If you want to sell online in Europe, you may find yourself asking the question: “What are the best European countries to set up an e-commerce business?”
In this case, it is likely that you immediately think of countries like the Netherlands, Switzerland, Germany, or the UK. Italy may not be the first country that comes to mind when you think of e-commerce.
Italy is not the largest e-commerce market in Europe. However, its e-commerce market continues to grow vigorously. The country has good potential for e-commerce, not to mention its unrivaled position as a strategic gateway to Europe, the Middle East, and Northern Africa.
Becoming a successful e-commerce entrepreneur in this country requires conducting exhaustive research on online consumer shopping habits and Italian administrative, legal, and tax regulations. Furthermore, learning about how to start a dropshipping business, in general, is also crucial to be successful.
So, to sell online in Italy, you need to learn more about your legal obligations and the Italian e-commerce market. It is also a good idea to carefully create a business plan together with a local expert. This will put you in a better position to achieve success as an e-commerce entrepreneur.
Main Characteristics of the Italian E-Commerce Market
Now, we will provide information on Italian consumer behavior and the overall e-commerce market. All of this is backed up with facts and figures.
Italian consumer behavior has changed notably in recent years. Several years ago, the majority of Italian consumers used to shop in person, i.e., in a physical store. Perhaps the main reason for this was that they failed to perceive online stores as trustworthy.
But, nowadays, Italians are converting enthusiastically to online shopping. Let’s go into detail. The current population of Italy is over 60 million. In 2021, it is projected that nearly 60% of the total population in the country will shop online.
Moreover, the country’s importance in the history of fashion should not be overlooked. Many Italian designers, brands, high-end labels, and fashion houses have had an enormous impact on the shape of style today. Fashion is simply part of the Italian culture. So it comes as no surprise that Italy is the largest market for luxury brands in Europe. As a result, starting a clothing dropshipping store in Italy can prove quite advantageous.
Evidently, this is good news for anybody that’s interested in selling designer clothing online in the country.
Who Can Establish a Dropshipping Business in Italy?
To start and operate a business in Italy as a foreigner, you must fulfill the condition of reciprocity. What does this mean? You can start a business in Italy only if an Italian citizen can open a business in your home country.
Citizens of the EU and EEA are excluded from this rule. If you are a non-EU citizen, visit the official website of the Italian Ministry of Foreign Affairs to figure out whether you can start a business in this country or not.
If you live outside the EU and fulfill the condition of reciprocity, you will need a work visa to start a business. You can apply for one at the Italian embassy or consulate in your home country.
When launching a new online business, especially the dropshipping business model, you must make many important decisions and follow a few rules and regulations. So, keep reading!
Legal Requirements That Relate to Starting a Dropshipping Business in Italy
The legal structure you will choose for your business can make or break your business. It can have long-lasting legal and tax consequences.
Decide what type of business entity to establish and register it
Considering how vital the legal structure is for different aspects of the business, you need to take your time choosing the most appropriate structure for your online start-up. Also, it is recommended to use expert advice when making that decision.
In Italy, there are a few types of legal structures. What is the best structure for your online start-up? Let’s take a look at the most common types of structures under which you can operate a dropshipping business in Italy. The same applies to every “most-common” online business model.
1. Sole proprietorship
This is the simplest type of structure that’s commonly used by single business owners. It is relatively easy and cheap to set up as a sole trader in Italy.
To set up as a sole trader, you must register with the Italian Business Register. But you will be legally responsible for all aspects of your business, including losses and debts. If your business faces a lawsuit, the debts of your business will become your debts. Everything you own, including your personal assets, will not be protected.
Many types of partnerships exist in this country. The difference between them lies in the liability level for each partner. The two most common forms of partnership are the general and limited partnership.
General Partnership (Società in nome collettivo or S.n.c.)
In this type of partnership, all partners are jointly liable for the obligations of the partnership. The advantage of this business structure is that you do not have to deposit minimum capital in a bank or with a notary to begin operations.
Limited Partnership (Società in accomandita semplice or S.a.s.)
Unlike the general partnership, the limited partnership requires at least one partner to be liable only to the extent of their share in the capital and the other to own full liability for the debts of the partnership.
No matter what type of partnership you choose, you need to prepare a partnership agreement. You and your partners need to sign the partnership agreement before a public notary and then register with the Italian Business Register.
You should notarize the agreement in case a potential legal dispute arises between you and your partner.
Limited Liability Company (Società a responsabilità limitata or S.r.l.)
The majority of small and medium-sized companies in the country opt for this legal structure. This makes it the most popular business form in Italy.
This business structure is the Italian version of a “Limited Liability Company” or LLC. When you open a limited liability company in Italy, you are actually creating a separate legal entity from yourself. It protects you from personal liability if your company gets into debt. You have limited liability based on the amount invested in the company.
However, one of its major disadvantages is that it requires at least one shareholder and minimum share capital of €10,000. Plus, it has a more complex registration process than that of a sole trader or a partnership. This means that to set up a company in Italy, you must deal with certain incorporation formalities.
Namely, you need to select a unique name for your company in any language based upon the Latin alphabet. But first, you need to find out if your company name is available. To do this, simply go to this page.
Then, you should open a business bank account and deposit at least €2,500 into that account. This accounts for 25% of the minimum share capital of €10,000. The bank will issue you a Certificate of Deposit confirming that you have the necessary sum of money in your business bank account.
Next, you should draft the Memorandum of Association (Atto Costitutivo) and the Articles of Association (Statuto) before a notary. You should also obtain an Italian tax code and register for VAT with the Italian Revenue Agency.
Prior to registering with the Italian Business Register, you must obtain the certificate of incorporation (Visura).
Register with the tax authorities
Regardless of whether your e-commerce business is based in Italy or not — if you are about to sell products via your website or through online marketplaces to customers in Italy, then you have to stay tax compliant and follow the Italian tax obligations.
In short, as an online store owner in Italy, you are liable to taxation. This country has a multitude of taxes, including income tax, corporate tax, value-added tax (VAT), etc.
The two tax authorities in this country are the Italian Revenue Agency (Agenzia delle entrate) and the Ministry of Finance. To learn more about taxation in Italy and register for the right taxes, you should visit these websites. It is also advisable to seek professional advice from a tax accountant.
Open a bank account for your online store
Generally speaking, there are two ways to open a business bank account in this country. One way is to go to an Italian bank in person and bring the right documentation with you. And the other way is to hire a local lawyer to do that on your behalf.
Nevertheless, some banks in Italy may offer the possibility to complete most banking tasks online — even opening a business bank account. Therefore, you must do your research to determine which banks offer the best services for your specific needs.
The largest banks in the country are Banca Nazionale del Lavoro, UniCredit, and Intesa Sanpaolo, to name a few. If you are looking for a bank with services in English, then Intesa Sanpaolo may be the right choice for you.
However, CheBanca may be your best bet if you are interested in using fully digitalized services. This bank is renowned for its innovative approach to digital banking.
Comply with the Italian and EU e-commerce legislation
Launching a professionally designed e-commerce website is not enough to start your own successful dropshipping business in Italy. To sell online in this country, you must also comply with the Italian and EU e-commerce legislation.
Firstly, you must display a clear “Terms and Conditions” agreement on your website to protect yourself and your online store from legal liability. In this agreement, you should include pricing, shipping, returns, cancellations, and payment terms. You should also provide details of the items you are going to sell. Do not forget to state whether you include VAT in the final price of a product. This can help customers get an immediate sense of whether an item is right for them.
Finally, you also need to publish certain mandatory information on your e-commerce website. This information includes an e-mail, an address, a phone number, a VAT number, etc.
Your Successful Dropshipping Business In Italy
Though not the biggest market in Europe, Italy is a fast-growing e-commerce market. The country has a vibrant and thriving e-commerce sector.
As we mentioned in the first part of this article, to become a successful online seller in Italy, you should know the preferences and shopping habits of your potential customers. Your online business should keep pace with the way Italian consumers prefer to shop online.
Italian consumers usually have high expectations when buying online and expect great customer service. So to better serve the Italian consumer, you should provide exceptional customer service and sell products that meet the highest quality standards.
You should also build trust with customers and make them feel safe buying from you. That’s why you need to follow the legal steps stated above.