The tariff war

Italian companies in the US: benefits and risks of localisation strategies

Analysis of tax and production implications for Italian companies that decide to move their operations to the US

by Franco Vernassa and Emiliano Zanotti

20 April 2025

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3' min read

Key points

Italian company with distributor
Italian company with production
Repatriation of profits

3' min read

Is it convenient for Italian companies to locate their production (or part of it) in the US? What withholding taxes will be applied by the US tax authorities on the distribution of dividends to the Italian parent company? What US withholding taxes will be applied on royalties and interest, if Italy is considered a 'bad' country? What effects should be considered with regard to transfer pricing?

The assessment is complex, the direct and indirect pros and cons are numerous for a choice that requires a timeframe that is not short and cautious production and financial planning.

The US duty announcements are prompting foreign companies, including Italian ones, to consider strategies to localise part of their business in the US territory. In fact, it is clear that additional customs duties, as well as any other production and marketing charges, affect the final cost of the goods, risking putting the product of foreign origin out of the market or in any case undermining the profit margins of overseas companies should they decide not to pass on the cost of the duty to the final consumers.

On the other hand, this is precisely one of President Trump's stated aims: to punish those who stay outside American borders and reward those who go to produce in the US, hoping for the consequent creation of new jobs.

At the moment, there are several scenarios that Italian companies are monitoring depending on their current and future business models. Let us look at them.

Italian company with distributor

In the case of an Italian company that markets its products in the US through independent local distributors, it will be on the latter that the cost of the duty will fall, which (net of renegotiations between the parties) will tend to be passed on (in whole or in part) to the final consumer. In this context, the establishment by the Italian company of a US distributor subsidiary would allow greater flexibility in terms of transfer pricing from Italy to the US with potential reduction of the customs value (and thus the duty) and ultimately the price. At the same time, this would allow for greater flexibility in the absorption policies of the duty cost between the Italian company and the local group distributor.

Italian company with production

Even more obvious would be the advantage potentially deriving from setting up/acquiring a company in the United States that would deal not only with distribution, but with part of the production process (from mere packaging or assembly to the actual processing stage). This, under certain conditions, could allow the final product to be dutiable only on the value of the semi-finished product of Italian origin and not on the added value generated by the activity carried out locally.

From this perspective, if the presence of the foreign company in the US became even more significant, upon fulfilment of certain requirements, one could even obtain the 'Made in USA' label for the good despite the Italian branding.

These strategies would become even more attractive should Trump make good on his promises to reduce income taxes on US corporations, for example, by lowering the current federal tax from 21% to 15%.

Of course, the considerable investment and time required to open a business abroad (fixed assets, personnel, working capital, etc.) must also be considered.

Repatriation of Profits

At the same time, however, the cost of repatriating profits to Italy should be taken into account, with specific reference to the risk of increased withholding taxes. For example, the recent House of Representatives Bill No. 591/2025 provides for the disapplication of treaties and the imposition of the 30% domestic withholding tax on dividends, interest and royalties paid by US companies to companies located in States that apply extraterritorial (or discriminatory) forms of taxation to US companies. These states could include Italy, given that it adopts forms of taxation considered unfair by the Trump administration such as the tax on digital services or the supplementary minimum tax of the Pillar 2 package.

Under the draft law, not only would the application of the treaty be skipped, but a 5% annual withholding tax surcharge would be applied (up to a maximum withholding tax of 50%), with the probable impossibility of recovery in Italy with the credit for taxes paid abroad (Article 165 of the Tuir).

Thus, while mitigating the impact of customs entry costs in the US, at the same time, locating in the US would expose the Italian company to potential increased withholding taxes upon repatriation of profits/royalties/interest.