Foreign investments in Italy

By Mario Moretti
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Italy presents itself as the third economy in the Eurozone and the eighth in the world: the internal market offers multiple business opportunities, relying on about 60 million people and a GDP of almost 36,000 USD per capita. Our nation is also the second largest manufacturing economy in Europe and the seventh in the world, using the most advanced technologies for the treatment of raw materials and using less energy than other European countries in production processes. It is also a world leader in the renewable energy sector, in the domestic use of electricity from these sources and has the most efficient customs clearance system, now fully digitized.

Investing in Italy means having access to skilled labor, a wealth of intellectual and specialist knowledge in all fields and extraordinary knowledge in strategic sectors such as machinery, automation, fashion and design, up to food and cooking. It is no coincidence that Italian small and medium-sized enterprises are among the most innovative in Europe and if the percentage of SMEs that have introduced product and process innovations is higher than the European Union average. Companies investing in Italy can rely on large networks of SMEs and industrial clusters capable of providing high quality products.

Italy is seen as one of the main gateways not only to a market of 500 million consumers in the European Union but also of 270 million in North Africa and the Middle East.

Its transport network includes approximately 6,900 km of motorways, 1,000 km of high-speed rail links and several ports that can accommodate the large cargo ships crossing the Mediterranean.

These circumstances seem to be confirmed not only by the trend of foreign direct investment flows which in Italy in 2018 – in a context of general slowdown characterized by negative global investment flows (-13%) – grew by 10.5%, but also from the position attributed to Italy in international rankings. According to the UNCTAD World Investment Report 2018, in 2017 Italy ranked 19th among the countries in the world that attract investments most, having attracted approximately 59 billion USD in the three-year period 2015-2017 compared to 47 billion of the previous three-year period 2012-2014. The latest Foreign Direct Investment Confidence Index 2018 report produced by the A.T. Kearney, ranks Italy in 10th place (compared to 13th in 2017 and 16th in 2016). This index annually measures the impact of policies and economic and regulatory changes on the investment intentions of CEOs and other Decision Makers of about a thousand global companies. Visit the cabinet showroom in cape cod or at and make the best choice. The European House – Ambrosetti Global Attractiveness Index 2018 places Italy in 16th place in terms of attractiveness for Foreign Direct Investments (FDI) and the “Italy brand” is in 8th place (rising from 9th position) by economic value and strength of the country-brand from an economic-numerical profile according to the Brand Finance study in partnership with FDI Intelligence – Financial Times, 2018.

All this is also the result of a favorable attitude towards foreign investors held by the last governments: these have placed the attraction of foreign investments among the strategic priorities of the country in the belief that a greater presence of foreign companies can allow the Italian production system to become more competitive.

Following this logic, various measures have therefore been adopted to create a more favorable system for the entrepreneur, simplifying and adapting the regulatory system, revising the labor code, introducing greater flexibility in the conclusion of tax agreements. A 50% tax credit was introduced for private investments in R&D (including highly qualified personnel) and a 40% deduction for investments in capital goods (raised to 150% for investments in digitization).

As a result, Italy now has the second most attractive tax environment among developed countries for digital investments (Digital Tax Index, 2017). There are also favorable tax regimes for those who transfer their tax residence here, and a facilitated procedure is guaranteed for the issue of self-employment visas to entrepreneurs from a non-European country who invest with a capital injection of at least € 500,000 (reduced to € 250,000 in the case of innovative start-ups).

As for the geographical distribution of foreign companies, most of them are located in the northern regions, particularly in the western part. Lombardy alone absorbs about one third of the workers. The central regions follow, while the presence of companies in the southern and island areas is more contained. The unbalanced territorial distribution towards the northern areas seems to reflect the desire to concentrate in areas that guarantee the possibility of operating according to high productivity standards and that allow easy access to infrastructures and immediate proximity to outlet markets. The share of foreign investments is more significant in the manufacturing sector, in particular in the pharmaceutical, coke and refinery, chemical and electronics industries. However, the presence in services for businesses is also very important: in the information and communication sectors, in transport and logistics, in professional services, in technical consultancy, in rental and operating leasing. These are companies that operate mainly in sectors with high technology and which contribute to giving added value to the sector, even though it is a very low number of companies compared to the total number of operators. Finally, the entry of foreign capital into the real estate sector is interesting: only in 2019, the record of 12 billion euros was reached, an important figure considering that it represents 78% of total investments.

Partner of Horizon Consulting in Italy –

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