Light BranchA Light Branch is an excellent choice for any business which want to expand into Italy, but want to avoid all the costs associated with incorporating a new subsidiary.

  • A Light Branch has all the capabilities of a Representative Office;
  • It has a company number and it is duly registered at the Chamber of Commerce (companies house);
  • It is registered at the Italian Labour Office, so you can employ in Italy (in fact, it’s forbidden to employ a long term employee in Italy through a foreign company);
  • Like a Representative Office, a Light Branch can NOT send invoices.

I guess you are thinking “if a Light Branch can’t send invoices, how can it be useful to expand my business?”. Well, it can, but it isn’t a solution for everyone.

  1. If you run a traditional business, if you produce in Italy, or if you have a stock house in Italy, the Light Branch is NOT for you. You should probably setup a more traditional Italian limited company or a branch.
  2. On the contrary, if you run a call center, provide IT assistance online, or any other case where you run the business from your own country, you maybe need a sales team in Italy. You probably want a secretary and a few sales managers driving all around Italy to promote your services. That’s when the Light Branch is the best solution.

In short a Light Branch is a Representative Office that can employ or – to use the words of one of my client from Gujarat (India) – a light branch is a ‘representative office on steroids’.

  • A Light Branch is NOT not required to keep statutory books nor publish financial statements;
  • Because the Light Branch does not invoice,  it is not required to file income tax or VAT returns;
  • There is no need to pay an accountant (this is probably why some accountants go ballistic when I speak about this solution in conferences);
  • The annual government tax is quite cheap .

The traditional expenses (e.g. staff costs, office equipment, supplies etc.) can be covered directly by your foreign company.

Some of my clients have no office at all. The secretary works from home, and they use a virtual office provider.

One last note

There is no record of Light Branches in the Italian Civil Code, our major corporate law. Italy is one of the rare country where the law is older than the Constitution. There was still a king in Italy when the Civil Code was issued (1939), while the Constitution has been approved after the Second World War (1947).

New laws followed, authorizing this activities but none of them gave an official name to this “less than a branch but more than a representative office” entity. So if your consultant looks confused by the word “Light Branch”, just ask him to setup a representative office. Then ask him to register it at the Labour Office. You will get the same results.

Image source: Dubber at Flickr.com

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