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Audit of a Italian company, financial statements, accounting, consulting in the Italia

Italy is a European country, rich in cultural heritage, located in a favourable Mediterranean climate, with a developed manufacturing sector and tourism, the possibility of obtaining a residence permit when registering a business. Italy attracts foreign investors, even despite the high taxes and bureaucracy. When doing business in Italy, national peculiarities must be taken into account. Financial statements, tax returns must be prepared in accordance with national laws and standards. Company audits are not required for small businesses.

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Service packages «Italy-SAS» Service packages «Italy-Srl» Legislation Tax System Audit Services
Preparation of annual financial statements and tax returns

(From EUR 4 000)

EUR 100-350 per hour
Preparation and submission of VAT / VIES / INTRASTAT returns
EUR 100-350 per hour
Obtaining an EORI number for a company
730 EUR
Registration of a company for VAT
1 130 EUR
Registration for the OSS (Union One-Stop Shop) – for intra-EU distance sales of goods and services
595 EUR
Consulting services and support during tax audits
EUR 100-350 per hour
Liquidation of a company
from 5 000 EUR

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Legal requirements

Accounting and financial reporting in Italy are regulated by the following legislative documents:

  1. Civil Code;
  2. Tax Code;
  3. Italian Generally Accepted Accounting Principles (Italian GAAP);
  4. International Financial Reporting Standards (IFRS).

According to the law every Italian company must keep accounting records sufficient to identify all financial transactions made by the company. Italian companies must provide the following documents in their financial statements: balance sheet, profit and loss statement, cash flow statement, and notes to accounts.

Financial statements must be accompanied by a director’s report (nota integrationtiva), which is a director’s statement explaining figures contained in the financial statements and, if the company is subject to audit, a report prepared by auditors.

Accounting records must be kept for 10 years after the last date of the financial statements along with relevant business correspondence.

The following types of legal entities must file financial statements:

  • Società a responsabilita limitata (SRL): limited liability company;
  • Società per azioni (SpA): public limited company;
  • Società in nome Collettivo (SNC): general partnership;
  • Società in Accomandita Semplice (SAS): limited joint-stock partnership;
  • Società Cooperativa (SC): cooperative company.

Limited liability companies (SNC, SAS) are not required to publish their accounts but must make a balance sheet and profit and loss statement. Companies listed on a stock exchange must make quarterly financial statements. Small and micro companies are allowed to make financial statements in a condensed form.

A company is considered a micro company in the first financial year if it meets at least two of the following three conditions in that year.

A company is considered a micro company in subsequent financial periods if:

  • the below conditions are met in the current and previous financial year;
  • the below conditions are met in the current financial year, and the company was considered a micro company in the previous financial year;
  • the below conditions were met in the last financial year, and the company had been considered a micro company in the previous financial year.

Micro companies are companies that did not exceed two of the following limits during the first financial year or, after that, during two straight financial years.

  1. balance sheet total is 175,000 EUR;
  2. turnover is 350,000 EUR;
  3. average headcount of employees during the financial year is 5.

Micro companies’ annual financial statements can contain only a balance sheet and profit and loss statement.

A company is considered small in the first financial year if it meets at least two of the following three conditions in that year.

A company is considered small in subsequent financial periods if:

  • the below conditions are met in the current and previous financial year;
  • the below conditions are met in the current financial year, and the company was considered a small company in the previous financial year;
  • the below conditions were met in the last financial year, and the company had been considered a small company in the previous financial year.

Conditions for classifying a company as small:

  1. balance sheet total is 4,400,000 EUR;
  2. turnover is 8,800,000 EUR;
  3. average headcount of employees during the financial year is 50.

Brief annual financial statements consist of:

  • Balance sheet;
  • Profit and loss statement;
  • Notes to financial statements.

Since November 2001, the Italian Accounting Committee (Organismo Italiano di Contabilità – OIC) has been responsible for accounting standards. The International Financial Reporting Standards are required for all national public companies and listed foreign companies (except for a foreign company whose national jurisdiction’s standards, in the opinion of the EU, are equivalent to IFRS). Small and medium-sized enterprises use Italian GAAP.

Audit

Audit is required for Italian companies:

1. Audit is generally required for companies if one or several of the following conditions are met:

In two subsequent financial years the company exceeded two of the following three limits:

  1. balance sheet total is 4,000,000 EUR;
  2. turnover is 4,000,000 EUR;
  3. average headcount of employees during the financial year is 20;

2. For limited joint-stock companies (S.p.A.); and for private limited companies (S.r.l.) that exceed two of the following limits in 2 straight years.

  1. balance sheet total is 2,000,000 EUR;
  2. turnover is 2,000,000 EUR;
  3. average headcount of employees during the financial year is 10.

3. All companies that make consolidated financial statements;

4. Banks, brokerage commission houses, fund management companies and regulated financial institutions.

Audit of financial statements («revisione legale dei conti») must be conducted in accordance with Italian legislation (article 2409-bis of the Italian Civil Code) and audit standards published by the Italian Institute of Chartered Accountants (CNDCEC, Consiglio Nazionale dei Dottori Commercialisti ed Esperti Contabili), which comply with the International Standards on Auditing (ISA) issued by the International Federation of Accountants (IFAC).

Time frame for preparation of financial statements and tax accounts

In accordance with the contents of the articles of association, partners annually approve accounts within 120 or 180 days after the end of the financial year. An annual return, auditor’s report, financial statements and a copy of the minutes of the annual general meeting of shareholders (Assemblea dei soci) must be filed with the registry of companies 30 days after the annual general meeting.

The usual tax period is 12 months; in some cases, there may be exceptions from this rule. Normally, profit tax returns must be filed within 11 months after the end of the tax year.

Liability for late filing of accounts

If a company fails to file its financial statements on time, the company will be imposed with the following penalties

If the delay in filing accounts is over 30 days, from 137.33 EUR to the maximum amount of 1,376 EUR,

If the delay in filing accounts is under 30 days, then the penalties are reduced to one third: from 45.78 EUR to the maximum amount of 458.66 EUR.

If a company fails to file a tax return within 11 months after the end of the tax year, the company will be imposed with an administrative penalty of 120% to 240% of the amount of the payable taxes.

Consolidated financial statements

Parent companies that along with their controlled companies exceed two of the following thresholds during two consecutive financial years must prepare consolidated financial statements:

  1. balance sheet total is 20,000,000 EUR;
  2. turnover is 40,000,000 EUR;
  3. average headcount of employees during the financial year is 250.

Exemption from the need to file consolidated financial statements, if the above criteria are not exceeded, does not apply if the parent company or one of its subsidiaries is a public company.

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