In 2006 the FDI (foreign direct investment) in Italy was $ 41.2 billions. more than doubling the FDI in 2005.
The following may be indicated, among others, as reasons for the lack of attraction to foreign investors:
- Absence of a developed infra-structure.
- Bureaucracy.
- Rigid labor laws.
As a general rule, 100% foreign ownership is recognized in most sectors other than the existing restrictions in defense industries such as aircraft industries.
There are specific restrictions in the telecommunications industry in regard to overseas investors.
In the banking sector, investments of over 5% must be approved by the Central Bank that, on occasion, will object to massive foreign investments.
Benefits to Investors
As a general rule, there is no discrimination between benefits granted to foreign investors and those granted to local investors.
The benefits are given in the form of investment grants, loans at reduced interest or a state guarantee for exporters. Occasionally, the benefit is granted in the form of a combination of an investment grant and low interest loans, depending on the geographical location of the investment and the size of the investing company.
In areas hit by unemployment, particularly in the south, an exemption is granted, subject to certain conditions, from corporation tax and local tax for a period of 10 years.
Companies that invest a sum in excess of the average investment for the 5 previous years are eligible for a deduction from taxable income to the limit of the excess investment.
Subject to terms and the geographical area, an investment grant of up to 65% of the investment may be obtained on investing in fixed assets.
In no case shall the benefit exceed 50% of the taxable income.
Research and Development Costs
The benefit is given in the form of a grant.
The grant will not be more than 50% of the amount invested in R & D.
The grant covers expenses such as employees' salaries, the purchase of research equipment and intellectual property rights.
Loans to Encourage Export
Low interest loans are granted to encourage export from Italy to other countries.
The loan is for up to 85% of the amount of products exported.
Financing is given over 5 years as interim financing on overseas customers' payments for countries defined as economically established, or for 10 years for countries defined as poor.
Free Trade Zones
There are two free trade zones in the north: Venice and Trieste.
The following benefits are granted, among others, to companies in free trade zones:
- An exemption from taxes on imported raw materials for re-export as manufactured goods.
- The company's right to bring employees from foreign countries subject to the labor laws of the country of origin.
