Italy, the first western country struck by the pandemic, saw its economy shrink by 8.9% in 2020, the sharpest contraction since World War II. As of May 5, 2021, Italy has reported over 122,000 COVID-19 deaths, the six-highest tally in the world. The government has spent more than €130 billion on stimulus measures (though it is able to borrow at a low cost thanks to support from the European Central Bank). Repeated hikes to government spending will probably drive Italy’s budget deficit close to 12% of national output in 2021, up from 9.5% in 2020. However, Italy also is slated to receive the largest share of the European Union’s pandemic recovery fund (Next Generation EU). The over €200 billion in NGEU funds for Italy will represent the largest transfer to Italy since the Marshall Plan. The National Recovery and Resilience Plan (NRRP) is designed to deploy the funds to accelerate the transition to a digital economy by focusing on digitization/innovation, the green energy transition, health, infrastructure, education/research, and equity. Italy on April 30 submitted its NRRP to Brussels for approval and disbursement of its share of NGEU funds.
The government expects Italy’s economy to grow by approximately 4.5% in 2021 and 4.8% in 2022 but faces an uphill battle to push ahead with long-needed structural reform aimed at boosting Italy’s productivity and growth by fixing the country’s tax regime, its byzantine bureaucracy, and its sluggish courts. Italy ranks 58th out of 190 countries in the 2020 World Bank’s “Doing Business” survey. Notably, it ranks 97th on securing building permits, 98th for starting businesses, 122nd at enforcing contracts, and 128th on tax rules. The government’s efforts to implement new investment promotion policies to market Italy as a desirable investment destination have been hampered by Italy’s slow economic growth, unpredictable tax regime, multi-layered bureaucracy, and time-consuming legal and regulatory procedures.
Yet, Italy remains an attractive destination for foreign investment, with one of the largest markets in the EU, a diversified economy, and a skilled workforce. Italy’s economy, the eleventh largest in the world, is dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. 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. Tourism is an important source of external revenue, generating approximately €70 billion a year, 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. The sectors that have attracted significant foreign investment include telecommunications, transportation, energy, and pharmaceuticals.
The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors. There were two significant investment-related policy developments during 2020: implementation of a digital services tax (DST) that primarily affects tech firms and media companies, and the Italian government’s expansion of its Golden Power investment screening authority.
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 EU’s treaties and laws. Under EU treaties with the United States, as well as OECD commitments, 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 its investment screening authority (known as “Golden Power”) if the proposed transactions raise national security concerns. Enacted in 2012 and further implemented through decrees or follow-on legislation in 2015, 2017, 2019 and 2020, the Golden Power law allows the Government of Italy (GOI) to block foreign acquisition of companies operating in strategic sectors: defense/national security, energy, transportation, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology. In March 2019, the GOI expanded 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. Under the April 6, 2020 Liquidity Decree the Prime Minister’s Office issued, the government strengthened Italy’s investment screening authority to cover all sectors outlined in the EU’s March 2019 foreign direct investment screening directive. The decree also extends (at least until June 30, 2021) Golden Power review to certain transactions by EU-based investors and gives the government new authorities to investigate non-notified transactions.
The Italian Trade Agency (ITA) is responsible for foreign investment attraction as well as promoting foreign trade and Italian exports. According to the latest figures available from the ITA, foreign investors own significant shares of 12,768 Italian companies. As of 2019, these companies had overall sales of €573.6 billion and employed 1,211,872 workers. ITA operates under the coordination of the Italian Ministry of Economic Development and the Ministry of Foreign Affairs. As of April 2021, ITA operates through a network of 79 offices in 65 countries. ITA promotes foreign investment in Italy through Invest in Italy program: http://www.investinitaly.com/en/. The Foreign Direct Investment Unit is the dedicated unit of ITA for facilitating the establishment and development of foreign companies in Italy.
While not directly responsible for investment attraction, SACE, Italy’s export credit agency, has additional responsibility for guaranteeing certain domestic investments. Foreign investors – particularly in energy and infrastructure projects – may see SACE’s project guarantees and insurance as further incentive to invest in Italy.
Additionally, Invitalia is the national agency for inward investment and economic development operating under the Italian Ministry of Economy and Finance. The agency focuses on strategic sectors for development and employment. Invitalia finances projects both large and small, targeting entrepreneurs with concrete development plans, especially in innovative and high-value-added sectors. For more information, see https://www.invitalia.it/eng. The Ministry of Economic Development (https://www.mise.gov.it/index.php/en/) within its Directorate for Incentives to Businesses also has an office with some responsibilities relating to attraction of foreign investment.
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 national 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 to protect the national strategic interest or in retaliation if the government of the country where the foreign firm is from applies discriminatory measures against Italian firms. Foreign investors in the defense and aircraft manufacturing sectors are more likely to encounter resistance from the many ministries involved in reviewing foreign acquisitions than are foreign investors in other sectors.
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 through its “Golden Power” legislation. Italy expanded its Golden Power authority in March 2019 to include the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. On April 6, 2020 the GOI passed a Liquidity Decree in which the Prime Minister’s office made three main changes to its Golden Power authority to prevent the hostile takeover of Italian firms as they weather the financial impact of the COVID-19 crisis. First, under the decree Golden Power authority now encompasses the financial sector (including insurance and credit) and all the sectors listed under the EU’s March 19, 2019 regulations establishing a framework for the screening of foreign direct investment. The Italian government previously had adopted only some of the sectors in the EU regulations when it passed its National Cybersecurity Perimeter legislation in November 2019. The EU regulations cover: (1) critical infrastructure, physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate; (2) critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, and nanotechnologies and biotechnologies; (3) supply of critical inputs, including food security, energy, and raw materials; (4) access to sensitive information; and (5) freedom of the media.
Second, until the end of the COVID-19 pandemic, EU-based investors must notify Italy’s investment screening authority if they seek to acquire, purchase significant shares in, or change the core activities of an Italian company in one of the covered sectors. Previously EU-based investors had to notify the government only of transactions deemed strategic to national interests, such as in the defense sector. Third, the government now has the power to investigate non-notified transactions and require that both public and private entities cooperate with the investigation. In addition to being able to fine companies for non-notified transactions, the government can impose risk mitigation measures for non-notified transactions. An interagency group led by the Prime Minister’s office reviews acquisition applications and makes recommendations for Council of Ministers’ decisions.
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, and available to foreign companies. 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 2020, Italy’s ranking decreased from 67 to 98 out of 190 countries in terms of the ease of starting a business: it takes seven procedures and 11 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, and provide advice to, potential investors on applying for necessary licenses and authorizations at both the local and national level. These services are available to all investors.
Italy neither promotes, restricts, nor incentivizes outward investment, nor restricts domestic investors from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
Italy does not have a bilateral investment treaty (BIT) with the United States.
Albania, Angola, Argentina, Bahrain, Bangladesh, Barbados, Belize (signed, not in force), 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, Egypt, Eritrea, Ethiopia, Gabon, Ghana (signed, not in force), Guatemala, Guinea, Hong Kong, Iran, Jamaica, Democratic People’s Republic of Korea (signed, not in force), Republic of Korea, Republic of Kuwait, Lebanon, Libya, Malawi, Malaysia, Malta (signed, not in force), Mauritania, Mexico, 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), Sri Lanka, Sudan (signed, not in force), Tanzania, United Republic of Tunisia, Turkey, Turkmenistan (signed, not in force), United Arab Emirates, Uruguay, Venezuela (signed, not in force), Vietnam, Yemen, Zambia, Zimbabwe (signed, not in force).
Regulatory authority exists at the national, regional, and municipal level. All applicable regulations could be relevant for foreign investors. The GOI and individual ministries, as well as independent regulatory authorities, develop regulations at the national level. 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 generally are published in the Gazzetta Ufficiale (and only become effective upon publication). Regulatory agencies may publish summaries of received comments.
No major regulatory reform affecting foreign investors was undertaken in 2020.
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 (BOI).
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 on occasion has failed to notify the EC and/or the World Trade Organization (WTO) of draft regulations in a timely way. For example, in 2017 Italy adopted Country of Origin Labelling (COOL) measures for milk and milk products, rice, durum wheat, and tomato-based products. Italy’s Ministers of Agriculture and Economic Development 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. Moreover, in March 2020, the Italian Ministers of Agriculture and Economic Development extended the validity of such COOL measures until December 31, 2021. 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 the 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 in recent years has introduced justice reforms to reduce the backlog of civil cases and speed new cases to conclusion. These reforms also included a digitization of procedures, and a new emphasis on ADR.
Regulations can be appealed in the court system.
Laws and Regulations on Foreign Direct Investment
Italy is bound by EU laws on FDI.
Digital Services Tax
In 2020, Italy began implementing a digital services tax (DST), applicable to companies that meet the following two conditions:
€750 million in annual global revenues from any source, not just digital services; and,
€5.5 million in annual revenues from digital services delivered in Italy.
As currently formulated, many U.S. technology companies will fall under Italy’s DST, and some Italian media firms could also be subject to the tax. Taxes incurred in 2020 are due in May 2021. (The government has twice postponed the tax payment deadline.) The government has declared that payments for future tax years will also be due in the month of May of the following year. The Italian DST includes a sunset clause should countries reach a multilateral agreement in the G20/OECD Inclusive Framework negotiations to reform the international tax regime.
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). AGCM decisions can be appealed in courts. In March 2020, at the beginning of the COVID health crisis, AGCM launched an investigation against Amazon and eBay for price spikes on hand sanitizer and other products. In July 2020 AGCM launched an investigation against Apple and Amazon for banning the sale of Apple and Beats branded products to retailers who do not join the official program. In September 2020, the Competition Authority initiated an investigation of Google, Apple and Dropbox for alleged unfair commercial practices and contractual clauses.
Expropriation and Compensation
The Italian Constitution permits expropriation of private property for “public purposes,” defined as essential services (including during national health emergencies) or measures indispensable for the national economy, with fair and timely compensation. Expropriations have been minimal in 2020.
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 April 28, 1971).
Italy has had very few publicly known investment disputes involving a U.S. person in the last 10 years. 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 February 12, 1931); and
The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (entered into force on May 1, 1969); and
The 1961 European Convention on International Commercial Arbitration (entered into force on November 1, 1970).
Italy’s Code of Civil Procedure (Book IV, Title VIII, Sections 806-840) governs arbitration, including the recognition of foreign arbitration awards. Italian law is not based on the UNCITRAL Model Law; however, many of the principles of the Model Law are present in Italian law. Parties are free to choose from a variety of Alternative Dispute Resolution methods, including mediation, arbitration, and lawyer-assisted negotiation.
Italy’s bankruptcy regulations are somewhat analogous to U.S. Chapter 11 restructuring and allow firms and their creditors to reach a solution without declaring bankruptcy. In recent years, the judiciary’s role in bankruptcy proceedings has been reduced 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. In early 2019, the government issued an “implementation decree” for the 2017 bankruptcy reform legislation. In the World Bank’s “Doing Business Index 2020,” Italy ranks 21 out of 190 economies in the category of “Ease of Resolving Insolvency.”
4. Industrial Policies
The GOI offers modest incentives to encourage private sector investment in targeted sectors and economically depressed regions, particularly in southern Italy. The incentives are available to eligible foreign investors as well. Incentives include grants, low-interest loans, and 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 in which the 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. The government has renewed “New Sabatini Law” benefits, extending them through 2021.
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 the 2019 budget law renewed only “hyper amortization.” The GOI reintroduced the “super amortization” by decree in December 2019 to stimulate investment. Both the 2020 and 2021 budget laws replaced these measures with a tax credit on investment goods.
In the 2021 budget, the GOI renewed the broad “Industry 4.0” initiative launched by the previous government, which had expired in 2020. The GOI allocated €23.8 billion in 2021-2023 for the private investment plan to transition to “Industry 4.0,” which aims to improve the Italian industrial sector’s competitiveness through a combination of policy measures, tax credits, and research and infrastructure funding. Additionally, in the 2021 budget, the GOI allocated €2 billion for deferred tax assets to spur bank mergers and attract a potential buyer for state-owned Monte dei Paschi di Siena.
The Italian tax system generally does not discriminate between foreign and domestic investors, though the digital services tax implemented by Parliament in December 2019 and now accruing will have a significant impact on certain U.S. companies and affect some Italian media companies as well. 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 59.1 percent in 2019, higher than the OECD high-income average of 39.7 percent.
Foreign Trade Zones/Free Ports/Trade Facilitation
The main free trade zone (FTZ) in Italy is in Trieste, in the northeast of the country. The goods brought into the zone may undergo transformation, free of any customs restraints. There is an absolute exemption from duties on products coming from a third country and re-exported to a non-EU country. There is draft legislation proposing creation of other FTZs in Genoa and Naples. A free trade zone in Venice was operating previously, but the government is restructuring it.
Italy’s “for the South” law (Laws 91of 2017 and amended by Law 123 of 2017) allowed for the creation of eight Special Economic Zones (ZES – Zone Economica Speciale) managed by port authorities in Italy’s less-developed south (the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia) and on the islands of Sardinia and Sicily. Investors will be able to access up to €50 million in tax breaks, hiring incentives, reduced bureaucracy, and reimbursement of the IRAP regional business tax, covered by national allotments of €250 million annually through 2022. In April 2019, the GOI allocated €300 million to boost the ZESs’ infrastructure but the 2020 budget law cancelled those funds. The 2021 budget law provided for a 50% reduction of income taxes for all business conducted in the ZES.
The ZES in the Region of Campania was the first to become operational. The Naples ZES encompasses 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 must be approved by local government bodies in a procedure governed by the Port Authority of the Central Tyrrhenian Sea. The Region of Campania forecasts that the ZES will create and/or save between 15,000 and 30,000 jobs. In February 2021 Campania defined the requirements for companies to qualify for the fiscal and administrative benefits of the ZES: any business can access the benefits if at least 50% of the related investments are carried out within the borders of Campania’s ZES.
A ZES encompassing the port cities of Bari and Brindisi on the Adriatic finished its approval procedure in late 2019, followed by a ZES based around the transshipment port of Gioia Tauro in Calabria. The zones of the remaining five regions are: 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, which received local approval in 2020.
With the 2020 budget law, the GOI established that each ZES is to be chaired by a government commissioner. Only two commissioners have been appointed to date: Rosanna Nisticò in Calabria (October 2020) and Gianpiero Marchesi in Taranto (December 2020).
In addition to the ZESs, Italian ports are focusing on Customs Free Zones, where port operators can conduct commercial activities and take advantage of significant customs incentives. In mid-February 2021, the Port Authority of the Ionian Sea launched Taranto’s Customs Free Zone, an area of approximately 163 hectares. In March 2021, the Port of Brindisi established a small 20- hectare Customs Free Zone.
Currently, goods of foreign origin may be brought into Italy without payment of taxes or duties, if 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.
However, temporary COVID-19-related restrictions to travel are in place. Effective January 26, 2021 all airline passengers to the United States ages two years and older must provide a negative COVID-19 viral test taken within three calendar days of travel. The Department of State has issued a Level 3 Travel Advisory for Italy recommending that travelers avoid all nonessential travel to Italy. In addition, the Centers for Disease Control has issued a Level 4 Travel Health Notice for Italy due to COVID-19 concerns and similarly recommends that travelers defer all nonessential travel to Italy. Regions in Italy are divided in a color-coded system ranging from white (very low risk), yellow (low risk), orange (high risk) and red (very high risk) depending on transmission rates, availability of hospital and ICU beds, and other parameters. Different restrictive measures apply to each zone. Essential services such as food stores, pharmacies, newsstands, and tobacco shops remain open throughout Italy. These restrictions are temporary and are routinely reviewed as the health situation improves.
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 but companies transmitting customer or other business-related data within or outside of the EU must comply with relevant EU privacy regulations.
In 2020, the GOI exercised its Golden Power authority in several 5G-equipment procurement cases. In some cases, the GOI authorized telecom operators to purchase equipment from certain foreign IT vendors if they could adhere to a set of “prescriptions.” One of these prescriptions includes access to the foreign IT vendors’ source code.
5. Protection of Property Rights
According to the World Bank 2020 Doing Business Index, Italy ranks 26 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, the Embassy estimates that less than 10 percent of the land in Italy lacks 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
USTR removed Italy from its Special 301 Watch List in 2014 after the Italian Communications Authority (AGCOM) issued a new regulation to combat digital copyright theft. The regulation created a process by which rights holders can report online infringements to AGCOM, which will then block access to the domestic and international sites hosting infringing content. This reduced the need for lengthy litigation. Authorities further strengthened the system in 2018 when they adopted new measures to prevent previously blocked websites from opening under different domain names. AGCOM is working to further expand application of the regulation. Italian copyright stakeholders report satisfaction with the AGCOM’s action and note improved judicial action by magistrates. Counterfeiting remains an issue, but it is in Italy’s interest to protect the “Made in Italy” branding and, accordingly, Italian law enforcement reportedly is active in combatting this phenomenon. USTR’s Notorious Market List includes two domains reportedly located in Italy that host infringing content.
The Italian customs agency, Agenzia Dogane Monopoli (ADM), has an active enforcement posture at Italian ports of entry for interdicting the importation of counterfeit and substandard goods into Italy and the European Union. In 2019, the last year for which full data is available, ADM seized over 10,000 tons of counterfeit goods at ports of entry with a retail value of €1.97 billion (with fines of €144 million).
The Republic of San Marino (covered by U.S. Embassy Rome) is home to an ongoing transnational case involving ‘legal fakes’ of a U.S. brand, SUPREME. According to the complaint, a San Marino-based company applied to register the SUPREME trademark with the San Marino Trademark Office in November 2015 through UK-registered International Brand Firm Ltd. (IBF). According to SUPREME, IBF was able to obtain trademark registrations with the World Intellectual Property Organization and in several third countries. Owning a national trademark, for example, a U.S. trademark, does not automatically lead to worldwide trademark protection against copycats. IBF is now using these registrations as the legal basis for the production and distribution of the SUPREME trademark-infringing products internationally. There are proceedings pending before the European Intellection Property Office (EUIPO) on the legality of IBF’s trademark registration.
In June 2019, the European Observatory for Intellectual Property Rights, based in Spain, launched a new single EU platform for IPR protection issues. EUIPO handles the registration of trademarks, designs, and models valid in all 27 EU member states. EUIPO has also consolidated three databases for case tracking, enforcement, and anti-counterfeiting intelligence.
For additional information about treaty obligations and points of contact at local IPR offices, please see the World Intellectual Property Organization’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, gaining 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.
Netherlands-based Euronext is acquiring Italy’s stock exchange, the Milan Stock Exchange (Borsa Italiana), from the London Stock Exchange. The acquisition should be completed by mid-2021. The exchange is relatively small, 377 listed companies and a market capitalization of 37 percent of GDP at the end of December 2020. 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 that 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. Financial experts have held that slow CONSOB (the Italian Companies and Stock Exchange Commission) processes and cultural biases against private equity have limited equity financing in Italy, and the Italian Association of Private Equity, Venture Capital, and Private Debt (AIFI) estimates investment by private equity funds in Italy decreased by 26 percent from 2018 to 2019, totaling €7.2 billion – a low figure given the size of Italy’s economy.
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). As of January 2021, the European Central Bank directly supervised 11 of Italy’s largest banks and indirectly supervised less significant Italian banks through the Bank of Italy. IVASS supervises and regulates insurance companies. Liquidity in the primary markets 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.
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 €0.025 to €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, government and other bonds, or financial instruments for companies with a capitalization of less than €500 million. The FTT has been criticized for discouraging small savers from investing in publicly traded companies on the Milan stock market.
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.
Since April 2020, investors, Italian or foreign, acquiring a stake of more than one percent of a publicly traded Italian firm must inform CONSOB but do not need its approval. Earlier the limit was three percent for non-SMEs and five percent for SMEs.
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 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).
Italy has sought to curb widespread tax evasion by improving enforcement and changing 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 institutionalized some 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 Draghi-led government has said it plans to pursue a general tax reform to simplify Italy’s tax system, which remains complex and has relatively high tax rates on labor income.
The GOI and the Bank of Italy have accepted and respect IMF obligations, including Article VIII.
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. The BOI said the profitability of Italian banks in 2019 was broadly in line with that of European peers but that the annualized rate of return on equity (ROE) at 5.0% (net of extraordinary components) was below the estimated cost of equity. In the first nine months of 2020, according to the BOI, the return on equity fell from 7.8 to 2.2 percent, though the downturn slowed in the third quarter. The capitalization of large banks (the ratio between common tier 1 equity and risk weighted assets) was 15.1 percent as of the third quarter of 2020.
While the financial crisis brought a pronounced worsening of the quality of banks’ assets, the ratio of non-performing loans (NPLs) to total outstanding loans has decreased significantly since its height in 2017. As of January 2021, net NPLs stand at €19.9 billion, the lowest level since June 2009 and down from €20.9 billion in December 2020 and €26.3 billion in January 2020. ABI, the Italian banking association, reported the NPL ratio was 1.14% (net of provisions) in January 2021, down from 1.2% of December 2020 and 4.89% in November 2015. The GOI has also taken steps to facilitate acquisitions of NPLs by outside investors.
In 2016, the GOI created a €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 2019. The government currently owns 64% of MPS but hopes to exit the bank by the end of 2021, as agreed with EU authorities. To attract a private buyer for MPS and otherwise encourage M&A activity in the banking sector, the GOI allocated €2.0 billion in tax benefits in the 2021 budget. The GOI also facilitated the sale of two struggling “Veneto banks” (Banca Popolare di Vicenza and Veneto Banca) to Intesa San Paolo in 2017. In 2019, Banca Carige, the smallest Italian bank under ECB supervision, was put under special administration.
The main risks for Italian banks are possible deterioration in credit quality and a further decline in profitability. The rate of new NPLs (as of January 2021) has remained very low despite the COVID-induced economic crisis, benefiting from government measures to extend credit, including through state guarantees on loans, and flexibility from supervisory authorities regarding loan classification. Some analysts express concern that NPL levels could rise again once government support begins to decline. Government loan guarantees (to large companies via SACE, Italy’s export credit agency, and to SMEs via the Central Guarantee Fund, or Fondo Centrale di Garanzia) and repayment moratoriums also helped lead to an 8.5 percent increase in credit to firms in 2020, the fastest rate of growth since 2008.
Despite some banking-sector M&A activity since the financial crisis, the ECB, OECD, and Italian government have had to encourage additional consolidation to improve efficiency. In 2019, Italy had 55 (down from 58) banking groups and 98 stand-alone banks, 229 fewer than one year earlier and as well as 80 subsidiaries of foreign banks. The cooperative credit reform and the consolidation of the network of small cooperative and mutual banks significantly altered the structure of the banking system. The most significant recent consolidation was Intesa San Paolo’s takeover in 2020 of UBI Banca, which created Italy’s largest banking group. 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. Cash remains widely used for transactions.
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.
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. Weak demand, combined with risk aversion by banks, continues to limit lending, especially to smaller firms.
The Ministry of Economy and Finance and BOI have indicated interest in blockchain technologies to transform the banking sector. As of March 2021, the Italian Banking Association (ABI) had implemented a Distributed Ledger Technology-based system across the Italian banking sector. The process aims to reconcile material (and not digitalized) products that are exchanged between banks, such as commercial paper or promissory notes.
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. Italy, however, presents a continued risk of money laundering from activities of organized crime and its significant black-market economy.
Foreign Exchange and Remittances
In accordance with EU directives, Italy has no foreign exchange controls. There are no restrictions on currency transfers; there are only reporting requirements. Banks are required to report any transaction over €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 €3,000. Payments above this amount must be made electronically. Enforcement remains uneven. The rule exempts e-money services, banks, and other financial institutions, but not payment services companies.
Italy is a member of the European Monetary Union (EMU), with the euro as its official currency. Exchange rates are floating.
There are no limitations on remittances, though transactions above €1,000 must be reported. In December 2018 Parliament passed a decree that 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.
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 €3.4 billion in invested capital and twelve companies in its portfolio, holding both majority and minority participations. CDP Equity invests in companies of relevant national interest and on its website (http://en.cdpequity.it/) provides information on its funding, investment policies, criteria, and procedures. 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 formerly owned and operated several 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), 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 or through CDP in companies such as, but not limited to, 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). The role and influence of CDP in the economy is increasing steadily with the number of deals it completed in 2020.
The COVID crisis has stimulated greater GOI intervention in the economy with the GOI shoring up companies such as airline Alitalia. The GOI also has taken a shareholding position in AMInvestco, an Italian subsidiary of Luxembourg-based steel producer Arcelor Mittal, which is operating a steel plant in Taranto in southern Italy. Despite the Italian government’s shareholding position, most of 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. 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. As an OECD member, Italy adheres to the Guidelines on Corporate Governance of State-owned Enterprises.
The COVID-19 triggered economic crisis caused the GOI to halt and reverse its privatization program. Notably, it embarked on rescuing troubled institutions like Alitalia, Autostrade, and the Arcelor Mittal steel plant in Taranto (formerly known as ILVA). Through its national development bank, CDP, the previous Italian government (led by Giuseppe Conte) also took large stakes in Italian companies it considered essential for economic security and prosperity. CDP took investment positions in Borsa Italiana, NexiSPA, and WeBuild, and likely will invest in other COVID-hit companies. On March 11, the new government of Mario Draghi published regulations for a fund to assist certain pandemic-affected companies to strengthen their balance sheets. The so-called “Patrimonio Destinato,” worth up to €40 billion, will be financed by specially issued sovereign bonds and managed by CDP. CDP will then use the sovereign bonds as collateral to raise liquidity on the market. Taking advantage of the EU’s more flexible approach to state aid, the fund will invest – via capital injections, convertible bonds, or subordinated debt – in non-financial Italian companies with revenues above €50 million with the aim of helping “strategic” companies weather severe financial difficulty because of the current economic crisis. CDP may also use the fund to support healthier companies on ordinary market terms and buy stakes in listed companies deemed of strategic importance, but only on the condition that CDP partners with market investors. The government approved the “Patrimonio Destinato” fund in the May 2020 Relaunch Degree. The 170-year-old CDP, of which the Ministry of Economy and Finance (MEF) now owns 83%, has played an active role in ensuring strategic assets remain in national hands and in mitigating the economic damage caused by the pandemic.
The MEF owns 64% of Banca Monte dei Paschi di Siena (MPS) after a 2017 bailout that cost taxpayers €5.4 billion; however, the government must sell its stake by the beginning of 2022. The MEF reportedly is ready to take two steps to guarantee re-privatization of the distressed institution: 1) increase MPS’ capital by injecting €2.5 billion in capital from the Italian Treasury, and 2) allow conversion of approximately €3.7 billion of MPS’ tax assets into tax credits. Finally, the MEF is said to be considering a divestment of €10 billion of legal risk from the bank.
8. Responsible Business Conduct
There is a general awareness of expectations and standards for responsible business conduct (RBC) in Italy. Enforcement of civil society disputes with businesses 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 at the European Court of Justice (ECJ).
As an OECD member, Italy supports and promotes the OECD Guidelines for Multinational Enterprises (“Guidelines”), which are recommendations by governments to multinational enterprises for conducting a risk-based due diligence approach to achieve responsible business conduct (RBC). The Guidelines provide voluntary principles and standards in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, consumer protection, taxation, and science and technology. (See OECD Guidelines: http://www.oecd.org/dataoecd/12/21/1903291.pdf). The Italian National Contact Point (NCP) for the Guidelines is 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. See Italian NCP: http://pcnitalia.sviluppoeconomico.gov.it/en/.
Independent NGOs and unions operate freely in Italy. Additionally, Italy’s three largest trade union confederations actively promote and monitor RBC. They serve on the advisory body to Italy’s NCP for the OECD Guidelines for Multinational Enterprises.
Italy encourages adherence to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and has provided operational guidelines for Italian businesses to assist them in supply chain due diligence. Italy is a member of the Extractive Industries Transparency Initiative (EITI). The Italian Ministry of Foreign Affairs works internationally to promote the adoption of best practices.
Corruption and organized crime continue to be significant impediments to investment and economic growth in parts of Italy, despite efforts by successive governments to reduce risks. Italian law provides criminal penalties for corruption by officials. The government has usually implemented these laws effectively, but officials sometimes have engaged in corrupt practices with impunity. While anti-corruption laws and trials garner headlines, they have been only somewhat effective in stopping corruption. Since 2014, Italy has improved its overall rank and score in Transparency International’s Corruption Perceptions Index, reaching a rank of 52 in the 2020 Index. Italy has made improvements in strengthening its institutions and public administration, but Transparency International assesses that the COVID 19 emergency has undermined the efficiency of Italy’s anti-corruption and transparency efforts. The organization cited weaknesses in regulation and oversight procedures for the use of the over €200 billion in Next Generation EU funds Italy expects to receive to spur its economic recovery – funds to be allocated in digitalization, green transition, infrastructures, education/research and social inclusion.
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 people to “run out the clock” on their respective cases. Italy’s anti-money laundering laws also apply to public officials, defined as people entrusted with important political functions, as well as their immediate family members. (This includes officials ranging from the head of state to members of the executive bodies of state-owned companies.) In 2019 the government passed an anti-corruption measure, called “spazza-corrotti,” giving the same treatment for political parties and related foundations, strengthening the penalties for corruption crimes against public administration, and providing more tools for investigations.
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 to comply with them and, where appropriate, U.S. individuals and firms 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 in the past year, commercial and economic officers are familiar with high-profile cases that may affect 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 (e.g., Transparency International Italy).
Italy has signed and ratified the UN Anticorruption Convention and the OECD Convention on Combatting Bribery.
Politically motivated violence is not a threat to foreign investments in Italy. On rare occasion, extremist groups have made threats and deployed letter bombs, firebombs, and Molotov cocktails against Italian public buildings, private enterprises and individuals, and foreign diplomatic facilities. Though many of these groups have hostile views of the United States, they have not targeted U.S. property or citizens in recent years.
Unemployment continues to be a pressing issue in Italy, particularly among youth (ages 15-24). Italy has one of the EU’s highest rates of youth unemployment at 29.7 percent (December 2020), while the overall unemployment rate was 9.0 percent in December 2020. The unemployment rate has decreased since the pandemic, but the decrease significantly underestimates the pandemic’s impact on the economy and labor as the government has banned most layoffs and implemented a program to provide paid furloughs, which allow companies to reduce staff temporarily without adding them to the ranks of the unemployed. Despite these measures, Italy lost 456,000 jobs in 2020, while Italy’s inactive population (neither working nor seeking work actively) rose 0.9 percent. Job losses were concentrated among those employed under temporary contracts and in the services sector, disproportionately affecting young people and women. As of December 2020, only 49% of females were employed, the second to lowest rate of all EU countries. The ratio of long-term unemployment (unemployment lasting over 12 months) as a share of overall unemployment continues to be among the highest of major European economies. Underemployment (employment that is not full-time or not commensurate with the employee’s skills and abilities) is also a serious issue. These jobs are often concentrated in the service industry and other low-skilled professions.
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 particularly in the South. However, low labor force participation rates do not encompass labor in the large informal economy, which Italy’s statistics agency estimates as comprising at least 12 percent of Italian GDP.
The productivity of Italy’s labor force – one of the main weaknesses of the country’s economy – is also below the EU average. Many Italian employers report an inability to find qualified candidates for highly skilled positions, 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 freedom of movement to work in the United Kingdom (pre-Brexit), Germany, or other EU countries. 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.
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. However, 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.
Indefinite employment contracts signed before March 2015 are governed by the 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.
Indefinite employment contracts signed after March 2015 are governed by the rules established under the 2015 Jobs Act, a package of labor market reforms that provides 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, a former employee is entitled to receive severance payments (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 robust national active labor market policies remains in progress.
In 2018 the government introduced the so-called “Dignity Decree,” which rolled back some of the structural reforms to Italy’s labor market adopted as part of the 2015 Jobs Act. For example, the Dignity Decree extended incentives to hire people under 35 years old, set limits on how often a short-term contract could be renewed – the government has suspended the limit during the pandemic – and made it more costly to fire workers.
Italy offers residents other social safety net protections. In 2017 the 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 a certain threshold. In the 2019 budget, a prior government introduced the Citizenship Income (Reddito di Cittadinanza), which replaced and broadened the Inclusion Income program of 2017. The Citizenship Income program provides a basic income of €780 a month to eligible citizens and acts as an employment agency to a portion of those receiving the Citizenship Income. The estimated annual cost of the program was approximately €6.5 billion, but the pandemic increased the number of potential beneficiaries. The program provides benefits to around 1.3 million households (or 3.1 million individuals).
In 2019 the government implemented an early retirement scheme (Quota 100), which changed the pension law and permitted earlier retirement for eligible workers aged 62 years or older with at least 38 years of employment. The benefit expires at the end of 2021.
While the Jobs Act included a statutory minimum wage, it has not yet been implemented. With no national minimum wage, wages are set through sector-wide collective bargaining. The government in 2016 established an agency for Job Training and Placement (ANPAL) to coordinate (with Italian regions) implementation of many labor policies. ANPAL oversees implementation of the Assegno di Ricollocazione (a “relocation allowance”), an initiative to provide unemployment benefits to workers willing to move to different regions of the country), and a related special wage guarantee fund (Cassa Integrazione Straordinaria) that provides stipends for retraining. The Citizenship Income program and ANPAL appear to have failed in their goal of helping eligible workers find jobs. The Citizenship Income program, however, seems to have played a role in reducing poverty before the pandemic, and limiting its rise in 2020 during the economic crisis. In March 2021 the Ministry of Labor set up a committee to examine how to reform the Citizenship Income program. Historical regional labor market disparities remain unchanged, with the southern third of the country posting a significantly higher unemployment rate than northern and central Italy. Despite these differences, internal migration within Italy remains modest, while industry-wide national collective bargaining agreements set equal wages across the entire country.
Italy is a member of the International Labor Organization (ILO). Italy does not waive existing labor laws 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 aimed at securing pay adjustments that take account of inflation/changes in the cost-of-living) and industry-level (to secure pay adjustments that reflect increased productivity and/or 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 2019 estimate from The European Trade Union Institute said collective bargaining coverage was approximately 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, although recent practice is to renew collective agreements annually. Collective bargaining establishes the minimum standards for employment, but 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. In recent years, U.S. companies have faced significant resistance from labor unions and politicians when attempting to right size operations. Due to the pandemic, the government has banned most layoffs through June 2021. (This date may be extended.)
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, occasional strikes by employees of local transportation providers may limit citizens’ mobility.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
DFC (formerly 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
Host Country Gross Domestic Product (GDP) ($M USD)
* 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.
**2020 GDP is $1,967,248 (€1,651,595).
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
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Debt Securities
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
U.S. Embassy Rome
Via Vittorio Veneto, 119
Tel. 39-06-4674-2867 RomeECON@state.gov