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Austria

Executive Summary

Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D.  The country benefits from a skilled labor force, and a high standard of living, with its capital Vienna consistently placing at the top of global quality-of-life rankings.  

With more than 50 percent of its GDP attributed to exports, Austria’s economy is closely tied to other EU economies, especially Germany’s, its largest trading partner, followed by the U.S.  The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.

Austria’s economy grew from 2017-18.  GDP increased by 2.7 percent in 2018, leading to a decrease in the unemployment rate to 4.8 percent. However, positive momentum has slowed since then, with GDP growth forecast to reach only 1.7 percent in 2019 and 1.6 percent in 2020.

The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.

Some 300 U.S. companies have investments in Austria, and many have expanded their original investment over time.  U.S. Foreign Direct Investment into Austria totaled approximately EUR 14.5 billion (USD 16.5 billion) in 2018, according to the Austrian National Bank, and U.S. companies support over 20,000 jobs in Austria.  Altogether, Austria offers a stable and attractive climate for foreign investors.

The most positive aspects of Austria’s investment climate include:

  • Relatively high political stability;
  • Harmonious labor-management relations and low incidence of labor unrest;
  • Highly skilled labor across sectors;
  • High levels of productivity and international competitiveness;
  • Excellent quality of life through high levels of personal security and high-quality health, telecommunications, and energy infrastructure.

Negative aspects of Austria’s investment climate include:

  • A high overall tax burden;
  • A large public sector and a complex regulatory system with extensive bureaucracy;
  • Low-to-moderate innovation dynamics.

Key sectors that have historically attracted significant investment in Austria:

  • Automotive;
  • Pharmaceuticals;
  • Financial.

Key issue to watch:

  • Austria’s government has announced a comprehensive tax-reform plan for the coming years. This plan includes lowering the corporate tax rate from 25 percent to around 20 percent in 2022, reducing personal income tax in 2021, and increasing the permissible amount of hours worked per week from 50 to 60.  The government is hoping to increase Austria’s attractiveness as a business location by reducing bureaucracy, reducing labor market protections and lowering non-wage labor costs.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 14 of 175 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 26 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 21 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $7,800 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2018 $45,440 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are no specific legal, practical or market access restrictions on foreign investment.  American investors have not complained of discriminatory laws against foreign investors. Corporate taxes are relatively low (25 percent flat tax), and the government plans to reduce them further in a tax reform to be implemented by 2022. U.S. citizens and investors have reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also factor in Austria’s lengthy environmental impact assessments in their investment decision-making.  The requirement that over 50 percent of energy providers must be publicly-owned creates a potential additional burden for investments in the energy sector.  Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops.

Austria’s national investment promotion company, the Austrian Business Agency (ABA), is the first point of contact for foreign companies aiming to establish their own business in Austria.  It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

Austrian agencies do not press investors to keep investments in the country, but the Federal Economic Chamber (WKO), and the American Chamber of Commerce in Austria (Amcham) carry out annual polls among their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems investors have identified.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly-started enterprise.  For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in many trades sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.  There are no limitations on ownership of private businesses. Austria maintains an investment screening process for takeovers of 25 percent or more in the sectors of national security and public services such as energy and water supply, telecommunications, and education services, where the Austrian government retains the right of approval. The screening process has been rarely used since its introduction in 2012, but could pose a de facto barrier, particularly in the energy sector. In April 2019, the EU Regulation on establishing a framework for the screening of foreign direct investments into the Union entered into force.  It creates a cooperation mechanism through which EU countries and the EU Commission will exchange information and raise concerns related to specific investments which could potentially threaten the security of EU countries.

Other Investment Policy Reviews

Not applicable.

Business Facilitation

While the World Bank ranks Austria as the 26th best country in 2019 with regard to “ease of doing business” (www.doingbusiness.org), starting a business takes time and requires many procedural steps (Austria ranked 118 in this category in 2019).

In order to register a new company, or open a subsidiary in Austria, a company must first be listed on the Austrian Companies’ Register at a local court.  The next step is to seek confirmation of registration from the Austrian Federal Economic Chamber (WKO) establishing that the company is really a new business.  The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located.  Finally, membership in the WKO is mandatory for all businesses in Austria.

For companies with sole proprietorship, it is possible under certain conditions to use an online registration process via government websites in German to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html  or www.gisa.gv.at/online-gewerbeanmeldung . It is advisable to seek information from ABA or the WKO before applying to register a firm.

The website of the ABA contains further details and contact information, and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/ .

According to the World Bank, the average time to set up a company in Austria is 21 days, well above the EU average of 12.5 days.

Outward Investment

The Austrian government encourages outward investment.  There is no special focus on specific countries, but the United States is seen as an attractive target country given the U.S. position as the second biggest market for Austrian exports.  Advantage Austria, the “Austrian Foreign Trade Service” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates six offices in the United States in Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco.  The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants in form of contributions to “market access costs,” and also provides “soft subsidies,” such as counselling, legal advice, and marketing support.

2. Bilateral Investment Agreements and Taxation Treaties

There is no current investment agreement between the United States and Austria.  Austria has Bilateral Investment Treaties (BITs) in force with: Albania, Algeria, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Belize, Bosnia and Herzegovina, Bulgaria, Chile, China, Croatia, Cuba, Czech Republic, Egypt, Estonia, Ethiopia, Georgia, Guatemala, Hong Kong, Hungary, Iran, Jordan, Kazakhstan, Republic of Korea, Kuwait, Latvia, Lebanon, Libya, Lithuania, North Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Oman, Paraguay, Philippines, Poland, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, Tajikistan, Tunisia, Turkey, Ukraine, United Arab Emirates, Uzbekistan, Vietnam, and Yemen.  BITs with Cambodia, Kyrgyzstan, Nigeria, and Zimbabwe have been signed, but have not yet entered into force.

On March 16, 2018, the European Court of Justice determined that arbitration clauses in Member State BITs are incompatible with EU law; subsequently, Austria agreed with the EU Commission to terminate its 12 bilateral intra-EU BITS (as did the other Member States), but negotiations on the date of termination are ongoing.

Austria and the United States are parties to a bilateral double taxation convention covering income and corporate taxes, which went into effect in January 1998.  Another bilateral double taxation convention (covering estates, inheritances, gifts and generation-skipping transfers) has been in effect since 1982 (amended in 1999).  Austria and the United States signed the Foreign Account Tax Compliance Act (FATCA) Agreement on April 29, 2014, covering U.S. citizen account holders in Austria. The FATCA Agreement went into force December 9, 2014.

Austria has 90 additional double taxation treaties in force with other countries.

Two other Austrian agreements, with Switzerland and Liechtenstein, on cooperation in the areas of taxation and financial markets (which entered into force in January and April 2013 respectively) cover the treatment of anonymous accounts from Austrian citizens in those countries.

3. Legal Regime

Transparency of the Regulatory System

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms.

Federal ministries generally publish draft laws and regulations, including investment laws, for public comment prior to their adoption by Austria’s cabinet and/or Parliament.  Relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Industrial Association, and research institutions are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws.  However, over the past year, the government has increasingly moved towards excluding outside parties from its decision-making process by either ignoring suggestions provided, or by making the time period for commenting unreasonably short. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important for investments than federal laws.  The judicial system is independent from the executive branch, thus helping ensure the government follows administrative processes.

Draft legislation by ministries (“Ministerialentwürfe”) and resulting government draft laws and parliamentary initiatives (“Regierungsvorlagen und Gesetzesinitiativen”) can be accessed through the website of the Austrian Parliament:  https://www.parlament.gv.at/PAKT/  (all in German).  The parliament also publishes a history of all law-making processes. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx 

The government has simplified the process for issuing business licenses and permits.  It can take up to three months to receive a business permit but the business may commence operations as soon as all the relevant documentation has been submitted and verified.

Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information.  In line with EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

International Regulatory Considerations

Austria is a member of the EU.  As such, its laws must comply with EU legislation and the country is therefore subject to European Court of Justice (ECJ) jurisdiction.  Austria is a member of the WTO and largely follows WTO requirements. Austria has ratified the Trade Facilitation Agreement (TFA), but has not taken specific actions to implement it.

Legal System and Judicial Independence

The Austrian legal system is based on Roman law.  The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher legislative instrument.  The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

Commercial matters fall within the competence of ordinary regional courts except in Vienna, which has a specialized Commercial Court.  The Commercial Court also has nationwide competence for trademark, design, model, and patent matters. There is no special treatment of foreign investors and the executive does not interfere in judicial matters.

The system provides an effective means for protecting property and contractual rights of nationals and foreigners.  Sensitive cases must be reported to the Minister of Justice, which can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first to a Regional Court and in the last instance, to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

There is no discrimination against foreign investors, but businesses are required to follow numerous local regulations.  Although there is no requirement for participation by Austrian citizens in ownership or management of a foreign firm, at least one manager must meet Austrian residency and other legal requirements.  Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

The “Law to Support Investments in Municipalities” (published in the Federal Law Gazette, 74/2017, available online in German only on the federal legal information system www.ris.bka.gv.at ), allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality.

Austria has restrictions on investments into industries that could affect national security, critical infrastructure or public services.  The government has to approve any foreign acquisition of a 25 percent or higher stake in any of these industries.

Competition and Anti-Trust Laws

Austria’s Anti-Trust Act (ATA) is in line with European Union anti-trust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states.  The Austrian Anti-Trust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Antitrust Prosecutor (FAP) are responsible for administering anti-trust laws.  The FCA can conduct investigations and request information from firms. The FAP is subject to instructions issued by the Justice Ministry and can bring actions before Austria’s Cartel Court. Additionally, the Commission on Competition may issue expert opinions on competition policy and give recommendations on notified mergers.  The most recent amendment to the ATA was in May, 2017. This amendment facilitated enforcing private damage claims, strengthened merger control, and enabled appeals against verdicts from the Cartel Court.

Companies must inform the FCA of mergers and acquisitions (M&A).  Special M&A regulations apply to media enterprises, such as a lower threshold above which the ATA applies, and the requirement that media diversity must be maintained.  A cartel court is competent to rule on referrals from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales.  The independent energy regulator E-Control separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.

Austria’s Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange.  The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price.  The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to force out minority shareholders.  An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

Expropriation and Compensation

According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property ownership is guaranteed in Austria.  Expropriation of private property in Austria is rare and may be undertaken by federal or provincial government authorities only on the basis of special legal authorization “in the public interest” in such instances as land use planning, and infrastructure project preparations.  The government can initiate such a procedure only in the absence of any other alternatives for satisfying the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. In 2017-18, the government expropriated Hitler’s birth house in order to prevent it from becoming a place of pilgrimage for neo-Nazis, paying the former owner €1.5 million (USD 1.8 million) in compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms.  There is no indication that further expropriations will take place in the foreseeable future.

Dispute Settlement

ICSID Convention and New York Convention

Austria is a member of both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce foreign arbitration awards in Austria. There is no specific domestic legislation in this regard, but local courts must enforce arbitration decisions where the affected companies have their business locations.

Investor-State Dispute Settlement

Austria is a member of the UN Commission on International Trade Law (UNCITRAL). Its arbitration law largely conforms to the UNCITRAL model law. The main divergence is that an award may only be set aside if the arbitral procedure is not in accordance with Austrian public policy.

Austria does not have a BIT or FTA with the United States. There is no special domestic arbitration body.

In 2015, the Austrian government was sued, for the first time ever, by the offshore parent company of the Austrian Meinl Bank, Far East.  The case was brought before the ICSID in New York because of alleged damages arising from domestic prosecution in Austria; the ICSID dismissed the case in November 2017.

International Commercial Arbitration and Foreign Courts

The Vienna International Arbitral Center of the Austrian Federal Economic Chamber acts as Austria’s main arbitration institution.  Legislation is modeled after the UNCITRAL model law (see above). The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) overrides most of Austria’s domestic provisions, where applicable, and Austrian courts are consistent in applying it.

Bankruptcy Regulations

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings.  Reorganization requires a restructuring plan and the debtor to be able to cover costs or advance some of the costs up to a maximum of €4,000 (USD 4,520).  The plan must offer creditors at least 20 percent of what is owed, payable within two years of the date the debtor’s obligation is determined. The plan must be approved by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims.  Bankruptcy proceedings take place in court and are opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting obligations in accordance with the law.

Austria’s major commercial association for the protection of creditors in cases of bankruptcy is the “KSV 1870 Group”,www.ksv.at , which also carries out credit assessments of all companies located in Austria. Other European-wide credit bureaus, particularly “CRIF” and “Bisnode”, also monitor the Austrian market.

4. Industrial Policies

Investment Incentives

Financial incentives and business subsidies provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants.  Most incentives are targeted to investments that meet specified criteria, including job-creation, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, and promoting startups. Tax allowances for advanced employee training and R&D expenditures are also available, as are financing options for start-ups and cash grants.  The Austrian Labor Market Service (AMS) offers grants for job creation and personnel development training.

Austria offers financial and tax incentives within EU regional co-funding schemes to firms undertaking projects in economically underdeveloped and rural areas. Eligibility for co-financing subsidies has already shown a decline within the EU “Common Strategic Framework” for the period 2014 to 2020, compared to previous funding periods.

Austria’s Wirtschaftsservice (AWS) is the government’s institution that provides financial incentives for businesses.  Additional information on targeted investment incentives is available at https://www.aws.at/en/ . More detailed information on investment incentives in English language is available on the ABA website (see chapter 2) at http://investinaustria.at/en/ 

Various government agencies in Austria offer attractive incentives for research and development (R&D) activities (up to 50 percent of the investment amount).  The incentives are also available for foreign-owned enterprises. The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en ); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/ ); and AWS (above). The latter also provides guarantees of up to €25 million over 5 to 10 years for investments in Austria, with a focus on small and medium-sized companies.

Performance and Data Localization Requirements

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the Austrian Labor Service (AMS).  The AMS only grants that permission if there is no comparable person in the pool of registered unemployed persons in Austria. This does not apply to senior management positions, researchers, highly qualified personnel, and a limited set of other categories.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty.  Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills).  This Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals.  Applicants must have an offer of employment to apply for the RWR. Highly qualified individuals holding U.S. citizenship may apply locally in Austria, or opt to find a potential employer from abroad and have the company apply in Austria on their behalf.

Austrian immigration law requires those applying for residency permits in some categories to take German language courses and exams.  The Austrian government in 2017 passed a law that introduces a specific visa category under the RWR model for founders of start-up enterprises to support Austria’s push to expand its innovation economy.  A draft law aimed at making Austria more attractive to qualified specialists is expected to go into effect in 2019.  This law addresses problematic visa application requirements regarding minimum salary and housing that have been making it hard for applicants to qualify.

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply.  The EU General Data Protection Regulation (GDPR) was adopted by Austria in May 2018 and places restrictions on companies’ ability to store and use customer data. It also requires specific user consent, in order for companies to send out promotional materials (previously, implied consent was sufficient). Transmission of customer or business related data is therefore subject to EU GDPR regulations.  Austria’s Data Protection Authority is in charge of enforcing all GDPR-related matters, which include GDPR rules on data storage. In February 2019, the DPA initiated proceedings against Austria’s postal service for illegal use of customer data, which included collecting and selling data on party affiliations. The postal service was ordered to delete the data concerned.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives.  There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

5. Protection of Property Rights

Real Property

The Austrian legal system protects secured-interests in property.  For any real estate agreement to be effective, owners must register with the land registry.  Mortgages and liens must also be registered. As a rule, property for sale must be unencumbered.  In case of rededication of land, approval of the land transfer commission or the office of the state governor is required.  The land registry is a reliable system for recording interests in property, and access to the registry is public.

Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land.  Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized.  Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.

Intellectual Property Rights

Austria has a strong legal structure to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law.  Austria is a party to the World Intellectual Property Organization (WIPO) and several international property conventions. Austria also participates in the Patent Prosecution Highway (PPH) program with the USPTO (started in 2014), which allows filing of streamlined applications for inventions determined to be patentable in other participating countries.

Austria’s Copyright Act conforms to EU directives on intellectual property rights. It grants authors exclusive rights to publish, distribute, copy, adapt, translate, and broadcast their work.  The law also regulates copyrights of digital media (restrictions on private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly.   Between 2015 and 2017, the Austrian High Court confirmed that Austrian Internet providers must prevent access to illegal music and streaming platforms once they are made aware of a copyright violation. They must also block workaround websites from these platforms.

Austria also has a law against trade in counterfeit articles.  In 2018, Austrian customs authorities confiscated pirated goods worth EUR 2.6 million (USD 3.1 million).

Austria is not listed in USTR’s Special 301 report, but its trade secrets regime is a concern for some U.S. businesses.  Austrian and U.S. companies have voiced specific concerns about both the scope of protection and the difficulty of adjudicating breaches. Following years of steady U.S. government advocacy, and because Austria was required to implement the 2016 EU Directive on Trade Secrets, the country improved its trade secrets regime in the Law Against Unfair Competition (entered into force in February 2019) to address these concerns.  The most relevant change in the law is a requirement for safeguarding the confidentiality of trade secrets (and other business confidential information) in court procedures. Under the old law, the opposing party could learn confidential trade secrets during court hearings, so companies often avoided taking legal action against offenders.  The new law requires a party to only “credibly demonstrate that the violation of a trade secret exists,” without having to disclose it to other parties during the court proceedings. The court is required to ensure full confidentiality of the proceedings.  The new law also defines injunctive relief and claims for damages in case of breach of trade secrets.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

6. Financial Sector

Capital Markets and Portfolio Investment

Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment.  The Austrian National Bank (OeNB) regulates portfolio investments effectively.

Austria has a national stock exchange that currently includes 63 companies on its regulated market and several others on its multilateral trading facility (MTF).  The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market, and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent to those listed on the MDAX in Germany.  In order to combat declining interest from investment bankers and brokers, the stock exchange introduced two new market segments in 2018: Direct Market, which replaces the Mid-Market segment, and Direct Market Plus. These segments target SMEs and young, developing companies.  The move comes in response to ongoing criticism that the stock exchange does not accurately reflect Austria’s business landscape, which largely consists of small- to medium-sized companies. The market capitalization of Austrian listed companies is small compared to its western European counterparts, accounting for 36 percent of Austria’s GDP, compared to 62 percent in Germany or 166 percent in the United States.

Unlike the other market segments in the stock exchange, Direct Market and Direct Market Plus are only subject to the Vienna Stock Exchange’s general terms of business, but not EU regulations. These segments also have lower reporting requirements but also greater risk for investors, as prices are more likely to fluctuate, due to the respective companies’ low level of market capitalization.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. The Austrian government hopes that the recent opening of the stock exchange to small, innovative companies will help serve that purpose.

Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments.  Credit is available to foreign investors at market-determined rates. Austria’s financial market ranked 28th in the 2018 World Economic Forum’s Global Competitiveness Report, out of 140 countries examined, compared to 30th place in 2017 and 47th in 2016.

Money and Banking System

Austria has one of the densest banking networks in Europe with almost 4,200 branch offices registered in 2018.  The banking system is highly developed, with worldwide correspondent banks and representative offices and branches in the United States and other major financial centers.  Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 986 billion (USD 1.2 trillion) in 2018 approximately three times the country’s GDP.  The Austrian banking sector is considered to be one of the most stable in the world. In 2018, Standard & Poor’s raised Austria’s industry country risk assessment from 3 to 2, making the domestic banking system one of the 13 most stable systems worldwide (no country has a rating of 1).  Moody’s also improved its outlook for the Austrian banking system in 2018, improving its outlook from positive to stable.

Austria’s banking sector is managed and overseen by the Austrian National Bank (OeNB) and the Financial Market Authority (FMA).  Five Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria, due to its significant cross-border assets.  All other Austrian banks continue to be subject to the country’s dual-oversight bank supervision system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds.

Due to U.S. government financial reporting requirements, Austrian banks are very cautious in accepting U.S. clients, whose access to banking services here is consequently restricted. Locally incorporated businesses belonging to U.S. investors have also reported problems in finding banking services.

Foreign Exchange and Remittances

Foreign Exchange

Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents.  The Euro, a freely convertible currency and the only legal tender in Austria and 18 other Euro-zone member states, shields investors from exchange rate risks within the Euro-zone.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

Austria has no sovereign wealth funds.

7. State-Owned Enterprises

Austria has two major wholly state-owned enterprises (SOEs):  The OeBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance and administration).  Other government industry holding companies are bundled in the government holding company OeBAG (new website under construction): http://www.oebib.gv.at/en/ 

The government reformed its holding company in 2018, changing its name from OeBIB to OeBAG, incorporating energy provider Verbund AG and the state-owned real estate holding company BIG into its portfolio and increasing its oversight powers.  Under the new regulation, the government will gain direct representation in the supervisory boards of its companies (commensurate with its ownership stake), and the new holding company will be given the power to buy and sell company shares, as well as purchase minority stakes in strategically relevant companies.  Such purchases will be subject to approval from a newly-established audit committee consisting of government-nominated independent economic experts.

OeBAG holds a 53 percent stake in the Post Office, 51 percent in energy company Verbund, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, and a few other minor ventures.  Local governments own the majority of utilities, Vienna International Airport, and more than half of Austria’s 268 hospitals and clinics.

Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OeBB) benefit from state-subsidized pension systems.  As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).

The five major OeBAG companies (Postal Service, Verbund AG, Casinos Austria, OMV, Telekom Austria), are listed on the Vienna stock exchange. In these cases, senior management does not directly report to a minister, but to an oversight board.  However, the government often appoints management and board members, who usually have strong political affiliations.

The Austrian Foreign Trade Act (FTA) requires advance approval by the Austrian Ministry for Digital and Economic Affairs for foreign acquisitions of a relevant stake (25 percent) in enterprises in certain strategic industries (with sales over EUR 700,000 per year), comprising a wide range of sectors.    Strategic sectors include not only internal and external security services, but also public order and safety, procurement, and crisis services. The latter include hospitals, ambulance and emergency medical services; fire fighters and civil protection services; energy and gas supply; water supply; telecoms; railways; road traffic; universities; schools of various types; and pre-schooling institutions.

Privatization Program

The government has not privatized any public enterprises since 2007.  Austrian public opinion is skeptical regarding further privatization. The current government consisting of the center-right People’s Party (OVP) and right-populist Freedom Party (FPO) is decidedly more pro-market than the previous government, but there is no plan for further privatization.

In prior privatizations, foreign and domestic investors received equal treatment.  Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including in telecommunications, banking, steel, and infrastructure.

8. Responsible Business Conduct

Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.”  The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities.

Austria adheres to the OECD’s Guidelines for Multinational Enterprises.  The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.

The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.

https://www.oekb.at/en/oekb-group/our-claim/corporate-governance.html 

9. Corruption

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention.  As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption.  Corruption generally is not a major issue in Austria, which ranked 14th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index.

Bribery of public officials is covered by the Austrian Criminal Code and corruption does not significantly affect business in Austria.  However, there is a small risk of corruption in public procurement, most commonly in the form of criteria that are tailor-made for certain participants.

Anti-corruption cases are often characterized by slow-moving trials that drag on for years.  Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offence with the sentence varying depending on the amount of the bribe. There are no rules on managing conflicts of interest for parliamentarians and no framework for dealing with gifts and other benefits.

Austria is in the midst of a prominent corruption case involving former Finance Minister Karl-Heinz Grasser and the privatization of BUWOG, an Austrian real-estate company, in 2003.  The case, which began in 2010 and went to trial in 2017, features 16 defendants. Grasser is accused of having demanded a bribe of EUR 9.6 million (USD 11 million) in exchange for privatization advantages, and judicial proceedings are ongoing.  There were no major new corruption cases uncovered in 2018.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors.  The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment of up to ten years for all parties involved.  Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country.  The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 3,500 (USD 3,960).  Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.0 million).

Resources to Report Corruption

Contacts at government agencies responsible for combating corruption:

Wirtschafts- und Korruptionsstaatsanwaltschaft
(Central Public Prosecution for Business Offenses and Corruption)
Dampfschiffstraße 4
1030 Vienna, Austria
Phone:  +43-(0)1-52 1 52 0
E-Mail: wksta.leitung@justiz.gv.at

BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung
(Federal Agency for Preventing and Fighting Corruption)
Ministry of the Interior
Herrengasse 7
1010 Vienna, Austria
Phone:   +43-(0)1-531 26 – 6800
E-Mail: BMI-III-BAK-SPOC@bak.gv.at

Contact at “watchdog” organization:

Transparency International – Austrian Chapter
Berggasse 7
1090 Vienna, Austria
Phone:  +43-(0)1-960 760
E-Mail: office@ti-austria.at

10. Political and Security Environment

There have been no incidents of politically motivated damage to foreign businesses.  Civil disturbances are rare and the overall security environment in the country is considered to be safe.

11. Labor Policies and Practices

Austria has a well-educated and productive labor force of about 4.3 million, of whom 3.8 million are employees and 500,000 are self-employed or farmers.  In line with EU regulations, the free movement of labor from all member states is allowed, except for Croatia, which joined the EU in July 2013 and is subject to a transition period until 2020.

Austria’s strong economy has led to a drop in the unemployment rate, from 5.5 percent in 2017 to 4.8 percent in 2018.  Austria’s economy is forecast to grow at a slower rate in 2019 and 2020 (around 1.7 percent compared to 2.7 percent in 2018), which may result in an increase in the unemployment rate. Foreigners account for almost one-fifth of Austria’s labor force; around 700,000 foreign workers are employed in Austria.  Migrant workers are largely from the CEE region but the 2015 Syria refugee crisis led to a stream of asylum-seekers from the Middle East entering the country and gradually becoming active on the labor market. Migrants from Eastern Europe frequently accept low-paid jobs and fill crucial vacancies in the tourism and healthcare sectors, which generally experience shortages.

Youth unemployment is much less of a problem in Austria than in other EU member states, due in large measure to Austria’s successful dual-education apprenticeship system.  That system combines on-the-job training with classroom instruction in vocational schools, and includes guaranteed placement by the Public Employment Service for those 15-24 year olds who cannot find an apprenticeship.

The Austrian government continues to adopt changes to existing labor market policies in an effort to make Austria a more attractive business location. The most controversial reform in 2018 was increasing the maximum allowable number of hours worked per week from 50 to 60, and from 10 to 12 hours per day.  The government is also planning to make the maximum duration of unemployment benefits payments more dependent on the length of time spent working, and to increase the base rate of pay from 55 percent of the last net income to 65 percent in the first months of unemployment.

Social insurance is compulsory in Austria and is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance.  Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment, including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for those parents with children under the age of seven.  Problematic areas include increased deficits in the pension and health insurance systems, the shortage of healthcare personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to its generous social welfare system, Austria has a high rate of employer non-wage labor costs, amounting to approximately 30 percent of gross wages.

Labor-management relations are relatively harmonious in Austria, which traditionally enjoys a low incidence of industrial unrest. However, 2018 lead to several contentious collective bargaining negotiations, with the metalworkers and railway sectors issuing several warning strikes before reaching a new collective bargaining agreement. Approximately 32 percent of the work force belongs to a union.  Additionally, all employees are automatically members of Austria’s Worker’s Chamber.

Collective bargaining revolves mainly around wages and fringe benefits.  Approximately 90 percent of the labor force works under a collective bargaining agreement.  In June 2017, Austria decided to implement a national minimum wage of EUR 1,500 (approx. USD 1,700) per month.  This equates to an hourly wage of EUR 10.09 (approx. USD 11.50), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK.  Sectors where wages are currently below this threshold have until 2020 to amend their collective bargaining agreements accordingly.

Austrian law stipulates a 40-hour workweek, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week.    Firms may increase the maximum regular hours from 40 to 60 per week in special cases, with no more than 12 hours in a single day. Responsibility for agreements on flextime or reduced workweeks resides at the company level.  Overtime is paid at an additional 50 percent of the employee’s and, in some cases, such as work on public holidays, even 100 percent. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 12 workdays annually.

12. OPIC and Other Investment Insurance Programs

OPIC programs are not available for Austria.  Austria is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA). Austria is a significant donor to EDGE, the International Finance Corporation’s (IFC) green building certification program, with which OPIC started to collaborate in 2018.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; World Bank; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Austria Gross Domestic Product (GDP) ($M USD) 2018 $455,586 2017 $416,596 https://data.worldbank.org/country/austria?view=chart  
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or international Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in Austria ($M USD, stock positions) 2018 $16,493 2017 $7,819 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) 2018 $12,646 2017 $12,303 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP 2018 51.5% 2017 48.5% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

*Statistics Austria (GDP):
http://www.statistik.at/web_de/statistiken/wirtschaft/volkswirtschaftliche_
gesamtrechnungen/bruttoinlandsprodukt_und_hauptaggregate/jahresdaten/019505.html
 

Austrian National Bank (Investments)

https://www.oenb.at/isaweb/report.do?lang=EN&report=9.3.31 

Differences between Austrian and U.S. statistics can arise from different allocations of investments to countries (headquarters versus subsidiaries) and different survey methods


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 $246,359 100% Total Outward $291,090 100%
Germany $55,214 22% Netherlands $35,917 12%
Russia $30.333 12% Germany $31,453 11%
Netherlands $27.933 11% Luxembourg $15,302 5%
Luxembourg $22.006 9% Czech Republic $14,881 5%
Switzerland $11.805 5% United States $11,178 4%
“0” reflects amounts rounded to +/- USD 500,000.

Austria’s domestic investment figures show significant lower numbers for the Netherlands and Luxembourg. Special Purpose Entities (SPEs) may be used to avoid corporate taxes.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity and Investment Fund Shares Total Debt Securities
All Countries $348,992 100% All Countries $138,369 100% All Countries $210,623 100%
Germany $54,228 15% Luxembourg $46,238 33% Germany $26,126 12%
Luxembourg $53,862 15% Germany $28,103 20% France $23,711 11%
United States $33,122 9% United States $14,434 10% United States $18,689 9%
France $31.227 9% Ireland $13,864 10% Spain $15,180 7%
Ireland $19,476 6% France $7,516 5% Netherlands $15,119 7%

14. Contact for More Information

Alexander Schratt
Economic Specialist
U.S. Embassy Vienna
1090 Vienna
+43 1 31339-2206
Email: schrattax@state.gov

Italy

Executive Summary

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.  

Table 1

Measure Year Index/Rank Website Address
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: http://www.investinitaly.com/en/.   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 https://www.invitalia.it/eng  .  The Ministry of Economic Development also has a program to attract innovative investments: https://www.mise.gov.it  

Italy’s main business association (Confindustria) also provides assistance to companies in Italy: https://www.confindustria.it/en  

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

An OECD Economic Survey was published for Italy in April 2019.  https://www.oecd.org/economy/surveys/Italy-2019-OECD-economic-survey-overview.pdf 

Business Facilitation

Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce: http://www.registroimprese.it.    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.

Outward Investment

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).

Italy has bilateral investment agreements with the following countries (for more information and text of the agreements, see http://investmentpolicyhub.unctad.org/IIA/CountryBits/103  ):

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).

Italy has not ratified a BIT since 2009 and has not negotiated a BIT since 2014.  Since 2009, investment treaty negotiations fall within the competence of the EU: http://ec.europa.eu/trade/policy/accessing-markets/investment/  .

As an EU member, Italy’s FTA negotiations are likewise handled at the EU level:  http://ec.europa.eu/trade/policy/  .

Bilateral Taxation Treaties:

Italy shares a bilateral taxation treaty with the United States.  The text of the treaty is available at https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z  .

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.

Dispute Settlement

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.

Bankruptcy Regulations

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

Investment Incentives

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: https://www.esteri.it/mae/en/servizi/stranieri/  .

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: http://vistoperitalia.esteri.it/home/en  .

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

Real Property

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.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

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.

The Italian Companies and Stock Exchange Commission (CONSOB), is the Italian securities regulatory body: http://www.consob.it  .

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.

Remittance Policies

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 (http://en.cdpequity.it/  ).  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.  

Privatization Program

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: https://venditaimmobili.agenziademanio.it/AsteDemanio/sito.php  .  The Agency has created a centralized registry with information on individual parcels for sale or long-term lease: http://www.investinitalyrealestate.com/en/  .

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).

CONSOB has enacted corporate governance, accounting, and executive compensation standards to protect shareholders.  Information on corporate governance standards is available at: http://www.consob.it/c/portal/layout?p_l_id=892052&p_v_l_s_g_id=0  .  

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: http://www.oecd.org/dataoecd/12/21/1903291.pdf )

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: http://pcnitalia.sviluppoeconomico.gov.it/en  /.

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.

9. Corruption

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
Email: protocollo@pec.anticorruzione.it
Contact Info page: http://www.anticorruzione.it/portal/public/classic/MenuServizio/Contatti  
ANAC’s whistleblowing web page is:  http://www.anticorruzione.it/portal/public/classic/Servizi/ServiziOnline/SegnalazioneWhistleblowing  

Transparency International Italia
P.le Carlo Maciachini 11
20159 Milano – Italy
T: +39 02 40093560
F: +39 02 406829
Email: info@transparency.it
General web site: www.transparency.it  
Corruption Specific: https://www.transparency.it/alac/  

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 €1,757,000 2017 $1,935,000 www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 $12,203 2017 $30,708 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm  
Host country’s FDI in the United States ($M USD, stock positions) 2017 $33,430 2017 $35,672 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm  
Total inbound stock of FDI as % host GDP 2017 24.8% 2017 21.7% N/A

* 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%
Luxembourg $88,638 21% Netherlands $63,550 11%
Netherlands $80,143 19% Luxembourg $47,074 9%
France $70,327 17% Germany $43,195 8%
United Kingdom $53,678 13% United States $40,279 7%
Germany $37,285 9% Spain $36,247 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%
Luxem-bourg $690,512 42% Luxem-bourg $665,672 65% France $104,049 16%
France $183,100 11% Ireland $131,735 13% Spain $99,870 16%
Ireland $148,185 8% France $79,051 8% United States $93,628 15%
United States $130,736 6% United States $37,108 4% Germany $61,778 10%
Spain $104,489 5% United Kingdom $32,263 3% Nether-lands $48,967 8%

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.

14. Contact for More Information

Unit 9500
Attn:  Economic Section
DPO AE 09624
Tel:  +39 06 4674 2107
Email:  
RomeECON@state.gov  

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