How to Do Business in Italy
December 5, 2017
Italy is located in South Europe, and borders Switzerland, France, Austria and Slovenia, with San Marino and Vatican City as enclaves. It was one of the founders of the European Union, and is a member of the G8, along with the US.
Although Italy’s economy fell behind its European neighbors during the first half of the 20th century, it is currently the world’s eighth-largest economy.
Italy is one of the major agricultural exporters in the European Union, leading Europe in rice, fruit, vegetable and wine production. Due to its limited natural resources, Italy heavily relies on raw material imports, with more than 80% of Italy’s energy being fueled by them. Italy’s reputation as an agricultural supplier, along with its reliance on raw-material imports, make it an ideal international business partner.
Tourism provides 63% of Italy’s national income and contributes to the appreciation that many Italians have for foreigners.
Milan is the wealthiest city in Italy, and is home to the country’s main stock exchange as well as Bocconi University, one of the top business universities in Europe. Some refer to Milan as “the gateway to business in Italy, linked to one of the most important economic developments in Europe.” With a wealthy population, developed infrastructure and Italian legislation that expedites the visa process and incentivizes foreign investment, Milan is a prime location for foreign business.
Although Rome is the capital and political hub of Italy, corruption, political instability and high unemployment rates make Rome a riskier business opportunity than Milan. However, Italy’s capital is part of the second-wealthiest region (Lazio), hosts a variety of different multinational corporations, and is well-connected to Italy’s transportation network.
It’s important that you understand the economic and technological gaps by region. Northern Italy is the “industrial engine” of the Italian economy, with over 90% of Italian exports coming from this region. Comparatively, Italy’s south is much less prosperous, relying on tourism, small agricultural and manufacturing businesses. According to a 2015 survey, there are three times as many families living in poverty in the south of Italy than in the north. This gap has been recognized by the Italian government, and has resulted in multiple initiatives to improve foreign investment in Italy’s southern region. Depending on the location, international businesses can receive a grant of up to 65% of the amount invested in purchasing assets from Italy.
This can be a significant opportunity for your business, as there is far less competition in southern Italy than the north. Plus, the government offering incentives to foreign businesses that invest in southern Italy can help cut your business expenses and improve profits.
Italy’s official currency is the euro: 2017’s best-performing currency. Economic growth and political stability in Europe have led to the euro outperforming the US dollar. As a result, countries like Italy are able to purchase foreign imports for cheaper from nations with a weaker currency. This greatly benefits US businesses who wish to export their goods to Italy.
Italian is the official language of Italy (with 93% of the Italian population being native speakers), while English is the most used foreign language. Like many European countries, there are some minority languages recognized in Italy, including French, Spanish, Greek and German. You may notice that many Italian business clients will want an interpreter for business negotiations, as Italy scores below the EU average for language competency.
Around 85% of Italians are Roman Catholic, making it crucial that you pay close attention to Italy’s Christian holidays. You should try not to schedule business meetings or negotiations on any of these important religious dates.
|New Year's Day||January 1||Nationwide|
|Good Friday||Friday before Easter Sunday||Nationwide|
|Easter Monday||Monday after Easter Sunday||Nationwide|
|Liberation Day||April 25||Nationwide|
|Labor Day||May 1||Nationwide|
|Republic Day||June 2||Nationwide|
|The Feast of St. John||June 24||Only in Florence, Genoa, and Turin|
|The Feast of St. Peter and St. Paul||June 29||Only in Rome|
|Assumption of Mary||August 15||Nationwide|
|The Feast of St. Januarius||September 19||Only in Naples|
|All Saints Day||November 1||Nationwide|
|The Feast of St. Ambrose||December 7||Only in Milan|
|Feast of the Immaculate Conception||December 8||Nationwide|
|Christmas Day||December 25||Nationwide|
|St. Stephen's Day||December 26||Nationwide|
|New Year's Eve||December 31||Nationwide|
Italy’s top four cell phone carriers are Vodafone, WIND, TIM and 3, with Vodafone and Tim having the greatest coverage of the four. As of 2017, those who have a SIM card from any EU country can make calls to any other EU country without roaming charges. If your business frequently trades with European countries, this may be a worthwhile investment.
If you’re staying longer than a week in Italy, it’s recommended that you purchase a SIM card as it’ll be cheaper than an international plan with your home-country provider.
Avoid purchasing SIM cards at airports as they can be quite expensive. Instead, you can purchase cheaper SIM cards at most Italian train stations, or at shops in the city. SIM cards must be registered with the Italian government before they can be activated. This can be done by showing your passport while purchasing the SIM card.
If you need to contact an Italian business client, Italy’s area code is +39. This number must be added before any Italian phone number. For example, the US and Canada use +1.
Finding a Supplier for your Business
The Italian government is actively trying to attract foreign investment. This has resulted in many different methods for foreign businesses to find Italian suppliers.
Major trade shows are the most common ways for foreign businesses to find suppliers. The benefit of trade fairs is that your business can meet many suppliers in one location, increasing the odds of finding the perfect supplier for your business. It’s recommended that you search for the events to attend during your visit that are related to your business.
Italy was the fourth European country to connect to the internet in 1986, but due to underinvestment, they had the EU’s slowest internet speeds in 2016.
Buying offices can also be a way to find suppliers in Italy. Many have established relationships with factories and can find you an Italian supplier based on your specific needs. Their services come at a cost, between 3% and 20% on top of the product cost, but their professional experience and connections can be a significant advantage for your business.
There are also some online platforms that provide supply databases for certain products, such as Sqetch for clothing production. These websites usually have a filtered search so you can identify exactly which supplier would be best suited for your business.
Traveling to Italy
Italy is part of the Schengen Agreement, which means US citizens can travel to Italy (for tourism or business) without a visa as long as they have a US passport and don’t stay for longer than 90 days.
Visitors from non-EU countries must have their passport stamped upon entering Italy. Many borders are unstaffed, so you must request a stamp at an official Italian border.
Italy was the fourth European country to connect to the internet in 1986, but due to underinvestment, they had the EU’s slowest internet speeds in 2016.
Former Italian Prime Minister Matteo Renzi recognized this underinvestment, pledging €6 billion in government funding to improve the country’s internet infrastructure. Amazon senior executive Diego Piacentini decided to leave his job for two years in 2016 in order to work for free on this initiative as well.
Widespread internet access in Italy has slowly begun to develop since then, with more than 98% of the population expected to have 4G LTE internet by the end of 2017. The Italian government’s target is to have 85% of homes running on 35 megabits per second by 2020 (for comparison, Finland currently runs on 45 megabits per second).
Italy’s internet capabilities is highly relevant to your success as a foreign business. It demonstrates a country’s technological development and wealth, and provides a reliable foundation for ecommerce.
Major Trade Shows and Events
|Cosmoprof Bologna||Bologna||Spring||Beauty, cosmetics and wellness|
|Ecomondo||Rimini||Winter||Material, Energy Recovery and Sustainable Development.|
|Nine||Rome||Fall||Nanotechnology-Based Applications for Environment.|
|Agrilevante||Bari||Fall Every Two Years||Machinery and Equipment for Agriculture, Food and Animal Industries.|
|European Autumn Gas Conference||Milan||Summer||Gas conference for the world's largest gas and energy companies.|
|Vitrum||Milan||Fall Every Two Years||Glass industry|
|Tende and Tecnica||Rimini||Fall Every Two Years||Curtains, blinds, fabrics, systems and technology|
Business in Italy
Building close relationships are important in Italian business culture. Initial meetings usually focus on building these connections rather than business decisions.
Italians are typically fond of foreigners, as they have helped Italy become the fourth most-visited country in the world with over 40 million visitors. This stance towards foreigners can benefit your business, as it gives you an advantage over domestic competition.
As Milan is a global fashion giant, it shouldn’t be a surprise that dress code plays an important role in Italian business culture.
Written communication is widely accepted in Italian business culture as the ideal medium for initial contact, especially if you’re a foreigner. This avoids potential language barriers that may occur, and can lead to a future phone call or visit. It’s important that you note whether or not you can speak Italian in your formal introduction letter, so your Italian business partner has enough time to find an interpreter if necessary.
As Milan is a global fashion giant, it shouldn’t be a surprise that dress code plays an important role in Italian business culture. Anything that is “made in Italy” attracts global respect, and it’s no different in Italy. Formal attire is expected for business meetings, and it’s recommended that men wear darker colors for business.
How do you stop an Italian from talking? By blocking their hands.
Eye contact is vital in Italian business communication, as it’s a sign of openness and interest.
Italians frequently gesture with their hands while they communicate. One common Italian gesture is when you group all your fingertips together against your thumb and wave your hand back and forth.
This means “what do you want?” or “what is it?”
Another common expression is when you extend your index and little fingers, while holding the middle and ring fingers down with the thumb, to make the “sign of the horns.”
Pointing the “horns” up protects against bad luck, while pointing them down is considered offensive.
Maintaining eye contact is vital in Italian business communication, as it’s a sign of openness and interest. Italian business culture prioritizes personal relationships, so showing that you’re dedicated to the business relationship is essential to successful negotiations.
- Use the right you. In Italian, there’s a formal “you” (Lei) and an informal “you” (Tu). It’s important that you use the right form depending on who you are speaking with.
- Crack a joke. Italians have a good sense of humor and telling jokes can potentially strengthen your relationship.
- Don’t paint all Italians with the same brush. Italy’s regions should be considered as individual countries with different geographies, economies and cultures.
- Exchange business cards during meetings. These usually contain contact information, business details, education and professional title. Sometimes, an Italian business client will cross out their title on the business card they give you. This is a good sign, as it indicates that your relationship has become less formal and that the title isn’t necessary.
- Use personal and professional titles unless told otherwise. Dottore or Dottoressa (male and female) are titles for those with a university degree, while lawyers (Avvocato), engineers (Ingegnere) and architects (Architetto) have their own specific titles. In writing, these are referred to as Dott., Dott.ssa, Avv., Ing., Arch. respectively.
- Don’t criticize Christianity. The Catholic Church’s influence has lessened over the years, but many Italians are still religious and may find anti-theistic discussions offensive.
- Don’t be offended by ringing cell phones during business negotiations. Italians usually follow the “mobile etiquette” found in every country, however, some calls have priority over face-to-face meetings.
- Don’t be stereotypical. A number of topics should be avoided, such as the mafia, private family and corruption. Instead, speaking about your hobbies or about Italian culture are good discussion ideas.
- Don’t criticize Italy. Just because your Italian business partner is, doesn’t mean you should chime in with your own opinion.
- Don’t take punctuality too seriously. Be prepared for some delays when working with Italian business clients, and don’t consider a small delay of a few hours, or even a week, to be disrespectful.
Although it’s recommended that you make initial contact with an Italian business partner through written communication, Italians prefer face-to-face meetings so they can get to know you better.
Lengthy business negotiations should be expected in Italy. This is a result of Italian business clients having to report their findings to superiors, who report to their superiors and so on.
Business negotiations usually end with a meal invitation, as a way to further strengthen the business relationship. Italians begin lunch by saying buon appetito (enjoy your lunch), and toast by raising their drink and saying salute (to your health). It’s proper Italian etiquette for the host to always pay the bill; however, it doesn’t hurt to offer to pay. The tip is usually included in the bill, as in many European countries, but adding an additional 5% tip can be appropriate as well.
Import and Export Regulations
Products entering the European Union need to be declared at customs according to their classification in the Combined Nomenclature.
US exports to the European Union have a 3% tariff, while certain products have additional rules and certain licenses that are required. For more information on these exceptions, consult “The Integrated Tariff of the Community”, or TARIC (Tarif Intégré de la Communauté) website. The European Commission website also maintains an export helpdesk with information on the import restrictions of specific products.
Import duty rates in Italy range from 0% to 17% depending on the import. If the value of the imports is under €150.00, the import tax isn’t applied. The value-added tax (VAT) applied on most Italian imports is 22% of the product value, plus shipping and insurance, but is projected to increase to 25% in 2018. Additional fees may apply to certain imports, depending on the type of product and whether they need to be examined or verified.
Import duty rates in Italy range from 0% to 17% depending on the import. If the value of the imports is under €150.00, the import tax isn't applied.
The Single Administrative Document (SAD) is the official model for written customs declarations and is essential for trade outside of the European Union, or of non-EU goods. The SAD is used as the EU importer’s declaration, encompasses customs duties as well as value-added tax, and is valid in all member states of the European Union.
All businesses outside of the European Union must have an Economic Operator Registration and Identification (EORI) number to lodge a customs declaration. Your business must formally request one from Italy’s customs, which may ask for additional documentation to be submitted depending on your business type. With an EORI number, your business can export to any of the 28 European Union member states.
The US and the European Union signed a Mutual Recognition Agreement in 2012 aimed at facilitating trade between Authorized Economic Operator (AEO) businesses from each country. This agreement offers US businesses simplified customs procedures in trade with Europe, along with easier facilitation through safety and security measures. US exporters greatly benefit from this relationship, as it speeds up the shipping process, lowers inspection costs and increases loyalty and recognition with European traders. The Mutual Recognition Agreement also provides greater predictability for international business between the European Union and non-EU countries.
Certain rules and regulations apply when importing foreign goods into the US, such as specific licenses and quotas depending on product type and quantity. For more information on rules specific to your business, you can visit the US Customs and Border Protection website.
Businesses Advisories in Italy
US exporters and importers face certain barriers when trying to enter the Italian market, including poor internet, lagging economic growth and criminal activity.
Although the Italian government has recently pledged €6 billion to internet infrastructure, Italy has the lowest internet penetration in Europe, with low digitization rates among Italian firms and businesses. Poor internet means poor ecommerce, and this has economic consequences for Italy and for international business. Another reason for low ecommerce numbers is a high level of credit fraud found on many of Italy’s unsecure cashless payment systems. This can be easily fixed by using Veem. Whether your business is importing Italian goods or exporting US goods to Italy, Veem offers you and your Italian business client a secure and simple method to transfer funds that avoids the Italian banking system.
In fact, Italy's central bank estimates that Italy’s mafia cost the country €16 billion in potential investment between 2006 and 2012.
The Italian economy has struggled to recover from its 2009 debt crisis, posting high unemployment rates and below the EU average economic growth. This may be about to change in 2017, however, with Italy posting its best annual economic growth since 2011. It’s recommended that your business be cautious of the volatile Italian economy, but also understand the potential of investing in Italy while Italian market competition is low.
An article from the Telegraph joked that after the economic crisis in Italy, the Italian mafia became the nation’s largest business. With an estimated €65bn in cash reserves, they also became Italy’s biggest bank. The Italian mafia scares many foreign investors away from Italy with their bribery, corruption and criminal activity. In fact, Italy’s central bank estimates that Italy’s mafia cost the country €16 billion in potential investment between 2006 and 2012. To successfully import to or export from Italy, your business must avoid the Italian banking system and the mafia by using secure payment methods like Veem.
ATM skimming devices have been on the rise in Italy. The US Secret Service in Rome has been assisting Italian police with their investigation, and it’s recommended that you avoid ATMs during your stay in Italy.
Payments in Italy
Letters of credit have declined in popularity in the Italian market over the past few years. Italian businesses are reluctant to pay the expensive fee for letters of credit when there are cheaper alternatives. This has led US importers and exporters to resort to other methods of payment, or risk losing business to other suppliers and traders in the Italian market.
Veem is one such example. A connected payments platform that offers businesses the ability to track their B2B payments, Veem makes global transactions as easy as sending an email.
The Key to Successful Business in Italy
Personal relationships are crucial to successful business in Italy. If Italian business partners don’t know or trust you, the business negotiation is going nowhere fast.
Considering Italy’s infrastructure and economic gap by region, it’s advised that you do your research, as it could make a significant difference in your business results. Some regions of Italy, especially in the south, simply can’t provide the resources and technology necessary for businesses, so knowing where to do business is essential.
Your business must also be aware of the incentives offered by the Italian government for foreign investment. Along with a 25% tax cut for private investments in research and development, and a 15% tax cut for investments in machinery and capital goods, the Italian government launched “Industria 4.0” in 2016 as an initiative to further boost foreign investment in research and development. The Italian government plans to implement additional tax cuts for foreign businesses by the end of 2017.
Here is a list of resources that can provide more information on doing business in Italy:
The World Factbook on Italy
Six Tips for Italian Business Culture
COMMISCEO on Italy
Why Italy’s Troubled Economy is Returning to Form
US Department of Commerce on Doing Business in Italy
European Commission on Italy’s TARIC