The task of identifying the ultimate beneficial owner (UBO) for foreign branches operating in Italy is a significant yet often underestimated challenge.
This requirement, aimed at preventing money laundering and terrorism financing, has been in place for nearly a year.
However, the lack of consistent guidelines and differing interpretations by chambers of commerce have made compliance difficult.
This issue is particularly evident when dealing with the branches of foreign companies in Italy.
A branch is essentially an extension of a foreign company that chooses to operate in Italy without establishing a local subsidiary.
This approach is prevalent in the banking and insurance sectors, where the principle of home country control allows for regulatory uniformity across European countries.
The question arises whether the UBO requirement applies to branches, given that they are not independent entities but extensions of the foreign parent company.
Typically, these branches are managed by a representative in Italy, whose name is registered with the tax authorities for compliance purposes and with the chamber of commerce for the delegation of powers.
The challenge is determining whose name should be registered as the UBO for a foreign branch.
One perspective suggests that if the parent company is based in an EU country and already complies with UBO requirements there, the Italian branch should be exempt from this obligation.
If, however, it is deemed necessary for the branch to be registered with the Italian business registry, the question of which name to register arises.
There are two main approaches.
The first, adopted by some chambers of commerce, is to register a legal representative of the parent company.
This approach can be impractical, especially if the parent company's administrator is not involved in the branch's operations.
In many European groups, the parent company is managed by a small administrative body, none of whose members may oversee the European branches, including the Italian one.
Thus, registering someone who does not have practical authority over the Italian branch seems illogical.
The second approach, which appears more sensible, is to register the Italian branch's representative, even if they are not part of the parent company's administrative body.
This individual, by virtue of their delegated powers, effectively manages the branch.
However, this approach is not widely accepted by chambers of commerce, despite support from authoritative sources like Assonime, which argues that in multinational groups, the person with actual decision-making power over the branch should be identified.
This situation has led to a frustrating inconsistency in judgments.
Some chambers of commerce register the foreign parent company's administrator as the UBO, allowing the process to be completed.
Others, however, have left the matter unresolved, awaiting guidance from the relevant ministries.
It is crucial to reach a consensus, as these groups operate in the financial sector, where the risks the regulation aims to mitigate are minimal or remote.

Insights

The issue of identifying the UBO for foreign branches highlights the broader challenge of regulatory compliance in a globalized economy. The principle of home country control offers a framework for regulatory consistency, but the lack of harmonized guidelines across jurisdictions can lead to confusion and inefficiencies. This case underscores the need for clear, unified regulations that consider the unique structures of multinational corporations.

Issues

• Lack of consistent guidelines from chambers of commerce

• Differing interpretations of UBO requirements

• Practical challenges in identifying the appropriate individual to register

• Potential delays in compliance due to pending regulatory clarifications

  Practical Applications

• Multinational companies should engage with local legal experts to navigate UBO requirements effectively.

• Chambers of commerce could benefit from developing standardized procedures to streamline the registration process.

• Policymakers should consider creating harmonized regulations to reduce compliance burdens for international businesses.