How to set up Holdings in Italy

Holdings companies in Italy are particularly used for estate planning and asset protection.

The term holding company refers to a company that holds controlling and/or connecting interests in other companies, which in turn may hold additional interests in other companies.

In Italy, holding companies of two types can be incorporated.

1) The “Pure” holding company, which exercises only the management of the shareholdings and sometimes the financial management of the group.

2) The “Industrial” holding company maintains and manages holdings in other companies and directly carries out production activities.

Holding companies in Italy may be limited to holding shareholdings and enjoying the fruits (dividends and capital gains) or may also exercise management and control over subsidiaries.

How to incorporate a holdings company in Italy.

If you want to set up a holdings company in Italy, you can choose one of the forms provided by Italian corporate law.

The most chosen company type is the SRL (Società a Responsabilità Limitata). This type of Limited company ensures better management of equity investments held, more efficient tax planning, and a clear separation of company and shareholder assets.

The Holdings company’s articles of association will set out the company’s characteristics and define its activities, whether only management and control or commercial.

Italian Holdings and taxation system.

The Italian tax system has also adopted the Participation Exemption (PEX) system.
This system consists of the exemption from taxation to the extent of 95% of the capital gains realised through the sale of shares.

With PEX, Italy wants to bring in entities established abroad where this system has been in use for some time.

In order to benefit from the participation exemption, the capital gains realised by the holding company following the sale of participations held must meet the following requirements:

1) uninterrupted possession from the first day of the twelfth month preceding that of the transfer, considering the shares acquired on the most recent date as sold first.
2) classification in the category of long-term investments in the first annual financial statements closed during the holding period.
3) tax residence of the subsidiary in a State or territory that does not have a privileged tax status.
4) carrying on business activity.

Setting up a holding company in Italy, therefore, has several advantages, thanks also to more favourable taxation of capital gains, and allows the development of business projects aimed not only at capital planning but also at business diversification.