Italy is a decent place to do business. But sometimes, due to certain reasons, businessmen and investors face so many difficulties that they look to shift their business setups to somewhere else in the world. Currently, the best place to move your Italian business is in Dubai, UAE. The country has a strong economy, zero-tax policy, business-friendly policies, and an environment that supports businesses. If you don’t know how you can move your Italy-based business to the UAE, this guide is for you. Read on to find out.
Problems of Doing Business in Italy
Here are some of the challenges that entrepreneurs and businessmen can face when doing business in Italy:
Hard to Start a Business in Italy
According to the World Bank’s Doing Business 2020 report, Italy trails below the majority of its EU countries in terms of ease of doing business. Italy is ranked 58th out of 190 economies for overall business ease. Costs associated with forming a company are primarily made up of notary fees.
Entrepreneurs should also account for grant, registration, and stamp duty taxes in addition to the registration and yearly membership costs charged by the Chamber of Commerce. This is a time-consuming process.
Hard to Get Credit in Italy
Italy ranks 119th in the World Bank’s 2020 report for getting credit. It shows it can be harder to get credit in Italy than in other EU countries and OECD high-income rivals. Italian banks are still suffering from the repercussions of the 2008 credit crunch, thus business owners looking for credit financing must adhere to more strict requirements and provide stronger guarantees than in other countries of Europe.
Dealing with Construction Permits
The Italian business system is typified by dealing with construction permits. Although there are fewer steps than the OECD average, it takes far longer to complete each one. For example, it takes 135 days to get a construction permit and 30 days with numerous other departments.
Construction permits in Italy cost more than they do elsewhere in the EU. In Italy, obtaining construction permissions costs 4.6% of the warehouse’s worth.
The location has an impact. Although national legislation governs construction permits, each city has its own interpretation of the law. Certain Italian cities are above the EU average in terms of the number of procedures, time in days, and expenditures, while a lot of cities are below.
Traditions
Many business owners make the mistaken decision to ignore cultural differences. Traditions play a big part in business in Italy, which may not seem clear at first. Not knowing Italian creates a lot of problems. And the language is difficult to learn.
Italian is the only language that is recognized for contracts and official documents, which explains why it is important to learn the language. Not knowing the local language will make it difficult for you to establish a direct and personal connection with your partners and win their trust.
Trading Across Borders
Import procedures take 16 days, and export procedures typically take 19 days, with document preparation taking 10 days at the minimum. It can take a while for products to clear customs. So, in short, it is a very much time taking and complicated process to trade across borders.
Getting Electricity
Time is a big issue when it comes to obtaining electricity, and the utility provider’s completion of external connection work can take close to 100 days. When the application has been submitted, it typically takes two months only to acquire an estimate.
Slow Contracts Enforcement
Italy has made a number of changes to the way that commercial lawsuits are filed and served, yet the World Bank’s Doing Business report places it 122nd in the category of contract enforcement. Due to backlogs, adjournments, delays in the issuance of judgments, and personnel shortages, cities have difficulties when it comes to enforcing final decisions.
Local governments are those who decide how to apply federal laws and regulations. So, businesses must be aware that local laws and processes for the same business activity will vary among municipalities.
The protracted judicial process is different in different cities of the country. A commercial dispute in Italy takes an average of 1,120 calendar days to resolve, with filing and service requiring an average of 10 days, a trial and judgment taking an average of 840 days, and enforcement and judgment taking an average of 270 days.
In Turin, it takes 860 days to settle a business dispute. Reggio Calabria needs twice as long to settle disputes. Due to the length of time needed to secure excavation permits in Palermo, it may take 231 days.
Company Culture
The success of your business is heavily dependent on your workforce and corporate culture. Although it is up to you to choose the proper candidates and establish the ideal working environment, dealing with foreign workers may cause a few challenges because you are unsure of their preferred working conditions.
The Italians place a lot of emphasis on hierarchy. This may have an impact on both internal and external business activities. For instance, you run the danger of wasting your effort and time negotiating with the incorrect individual if you are not knowledgeable of how the chain of command functions in a certain organization.
Paying Italian Taxes
The tax burden is complicated. The burden on businesses is 24%, in line with the corporation tax rate for other OECD countries. Businesses and self-employed people need to pay up to 15 taxes, including real estate, regional production tax (IRAP), corporate income tax (IRES), social security, and VAT. As taxes are calculated in part based on predicted income rather than actual income, some of these payments are paid in advance.
Registering Property
The process of registering a property is quite simple. However getting an energy certificate (Attestato di Certificazione Energetica, ACE) and collecting the Notartel-required certificates for the transaction might be expensive.
Employment Law
The labor market in Italy is governed by a complicated set of laws and collective bargaining agreements. Italy’s labor market has become more relaxed as a result of a 2015 change that lowered labor costs and decreased the likelihood of legal action. But without an in-depth understanding of current employment legislation and the support of knowledgeable HR experts, the system is still challenging to manage.
Digital Development
Italian companies are behind the rest of Europe in recent years when it comes to digital expenditures. According to the Digital Economy and Society Index (DESI), Italy’s digital competitiveness in the EU was fourth to last in 2019. Lack of investments in digital space for its development will make businesses go way back in time as they won’t be able to equip with modern-day technologies.
How to Move an Italian Business to Dubai?
Here is the general process followed to get a trading license in Dubai.
1. Choose a Business Activity
The first step is to select the business activity you will engage in. This will decide the kind of business license you require to conduct business in Dubai. There are four licenses available for your business which are industrial, professional, commercial, and tourism.
2. Select the Ideal Location for Your Business
When moving a business to the UAE, foreigners have a choice between the Free Zone and the Mainland.
A mainland business is a business establishment with direct access to the local market. Businesses operating from free zones must take help from a local agent to conduct business directly in the United Arab Emirates.
Free zones provide amazing advantages like a complete exemption from customs taxes, no exchange rate limits, and capital and profit repatriations. Typically, foreign investors are better suited for free zone company ownership.
3. Select the Type of Company
There are four different kinds of businesses that investors and business owners can incorporate in Dubai A privately owned business, a public corporation, a branch of an established UAE company, or a branch of a foreign company are all options that you can choose from.
4. Register Your Business Name
Before you register your new business, you should get guidance because the process for naming a company in the UAE differs from that in many other countries. You can keep the already set name of your business if it is according to the naming rules or you can choose a new one.
You must adhere to a number of naming guidelines established by the UAE. But picking a name for the business is simple and mostly common sense.
In general, you should stay away from vulgar and offensive words as well as don’t choose names of well-known company names.
5. Compile the Paperwork
The main cause of delays and rejection of applications for a business license in Dubai is incomplete and inaccurate paperwork.
Make sure your registration is complete before submitting it to save time and hassle. The necessary paperwork is listed below:
Documents Required for Business Setup in Dubai as an Italian Business Owner
There are several documents required to move an Italian business to Dubai. The following are the primary documents that you will require:
- The official application form from the appropriate government, whether it be from the Mainland or a Free Zone
- A plan for a professional business plan
- A copy of any active business licenses
- Colored passports copies of the shareholders, managers, and directors
- Authenticated signatures from the shareholders, managers, and managing directors
- Your passport copy
- NOC from the current sponsor – for individuals
- Photo in passport size (digital)
- Copy of a resident passport (if applicable)
- Copy of UAE Emirates ID (if applicable)
- Financial audit reports for two years attested by a UAE-based bank
6. Apply for a Trading License
The licensing application is submitted to the relevant authority where your new company will be located. Applications for the Dubai mainland are submitted to the DED (Dubai Department of Economic Development), and those for the free zones are submitted to the appropriate government body.
7. Obtain a Visa
Then you need to obtain a visa. To get a visa, you need to submit documentation and undergo a blood test, fitness test, and chest x-ray. In addition to sponsoring your own visa, you can sponsor others, such as your children and parents, your spouse, and domestic staff.
8. Open a Corporate Bank Account
A corporate bank account is required to operate the business in the UAE.
9. Sponsors And Service Agents
When trading in the UAE, you may need the assistance of a local agent or sponsor. If you start a free zone company, the local agent will facilitate your business to trade with the neighborhood market.
You might need a sponsor who will own a 51% stake in your company if you start a mainland business. But many commercial activities are now allowed to be fully carried out by foreign company owners.
For both cases, the agent or sponsor receives a fee but has no influence over decisions or ownership of earnings.
Types of Business Licenses in Dubai
In order to run a non-resident business setup in Dubai, you need a business license. Licenses are given out for the Dubai Free Zones and the mainland.
The Mainland license is designed for companies that desire to conduct business both domestically and abroad. It is typically necessary to work with a resident sponsor who receives a 51% ownership stake in the business as a sleeping partner for this type of business license.
The most ideal way to establish a company in one of Dubai’s designated free economic zones is probably with a free zone license. This license is very simple to obtain, grants foreigners offer no tax advantages, 100% ownership, has no trade duties, and gives them a ready-to-use company infrastructure.
You can get four types of trading licenses from the Dubai Department of Economic Development (DED) as a foreign business investor. These are:
- Tourism – For travel and hospitality providers.
- Commercial – For commercial trading of goods.
- Industrial – For packaging, manufacturing, etc.
- Professional – For providing professional services like consultancy, accounting, legal, etc.