In order to hire a worker in Italy as a foreign company it is essential that the work contract adapts to local laws. In Italy, the government has made it necessary for foreign businesses to have an organization within the country.

The available options for a non-resident company are listed below:

A. Representative offices

In this case, the foreign company can appoint an Italian resident (for example, the worker themselves, a professional, or a company) to comply with Social Security and insurance obligations stemming from the work performance of the employee to be hired.

The nonresident company must then send a mandate to the appointed Italian individual so they can fulfill the obligations under their name and on their account with the social security and insurance institutions. In this case, there are no obligatory taxes for the representative office (since the representative office is not considered a “withholding agent” according to Article 2 of Presidential Decree No. 600/73).

B. Permanent establishment

Permanent establishment is the prerequisite for the taxation of an economic activity carried out by a company in a country other than that of its tax residency.

Permanent establishment implies the existence of a “place of business” with the presence of facilities, goods or machinery, factories, and miscellaneous equipment for the development of the business activity. You must keep in mind that permanent establishment declares your entry into both the country where you set yourself up (Italy) and the foreign country where the business resides.

The worker can be hired for permanent establishment. At this point the same considerations apply as with the creation of a representative office. However, permanent establishment in Italy is among withholding agents, so the employee will be subject to both social security and tax withholding.