expedite proceedings. In 2015, the Italian parliament passed a package of changes to the bankruptcy law, including measures to ease access to interim credit for bankrupt companies and to restructure debts. Additional changes were approved in 2017 (juridical liquidation, early warning, simplified process, arrangement with creditors, insolvency of affiliated companies as a group, and reorganization of indebtedness rules). The measures aim to reduce the number of bankruptcies, limit the impact on the local economy, and facilitate the settlement of corporate disputes outside of the court system. The reform follows on the 2015 reform of insolvency procedures. The legislative “implementation decree” for the 2017 bankruptcy reform was issued in early 2019. In the World Bank’s Doing Business Report 2018, Italy ranks 22 out of 190 economies in the category of Ease of Resolving Insolvency.
4. Industrial Policies
The GOI offers modest incentives to encourage private sector investment in targeted sectors (e.g., innovative companies) and economically depressed regions, particularly in southern Italy. The incentives are available to eligible foreign investors as well. Incentives include grants, low-interest loans, deductions and tax credits. Some incentive programs have a cost cap, which may prevent otherwise eligible companies from receiving the incentive benefits once the cap is reached. The GOI applies cost caps on a non-discriminatory basis, typically based on the order that applications were filed. The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.
Italy provides an incentive for investments by SMEs in new machinery and capital equipment (“New Sabatini Law”), available to eligible companies regardless of nationality. This investment incentive provides financing, subject to an annual cost cap. Sector-specific investment incentives are also available in targeted sectors.
In January 2018, the GOI also provided “super amortization” and “hyper amortization” (essentially, generous tax deductions) on investments in special areas of the economy. Of these only “hyper amortization” was renewed in the 2019 budget law. The GOI is considering reintroducing the “super amortization” by decree law in the second half of 2019 in order to stimulate investment. The GOI has not yet renewed the broader “Industry 4.0” initiative launched by the previous government in 2017 to improve the Italian industrial sector’s competitiveness through a combination of policy measures and research and infrastructure funding.
The Italian tax system does not generally discriminate between foreign and domestic investors, though a digital services tax approved in principle by the Parliament in December 2018, but not yet implemented, would primarily impact U.S. companies. The corporate income tax (IRES) rate is 24 percent. In addition, companies may be subject to a regional tax on productive activities (IRAP) at a 3.9 percent rate. The World Bank estimates Italy’s total tax rate as a percent of commercial profits at 53.1 percent in 2018, higher than the OECD high-income average of 39.8 percent.
Several U.S. multinationals have sought U.S. Embassy assistance in dealing with Italy’s tax enforcement, with some expressing concerns that the Italian Revenue Agency unfairly targeted large companies. According to the companies, Italian tax investigations may focus on corporate accounting practices deemed legitimate in other EU Member States, creating inconsistencies and uncertainty.
Foreign Trade Zones/Free Ports/Trade Facilitation
The main free trade zone in Italy is located in Trieste, in the northeast. The goods may undergo transformation free of any customs restraints. An absolute exemption is granted from any duties on products coming from a third country and re-exported to a non-EU country. Legislation to create other FTZs in Genoa and Naples exists, but has yet to be implemented. A free trade zone operated in Venice for a period but is currently being restructured.
Italy’s “Decree for the South” law (Law 91 of 2017) foresees eight Special Economic Zones (ZES – Zone Economica Speciale) managed by port authorities in Italy’s less-developed south and islands (the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily). Investors will be able to access up to EUR 50 million in tax breaks, hiring incentives, reduced bureaucracy, and reimbursement of the IRAP regional business tax, covered by national allotments of EUR 250 million for 2019 and 2020. The GOI announced plans to increase the allotment by another EUR 300 million, but the increase has not passed into law yet. The Region of Campania approved the strategic plan for implementing the law on March 28, 2018, but the plan still awaits final approval from the Chamber of Deputies to become operational. The Naples ZES will encompass over 54 million square meters of land in the ports of Naples, Salerno and Castellamare di Stabia, as well as industrial areas and transport hubs in 37 cities and towns in Campania. Incentives are not automatic, as investments will be approved by local government bodies in a procedure governed by the Port Authority of the Central Tyrrhenian Sea. The Campania Region forecasts that the ZES will create and/or save between 15 and 30 thousand jobs. A proposed ZES encompassing the port cities of Bari and Brindisi on the Adriatic is expected to finish the approval procedure in 2019, followed by a ZES planned around the transshipment port of Gioia Tauro in Calabria and the other five zones: eastern Sicily (Augusta, Catania, and Siracusa), western Sicily (Palermo), Sardinia (Cagliari), ZES Ionica (Taranto in Puglia and the region of Basilicata), and a ZES to be shared between the ports in Abruzzo and Molise.
A special free trade zone was established in late 2015 in the areas within the Emilia-Romagna region that were hit by a May 2012 earthquake and by a January 2014 flood. The measure aimed to assist the recovery of these areas through tax exemptions amounting to EUR 39.6 million for the years 2015 and 2016 for small enterprises headquartered in these areas.
Currently, goods of foreign origin may be brought into Italy without payment of taxes or duties, as long as the material is to be used in the production or assembly of a product that will be exported. The free-trade zone law also allows a company of any nationality to employ workers of the same nationality under that country’s labor laws and social security systems.
Performance and Data Localization Requirements
Italy does not mandate local employment. Non-EU nationals who would like to establish a business in Italy must have a valid residency permit or be nationals of a country with reciprocal arrangements, such as a bilateral investment agreement, as described at: .
Work permits and visas are readily available and do not inhibit the mobility of foreign investors. As a member of the Schengen Area, Italy typically allows short-term visits (up to 90 days) without a visa. The Italian Ministry of Foreign Affairs has specific information about visa requirements: .
As a member of the EU, Italy does not follow forced localization policies in which foreign investors must use domestic content in goods or technology. Italy does not have enforcement procedures for investment performance requirements. Italy does not require local data storage. Companies transmitting customer or other business-related data within or outside of the EU must comply with relevant EU privacy regulations.
5. Protection of Property Rights
According to the World Bank, Italy ranks 23 worldwide out of 190 economies for the ease of registering property. Real property registration takes an average of 16 days, requires four procedures, and costs an average of 4.4 percent of the value of the property. Real property rights are enforced in Italian courts. Mortgages and judgment liens against property exist in Italy and the recording system is reliable. Although Italy does not publish official statistics on property with titling issues, Post estimates that less than 10 percent of the land in Italy does not have clear title. Italian law includes provisions whereby peaceful and uninterrupted possession of real property for a period of 20 years can, under certain circumstances, allow the occupying party to take title to a property.
Intellectual Property Rights
Italy was removed from the USTR’s Special 301 Watch List in 2014 after the Italian Communications Authority’s (AGCOM’s) issuance of a new regulation to combat digital copyright theft. The regulation created a process by which rights holders can report online infringements to AGCOM, which can then block access to domestic and international sites hosting infringing content. This negated the need for lengthy litigation, which had been required previously. The system was further strengthened in 2018, when authorities adopted new measures to prevent previously blocked websites from becoming accessible again under different domain names.
Authorities also continue to pursue trademark violations. In 2017, the last year for which statistics are available, customs and the tax police jointly seized almost 32 million counterfeit items (excluding food and beverages, tobacco, and medical products), worth almost EUR 295 million.
6. Financial Sector
Capital Markets and Portfolio Investment
The GOI welcomes foreign portfolio investments, which are generally subject to the same reporting and disclosure requirements as domestic transactions. Financial resources flow relatively freely in Italian financial markets and capital is allocated mostly on market terms. Foreign participation in Italian capital markets is not restricted. In practice, many of Italy’s largest publicly-traded companies have foreign owners among their primary shareholders. While foreign investors may obtain capital in local markets and have access to a variety of credit instruments, access to equity capital is difficult. Italy has a relatively underdeveloped capital market and businesses have a long-standing preference for credit financing. The limited venture capital available is usually provided by established commercial banks and a handful of venture capital funds.
Italy’s conservative regulatory system somewhat limits portfolio investment. Italy’s financial markets are regulated by the Italian securities regulator (CONSOB), Italy’s central bank (the Bank of Italy), and the Institute for the Supervision of Insurance (IVASS). CONSOB supervises and regulates Italy’s securities markets (e.g., the Milan Stock Exchange). The European Central Bank (ECB) assumed direct supervisory responsibilities for the 12 largest Italian banks in 2019 and indirect supervision for less significant Italian banks through the Bank of Italy. IVASS supervises and regulates insurance companies. Liquidity in the primary markets (e.g., the Milan exchanges) is sufficient to enter and exit sizeable positions, though Italian capital markets are small by international standards. Liquidity may be limited for certain less-frequently traded investments (e.g., bonds traded on the secondary and OTC markets).
Italian policies generally facilitate the flow of financial resources to markets. Dividends and royalties paid to non-Italians may be subject to a withholding tax, unless covered by a tax treaty. Dividends paid to permanent establishments of non-resident corporations in Italy are not subject to the withholding tax.
In 2009, the United States and Italy enacted an income tax agreement to prevent double-taxation of each other’s nationals and firms, and to improve information sharing between tax authorities.
In 2014 the United States and Italy signed an intergovernmental agreement to implement provisions of the U.S. law known as FATCA (Foreign Account Tax Compliance Act), that allows for the automatic exchange of information between tax authorities. This automatic exchange of information takes place on the basis of reciprocity, and includes accounts held in the United States by persons resident in Italy and those held in Italy by U.S. citizens and residents.
Italy imposed a financial transactions tax (FTT, a.k.a. Tobin Tax) beginning in 2013. Financial trading is taxed at 0.1 percent in regulated markets and 0.2 percent in unregulated markets. The FTT applies to daily balances rather than to each transaction. The FTT applies to trade in derivatives as well, with fees ranging from EUR 0.025 to EUR 200. High-frequency trading is also subject to a 0.02 percent tax on trades occurring every 0.5 seconds or faster (e.g., automated trading). The FTT does not apply to “market makers,” pension and small-cap funds, transactions involving donations or inheritances, purchases of derivatives to cover exchange/interest-rate/raw-materials (commodity market) risks, and financial instruments for companies with a capitalization of less than EUR 500 million.
Italy has sought to curb widespread tax evasion by improving enforcement and changing popular attitudes. GOI actions include a public communications effort to reduce tolerance of tax evasion; increased and visible financial police controls on businesses (e.g., raids on businesses in vacation spots at peak holiday periods); and audits requiring individuals to document their income. In 2014 Italy’s Parliament approved the enabling legislation for a package of tax reforms, many of which entered into force in 2015. The tax reforms aim to institutionalize OECD best practices to encourage taxpayer compliance, including by reducing the administrative burden for taxpayers through the increased use of technology such as e-filing, pre-completed tax returns, and automated screenings of tax returns for errors and omissions prior to a formal audit. The reforms also offer additional certainty for taxpayers through programs such as cooperative compliance and advance tax rulings (i.e., binding opinions on tax treatment of transactions in advance) for prospective investors.
The GOI and the Bank of Italy have accepted and respect IMF obligations, including Article VIII.
Credit is allocated on market terms, with foreign investors eligible to receive credit in Italy. In general, credit in Italy remains largely bank-driven. In practice, foreigners may encounter limited access to finance, as Italian banks may be reluctant to lend to prospective borrowers (even Italians) absent a preexisting relationship. Although a wide array of credit instruments are available, bank credit remains constrained following the financial crisis. Weak demand, combined with risk aversion by banks, continues to constrain lending. The latest business surveys indicate that credit conditions are easing, yet availability of credit remains constrained, especially for smaller firms.
Money and Banking System
Despite isolated problems at individual Italian banks, the banking system remains sound and capital ratios exceed regulatory thresholds. However, Italian banks’ profit margins have suffered since 2011 as a result of tightening European supervisory standards and requirements to increase banks’ capital. The recession brought a pronounced worsening of the quality of banks’ assets, which further dampened banks’ profitability. The ratio of non-performing loans (NPLs) to total outstanding loans decreased significantly since its height in 2017. Currently net NPLs stand at EUR 33 billion. The GOI is also taking steps to facilitate acquisitions of NPLs by outside investors. In December 2016, the GOI created a EUR 20 billion bank rescue fund to assist struggling Italian banks in need of liquidity or capital support. Italy’s fourth-largest bank, Monte dei Paschi di Siena (MPS), became the first bank to avail itself of this fund in January. The GOI also facilitated the sale of two struggling “Veneto banks” (Banca Popolare di Vicenza and Veneto Banca) to Intesa San Paolo in mid-2017. In January 2019, Banca Carige, the smallest Italian bank under ECB supervision, was put under special administration.
Italy’s central bank, the Bank of Italy (BOI), is a member of the euro system and the European Central Bank (ECB). In addition to ECB supervision of larger Italian banks, BOI maintains strict supervisory standards. The Italian banking system weathered the 2007-2013 financial crisis without resorting to government intervention.
The banking system in Italy has consolidated since the financial crisis, though additional consolidation is needed, according to the OECD and ECB. In 2017, the Italian banking landscape included 70 banking groups (comprising 129 banks), 393 banks not belonging to a banking group, and 82 branches of foreign banks. The GOI is taking further steps to encourage consolidation and facilitate acquisitions by outside investors. The Italian banking sector remains overly concentrated on physical bank branches for delivering services, further contributing to sector-wide inefficiency and low profitability. Electronic banking is available in Italy, but adoption remains below euro-zone averages and non-cash transactions are relatively uncommon.
The London Stock Exchange owns Italy’s only stock exchange: the Milan Stock Exchange (Borsa Italiana). The exchange is relatively small — 357 listed companies and a market capitalization of only 33.5 percent of GDP as of December 2018. Although the exchange remains primarily a source of capital for larger Italian firms, Borsa Italiana created “AIM Italia” in 2012 as an alternative exchange with streamlined filing and reporting requirements to encourage SMEs to seek equity financing. Additionally, the GOI recognizes Italian firms remain overly reliant on bank financing, and has initiated some programs to encourage alternative forms of financing, including venture capital and corporate bonds. While financial experts have held that slow CONSOB processes and cultural biases against private equity have limited equity financing in Italy, panelists at the March 2019 annual meeting of the Italian Association of Private Equity, Venture Capital, and Private Debt (AIFI) said investment by private equity funds in Italy rose by 98 percent from 2017 to 2018, totaling EUR 9,788 million —still a low figure given the size of Italy’s economy.
Most non-insurance investment products are marketed by banks, and tend to be debt instruments. Italian retail investors are conservative, valuing the safety of government bonds over most other investment vehicles. Less than ten percent of Italian households own Italian company stocks directly. Several banks have established private banking divisions to cater to high-net-worth individuals with a broad array of investment choices, including equities and mutual funds.
There are no restrictions on foreigners engaging in portfolio investment in Italy. Financial services companies incorporated in another EU member state may offer investment services and products in Italy without establishing a local presence.
Any investor (Italian or foreign) acquiring a stake in excess of two percent of a publicly traded Italian corporation must inform CONSOB, but does not need its approval. Any Italian or foreign investor seeking to acquire or increase its stake in an Italian bank equal to or greater than ten percent must receive prior authorization from the Bank of Italy (BOI). Acquisitions of holdings that would change the controlling interest of a banking group must be communicated to the BOI at least 30 days in advance of the closing of the transactions. Approval and advance authorization by the Italian Insurance Supervisory Authority IVASS are required for any significant acquisition in ownership, portfolio transfer, or merger of insurers or reinsurers. Regulators retain the discretion to reject proposed acquisitions on prudential grounds (e.g., insufficient capital in the merged entity).
The Ministry of Economy and Finance has indicated its interest in blockchain technologies, but this discussion remains in the formative stages. Blockchain technologies are not currently being used in banking transactions, nor have any banks announced their intention to start using them. However, in late 2018, the Association of Italian Banks (ABI) tested blockchain technology in a project associated with check clearing.
Foreign Exchange and Remittances
Foreign Exchange Policies
In accordance with EU directives, Italy has no foreign exchange controls. In December 2018 Parliament passed a decree which imposed a 1.5 percent tax on remittances sent outside of the EU via money transfer. The government estimates that the tax on remittances to countries outside of the EU will raise several hundred million euros per year. There are no restrictions on currency transfers; there are only reporting requirements. Banks are required to report any transaction over EUR 1,000 due to money laundering and terrorism financing concerns. Profits, payments, and currency transfers may be freely repatriated. Residents and non-residents may hold foreign exchange accounts. In 2016, the GOI raised the limit on cash payments for goods or services to EUR 3,000. Payments above this amount must be made electronically. Enforcement remains uneven. The rule exempts e-money services, banks, and other financial institutions, but not payment services companies.
Italy is a member of the European Monetary Union (EMU), with the euro as its official currency. Exchange rates are floating.
There are no limitations on remittances, though transactions above EUR 1,000 must be reported.
According to the Financial Action Task Force, Italy has a strong legal and institutional framework to fight money laundering and terrorist financing and authorities have a good understanding of the risks the country faces. There are areas where improvements are needed, such as its money-laundering investigative and prosecutorial action on risks associated with self-laundering, stand-alone money laundering, and foreign predicate offenses, and the abuse of legal persons.
Sovereign Wealth Funds
The state-owned national development bank Cassa Depositi e Prestiti (CDP) launched a strategic wealth fund in 2011, now called CDP Equity (formerly Fondo Strategico Italiano – FSI). CDP Equity has EUR 3.5 billion in capital, and has invested EUR 3.7 billion in eleven portfolio companies. CDP Equity generally adopts a passive role by purchasing minority interests as a non-managerial investor. It does not hold a majority stake in any of its portfolio companies. CDP Equity invests solely in Italian companies with the goal of furthering the expansion of companies in growth sectors—though some of these investment decisions are political. CDP Equity provides information on its funding, investment policies, criteria, and procedures on its website ( ). CDP Equity is open to capital investments from outside institutional investors, including foreign investors. CDP Equity is a member of the International Working Group of Sovereign Wealth Funds and follows the Santiago Principles.
7. State-Owned Enterprises
The Italian government has in the past owned and operated a number of monopoly or dominant companies in certain strategic sectors. However, beginning in the 1990s and through the early 2000s, the government began to privatize most of these state-owned enterprises (SOEs). Notwithstanding this privatization effort, the GOI retains 100 percent ownership of the national railroad company (Ferrovie dello Stato) and road network company (ANAS), both of which merged in January 2018. The GOI holds a 99.56 percent share of RAI, the national radio and television broadcasting network; and retains a controlling interest, either directly and/or through the state-controlled sovereign wealth fund Cassa Depositi e Prestiti (CDP), in companies such as shipbuilder Fincantieri (71.6 percent), postal and financial services provider Poste Italiane (65 percent), electricity provider ENEL (23.6 percent), oil and gas major Eni (30 percent), defense conglomerate Leonardo-Finmeccanica (30.2 percent), natural gas transmission company Snam (30.1 percent), as well as electricity transmission provider Terna (29.85 percent).
However, these companies are operating in a competitive environment (domestically and internationally) and are increasingly responsive to market-driven decision-making rather than GOI demands. In addition, many of the state-controlled entities are publicly traded, which provides additional transparency and corporate governance obligations, including equitable treatment for non-governmental minority shareholders. Italy’s parastatals (CDP, Ferrovie dello Stato, Eni, ENEL, ENAV, Poste Italiane and Leonardo) generated EUR 2.4 billion return on investment in 2018 for the GOI. The largest contributor was CDP (EUR 1.256 billion) and the second largest was Eni (EUR 671 million).
SOEs are subject to the same tax treatment and budget constraints as fully private firms. Additionally, industries with SOEs remain open to private competition.
As an EU member, Italy is covered by EU government procurement rules.
The Italian government committed to privatize EUR 16 billion in state-owned assets in 2016 and 2017, planning for EUR 8 billion in each year, although privatizations have not reached these targets. The privatizations fall into two categories: minority stakes in SOEs and underutilized real estate holdings. In 2016, the GOI sold a minority stake in the air traffic controller (ENAV). Revenues in 2016 were well below expectations due to the unfavorable markets that discouraged other privatizations and resulted in the postponement of the planned privatization of a minority share of the national rail network (Ferrovie dello Stato) as well as the national postal provider (Poste Italiane). At the end of 2018, the government set a revenue target for 2019 equal to 1 percent of GDP (approximately EUR 18 billion).
The GOI solicits and actively encourages foreign investors to participate in its privatizations, which are non-discriminatory and transparent. The GOI sells SOE shares through the Milan Stock Exchange (Borsa Italiana), while real estate sales are conducted through public bidding processes (typically online). The Italian Public Property Agency (Agenzia del Demanio) administers real estate sales: . The Agency has created a centralized registry with information on individual parcels for sale or long-term lease: .
8. Responsible Business Conduct
There is a general awareness of societal expectations and standards for responsible business conduct (RBC). Enforcement is generally fair, though the slow pace of civil justice may delay individuals’ ability to seek effective redress for adverse business impacts. In addition, EU laws and standards on RBC apply in Italy. In the event Italian courts fail to protect an individual’s rights under EU law, it is possible to seek redress to the European Court of Justice (ECJ).
As an OECD member Italy supports and promotes the OECD Guidelines for Multinational Enterprises (“Guidelines”), which are recommendations by governments to multinational enterprises for conducting a risk-based due diligence approach to achieve responsible business conduct (RBC). The Guidelines provide voluntary principles and standards in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, consumer protection, taxation, and science and technology. (See: OECD Guidelines: )
The Italian National Contact Point (NCP) for the Guidelines is located in the Ministry of Economic Development. The NCP promotes the Guidelines; disseminates related information; and encourages collaboration among national and international institutions, the business community, and civil society. The NCP also promotes Italy’s National Action Plan on Corporate Social Responsibility which is available online. For the key link, see: Italian NCP: /.
Independent NGOs are able to operate freely in Italy. Additionally, Italy’s three largest trade union confederations actively promote and monitor RBCs. They serve on the advisory body to Italy’s National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises. Unions are able to work freely in Italy.
Italy encourages responsible supply chains and has provided operational guidelines for Italian businesses to assist them in supply chain due diligence. Italy is a member of the Extractive Industries Transparency Initiative (EITI). The Italian Ministry of Foreign Affairs works internationally to promote the adoption of best practices.
Corruption and organized crime continue to be significant impediments to investment and economic growth in parts of Italy, despite efforts by successive governments to reduce risks. Italian law provides criminal penalties for corruption by officials. The government has usually implemented these laws effectively, but officials sometimes have engaged in corrupt practices with impunity. While anti-corruption laws and trials garner headlines, they have been only somewhat effective in stopping corruption. Italy has steadily improved in Transparency International’s Corruption Perceptions Index, in overall rank and score every year since 2014, yet ranked 53 in the 2018 index.
In October 2012, as part of an anti-corruption package, a new National Anti-Corruption Authority (ANAC) was created. The 2012 anti-corruption law has subsequently been strengthened by further provisions. In November 2017 the government approved legislation to protect both public and private sector employees who report illicit conduct in the workplace (i.e. whistleblowing). The legislation helped protect employees who denounce illicit conduct to the National Anti-Corruption Authority or to enforcement agencies from retaliation. In December 2018 Italy’s Parliament passed an anti-corruption bill that introduced new provisions to combat corruption in the public sector and regulate campaign finance. The measures in the bill changed the statute of limitations for corruption-related crimes as well as other crimes and made it more difficult for a person to “run out the clock” on their case. Italy’s anti-money-laundering laws also apply to public officials, defined as any person who has been entrusted with important political functions, as well as their immediate family members. (This encompasses anyone from the head of state to members of the executive body in state-owned companies.)
U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the anticorruption laws of both the foreign country and the United States in order to comply with them and, where appropriate, they should seek the advice of legal counsel. While the U.S. Embassy has not received specific complaints of corruption from U.S. companies operating in Italy, commercial and economic officers are familiar with high-profile cases that may impact U.S. companies. The Embassy has received requests for assistance from companies facing a lack of transparency and complicated bureaucracy, particularly in the sphere of government procurement and specifically in the aerospace industry. There have been no reports of government failure to protect NGOs that investigate corruption (such as Transparency International Italy).
Italy has signed and ratified the UN Anticorruption Convention and the OECD Convention on Combatting Bribery.
Resources to Report Corruption:
Autorità Nazionale Anticorruzione (ANAC)
Via Marco Minghetti, 10 – 00187 Roma
Phone: +39 06 367231
Fax: +39 06 36723274
Contact Info page:
ANAC’s whistleblowing web page is:
Transparency International Italia
P.le Carlo Maciachini 11
20159 Milano – Italy
T: +39 02 40093560
F: +39 02 406829
General web site:
10. Political and Security Environment
Politically motivated violence in Italy is rare and most often connected to Italian internal developments or social issues. Italian authorities and foreign diplomatic facilities have found bombs outside public buildings, have received bomb threats, and have been targets of letter bombs, fire bombs and Molotov cocktails in the past several years. These attacks have generally occurred at night, and they have not targeted or injured U.S. citizens. Political violence is not a threat to foreign investments in Italy, but corruption, especially associated with organized crime, can be a major hindrance, particularly in the south.
Italy-specific travel information and advisories can be found at: https://www.travel.state.gov/.
11. Labor Policies and Practices
As a result of its longest and deepest recession since World War II, Italy’s unemployment rate peaked at 13.1 percent in November 2014. Italy’s unemployment rate has since ebbed, but has remained high at 10.5 percent in January 2019 and above the Eurozone average of 7.6 percent. Despite the recent improvement, the GOI and the European Commission continue to forecast Italy’s unemployment rate will remain in double digits until 2020, as employers increasingly seek to improve worker productivity and increase hours for existing workers, rather than hire additional workers. The youth unemployment rate more than doubled during the financial crisis, exceeding 43 percent in 2014. Though youth unemployment has since declined, it remains elevated at 33.0 percent in January 2019 and is one of the highest among EU members. The Central Institute of Statistics estimates there are 2.2 million young Italians not enrolled in education, employment or training (NEETs), more than 22 percent of all young Italians, which is one of the highest percentages in the EU. Long-term unemployment is also elevated, leading to a permanent reduction in human capital and earnings potential.
Italy’s labor force participation rates are among the lowest in the EU, particularly among women, the young, and the elderly, and in the south. Low labor force participation has been partially attributable to the informal economy, which Italy’s statistics agency estimates as at least 12 percent of Italian GDP. January 2019 marked the highest labor force participation rate in Italy since the data series began in 2004: 65.7 percent of working-age Italians.
The productivity of Italy’s labor force is also below the EU average. Many Italian employers report an inability to find qualified candidates for highly-skilled vacancies, demonstrating significant skills mismatches in the Italian labor market. Many well-educated Italians find more attractive career opportunities outside of Italy, with large numbers of Italians taking advantage of EU agreements on freedom of movement to work in the United Kingdom, Switzerland, or Germany. There is no reliable measure of Italians working overseas, as many expatriate workers do not report their whereabouts to the Italian government. Skilled labor shortages are a particular problem in Italy’s industrialized north.
On paper, companies may bring in a non-EU employee after the government-run employment office has certified that no qualified, unemployed Italian is available to fill the position. In reality, the cumbersome and lengthy process acts as a deterrent to foreign firms seeking to comply with the law; language barriers also prevent outsiders from competing for Italian positions. Work visas are subject to annual quotas, although intra-company transfers are exempt from quota limitations.
In 2018 the newly-elected government majority introduced the so-called “Dignity Decree,” which rolled back some key structural reforms to Italy’s labor market adopted as part of the Jobs Act by the previous center-left government. The Dignity Decree extended incentives to hire people under 35 years old, set limits on short-term contracts, and made it more costly to fire workers.
Indefinite employment contracts signed before March 2015 are governed by the June 2012 labor regime, which allows firms to conduct layoffs and firings with lump sum payments. Under the 2012 system, according to Article 18 of the workers’ statute of 1970, judges can order reinstatement of dismissed employees (with back pay) if they find the dismissal was a pretext for discriminatory or disciplinary dismissal. In practice, dismissed employees reserved the right to challenge their dismissal indefinitely, often using the threat of protracted legal proceedings or an adverse court ruling to negotiate additional severance packages with employers.
However, indefinite employment contracts signed after March 2015 are governed by the rules established under the “Jobs Act” labor market reforms, which provide for employment contracts with protections increasing with job tenure. During the first 36 months of employment, firms may dismiss employees for bona fide economic reasons. Under the Jobs Act regime, dismissed employees must appeal their dismissal within 60 days and reinstatements are limited.
Regardless of the reason for termination of employment, all former employees are entitled to receive mandatory severance payments from their employer (TFR – trattamento di fine rapporto), equal to 7.4 percent of the employee’s annual gross compensation for each year worked.
Other Jobs Act measures enacted in 2015 include universal unemployment and maternity benefits, as well as a reduced number of official labor contract templates (from 42 to six). The GOI’s unemployment insurance (NASPI) provides up to six months of coverage for laid-off workers. The GOI also provides worker retraining and job placement assistance, but services vary by region and implementation of national active labor market policies remains in progress.
Italy also offers other social safety net protections to all residents, designed to tackle poverty. The previous government implemented an anti-poverty plan (Reddito di Inclusione, or “Inclusion Income”) aimed at providing some financial relief and training to homeless individuals and people with income below the poverty level. In the 2019 budget, the current government introduced the so-called Citizenship Income (Reddito di Cittadinanza), which will replace and broaden the Inclusion Income program. The Citizenship Income program is aimed at providing a basic income of €780 a month to eligible citizens; the GOI estimates that one million workers are potentially eligible for this benefit. The program also gives active support in finding a job to a portion of those receiving the Citizenship Income. The annual cost of the program is estimated to be €6 billion a year.
The 2019 budget and the associated decree and law also implemented an early retirement scheme (a.k.a. Quota 100) changing the pension law and permitting earlier retirement for eligible workers with 62 years of age and 38 years of work seniority.
Other Jobs Act measures, including a statutory minimum wage, have not yet been implemented, although in July 2018 a national minimum wage bill was introduced in Parliament. Italy does not currently have a national minimum wage, as wages are set through sector-wide collective bargaining. An agency for Job Training and Placement (ANPAL) was established in 2016 to coordinate with Italian regions, which after the defeat of the December 2016 constitutional reform referendum, remain in charge of implementation of many labor policies. ANPAL is following the implementation of the Assegno di Riallocazione (the “reallocation check”, an initiative related to the Jobs Act aimed at providing unemployment benefits to workers willing to move to a different part of the country), and the related special wage guarantee fund (Cassa Integrazione Straordinaria) and retraining to find a new job. The “reallocation check” funds are disbursed to the agency in charge of the retraining and job placement only after the candidate gets a new job. Citizenship Income and ANPAL are expected to play a key role in helping eligible workers who are willing to work to find a job.
Historical regional labor market disparities remain unchanged, with the southern third of the country posting a significantly higher unemployment rate (e.g., more than 25 percent in Calabria) than northern and central Italy (e.g., approximately 4 percent in Bolzano). Despite these differences, internal migration within Italy remains modest, while industry-wide national collective bargaining agreements set equal wages across the entire country. Immigrants from Eastern Europe and North Africa often are drawn to the north by the opportunities created there by shortages of unskilled and semi-skilled labor.
Italy is an International Labor Organization (ILO) member country. Italy does not waive existing labor laws in order to attract or retain investments. Terms and conditions of employment are periodically fixed by collective labor agreements in different professions. Most Italian unions are grouped into four major national confederations: the General Italian Confederation of Labor (CGIL), the Italian Confederation of Workers’ Unions (CISL), the Italian Union of Labor (UIL), and the General Union of Labor (UGL). The first three organizations are affiliated with the International Confederation of Free Trade Unions (ICFTU), while UGL has been associated with the World Confederation of Labor (WCL). The confederations negotiate national-level collective bargaining agreements with employer associations, which are binding on all employers in a sector or industry irrespective of geographical location.
Collective bargaining is widespread in Italy, occurring at the national-level (primarily to reflect inflation and cost-of-living adjustments) and industry-level (to reflect productivity and profitability). Firm-level collective bargaining is limited. The Italian Constitution provides that unions may reach collective agreements that are binding on all workers. There are no official estimates of the percentage of the economy covered by collective bargaining agreements. A 2014 estimate from union officials projected collective bargaining coverage at 80 percent (for national-level bargaining), with less coverage for industry-level agreements and minimal coverage for company-level agreements.
Collective agreements may last up to three years, though recent practice is to renew collective agreements annually. Collective bargaining establishes the minimum standards for employment, though employers retain the discretion to apply more favorable treatment to some employees covered by the agreement.
Labor disputes are handled through the civil court system, though they are subject to specific procedures. Before entering the civil court system, parties must first attempt to resolve their disputes through conciliation (administered by the local office of the Ministry of Labor) and/or through specific union-agreed dispute resolution procedures.
In cases of proposed mass layoffs or facility closures, the Ministry of Economic Development may convene a tripartite negotiation (Ministry, company, and union representatives) to attempt to reach a mutually acceptable agreement to avoid the layoff or closure.
There have been no recent strikes that posed investment risks. The Italian Constitution recognizes an employee’s right to strike. Strikes are permitted in practice, but are typically short-term (e.g., one working day) to draw attention to specific areas of concern. In addition, workers (or former employees) commonly participate in demonstrations to show opposition to proposed job cuts or facility closings, but these demonstrations have not threatened investments. In addition, frequent strikes by employees of local transportation providers may limit citizens’ mobility.
12. OPIC and Other Investment Insurance Programs
OPIC does not currently operate programs in Italy.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
* Italian GDP data are taken from ISTAT, the official statistics agency. ISTAT publishes preliminary year end GDP data in early February and issues revised data in early March. Italian FDI data are from the Bank of Italy and are the latest available; new data are released in May.
Table 3: Sources and Destination of FDI
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$420,437||100%||Total Outward||$557,022||100%|
|United Kingdom||$53,678||13%||United States||$40,279||7%|
|“0” reflects amounts rounded to +/- USD 500,000.|
The 2017 IMF statistics above show Italy’s largest investment partners to be within the European Union and the United States. This is consistent with Italy being fully integrated with its EU partners and the United States. Note: Foreign direct investment data can vary widely by source, reflecting different definitions used. End note.
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Coun-tries||$1,658,786||100%||All Countries||$1,018,524||100%||All Countries||$640,262||100%|
|United States||$130,736||6%||United States||$37,108||4%||Germany||$61,778||10%|
The statistics above show Italy’s largest investment partners to be within the European Union and the United States. This is consistent with Italy being fully integrated with its EU partners and the United States.