In accordance with article 2508 of the Italian Civil Code, foreign companies have the right to establish one or more branches in Italy.
A branch is an extension of the foreign entity and depends – both administratively and economically – on its headquarters. It uses the same name and legal form as the foreign company: it does not have its own internal governing body but is managed directly by the governing body of the foreign company, which appoints one or more permanent legal representatives (preposto/i), entrusted with the powers to manage and represent the branch before third parties.
It does not have its own capital and is not required to draw up annual financial statements:
a copy of the financial statements of the headquarters must be filed at the Trade Register (in the original language, accompanied by a sworn Italian translation).
An annual report is required only in order to prepare the Italian income tax return. To facilitate record-keeping and the preparation of its annual report, an Italian branch usually keeps the accounting books required by article 2214 of the Italian Civil Code, in particular the general ledger (libro giornale) and the inventory book (libro inventari).
Contracts concluded by the branch through its legal representative are binding upon the foreign company and any liabilities for the breaching of the contractual obligations are attributable directly to the directors of the latter.
The branch is subject to Italian laws and regulations. The setting-up of a branch must be recorded in the Trade Register, together with the appointment of the legal representative, the description of his powers, details of the registered office, the activities, etc.