Investments in Italy: limits for non-EU companies and persons



Historically, the Italian legislator has adopted an approach toward those foreigners willing to make an investment of any kind in Italy based on the reciprocal treatment of its citizens in the relevant foreign country. Such an approach, provided for in Article 16 of the General Provisions on Law of the Italian Civil Code dated 1942, is still valid notwithstanding exceptions which have been introduced, since 1942, by law and case law. This is the so-called ‘Reciprocity Principle’. Recently, the Milan Appeal Court issued a decision (the ‘Decision’), in respect of the Reciprocity Principle with specific reference to the acquisition of a real estate asset by a Swiss company.

As noted, the key provision is Article 16, which is intended to regulate the legal status of a foreign investor. In particular, this principle identifies the conditions which must be met in order for a foreigner to carry out economic activities in Italy. The Reciprocity Principle does not apply only to the purchase of real estate assets, but also to: (i) shareholding of companies; (ii) management of companies; and (iii) the carrying out of industrial and agricultural activities, etc.

More specifically, Article 16 provides that a foreigner (including a foreign company) may enjoy rights, recognised under Italian law, only to the extent that an Italian citizen would not be treated, in the relevant foreign country, worse than the citizens of such country in the exercise of the corresponding right. In other words, to ascertain whether a foreigner might enjoy a right in Italy, one must consider whether, in the legal system of the state to which the foreigner belongs, an Italian citizen would be treated in the same way as the citizens of such country in enjoying a right at least similar or analogous to the right at stake in Italy.

As anticipated, case law and the Italian legislator, over the course of time, in adherence to the principle of universalism of rights, has softened this principle. As a consequence, today the Reciprocity Principle does not refer to fundamental rights, which are, therefore, enjoyed by foreigners independent of assessing the Reciprocity Principle.

In general, the Reciprocity Principle is not applicable if any of the following applies, firstly where a citizen of, or a company from a European Union member state, which, as a matter of EU law, enjoys full rights in Italy; or secondly in the case of a citizen of, or a company from Iceland, Norway or Liechtenstein, which enjoys full rights in Italy. Neither does the Principle apply in those cases, as stated by the Italian courts, of a citizen of, or a company from a non-EU state which has entered into a bilateral investment treaty (BIT) with Italy (the reason being that the BIT is considered as a lex specialis which derogates to Article 16); or finally in those cases involving non-EU nationals who lawfully reside in Italy, having obtained a residence permit (permesso di soggiorno).

As a consequence, in the case of foreign individuals who do not hold a residence permit in Italy or those companies from a non-EU country which has not executed any BITs with Italy, the Reciprocity Principle shall always be verified.

Furthermore, it is worth noting that, to the extent that the BIT only deals with certain matters (for example, the purchase of real estate asset) but not with other matters (the management of companies, for instance), the Reciprocity Principle still applies to the matters not expressly covered by the BIT.

The Italian Foreign Office has analysed on its website (which is updated from time to time), for information purposes only, the state-of-the art of the Reciprocity Principle with respect to non-EU countries. However, the analysis is not binding on Italian Courts. Therefore, independent of the survey carried out by the Foreign Office, the Reciprocity Principle will need to be verified in each case.

With specific reference to the purchase of real estate assets, a recent decision of the Italian Supreme Court held that the right to purchase real estate assets should not be considered at all as falling out of the scope of application of Article 16, since it cannot be qualified as a fundamental right belonging to a person or entity. In such a case, in fact, the purpose that the Reciprocity Principle is meant to serve is to enhance the cooperation with non-EU member states, by encouraging or forcing their legislators to amend national laws in order to protect the rights and interests of Italian citizens. Therefore, notwithstanding the opening to the principle of universalism of rights, the purchase of real estate assets still remains as at the date hereof a subject matter where Italian legislation provides for limits to non-EU nationals and companies.

It is to be noted that the violation of such limits results in the voiding of the purchase of real estate. As such, it can be claimed by any interested party, without any statute of limitation. Therefore, a purchase made in 2015 by a foreign national or company of a certain non-EU country which does not comply with the Reciprocity Principle might be declared void by an Italian court, in 2030 for example, upon the application of a third party which is interested in purchasing the real estate asset from the former owner. In light of this, taking legal advice before carrying out investment activities in Italy is of paramount importance for non-EU citizens and companies.

Recently a decision was handed down relating to the purchase of a real estate asset located in Italy by a Swiss company. Swiss Federal Law governing the acquisition of real estate assets restricts the rights of foreign individuals and companies. In particular, Italian companies are allowed to purchase real estate assets located in Switzerland only to the extent that such assets are used as registered offices or seat of the company or for production purposes that are strictly connected to the company’s business activity. As a consequence, based on the Reciprocity Principle, the purchase by Swiss companies of real estate assets in Italy is subject to the same limits.

The Milan Court of Appeal recently held that, as the Swiss company had not proved that the real estate asset was being used as seat of the company, the purchase should be declared void. Notably, the decision has also stated that the Reciprocity Principle is to be verified as at the start date of legal action. Thus, also assuming subsequent legislative changes in the non-EU country, such that the Reciprocity Principle will be met at a later date, in any case a purchase of a real estate asset by a non-EU individual or company carried out at a time when the Reciprocity Principle was not met, will remain void. Again, this confirms the importance of taking legal advice before carrying out investment activities in Italy.


Francesco Dialti is a partner at Watson Farley & Williams. He can be contacted on +39 02 721 7071 or by email:

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Francesco Dialti

Watson Farley & Williams

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