Definition of ‘Innovative’ Startup
To be ‘innovative’, a startup shall:
– the costs allocated to research and development must be equal to or higher than 15 per cent of the higher value between (i) the company’s production costs and (ii) the company’s production value;
– at least one-third of its work force shall be represented by individuals having a Ph.D. or carrying out a Ph.D. or having a degree and having completed a research program of three years at public or private research entities in Italy or abroad. Alternatively, at least two thirds of its workforce shall be composed of individuals with a master degree; or
– the startup shall be the owner or assignee, or have applied for the registration with the relevant authorities, of an industrial property right (eg, a patent) related to its core business; as an alternative, the startup shall be the titleholder of the rights relating to an original software duly registered with the special public registry for software. In addition to the above, the innovative startup shall also satisfy the following requirements:
Generally speaking, the age, nationality or residence or domicile of the founders and investors is not relevant. A startup will be qualified as ‘innovative’ upon its enrolment with the special sector of the companies’ register of the place where it has its registered office. On the assumption that all the above law requirements remain unchanged, a startup is considered ‘innovative’ only for the first four years following its incorporation. A different term, not exceeding six years, will apply in case the startup has been incorporated before the enactment of the Regulation.
Main Corporate Benefits
Special advantages are provided for startups incorporated under the form of limited liability companies. Such companies will be entitled to:
Regardless of the type of company, any innovative start-up will have:
Main Tax Incentives
Starting from the year 2017, individuals or legal entities investing capitals in innovative startups will be entitled to get some tax relief under certain terms and conditions. Individuals subject to personal tax (‘IRPEF’) may benefit from a tax credit (‘detrazione d’imposta’) equal to 30 per cent of the amount they have invested (either directly or indirectly, for example through an investment fund or other companies investing mainly in innovative startups) in the corporate capital of innovative startups [iii]. The tax credit may not exceed € 1,000,000 for each fiscal year. The amount in excess may be carried forward in the subsequent three fiscal years. Companies and other entities subject to corporate tax (‘IRES’), other than innovative startups, are entitled to a deduction (‘deduzione’) from the corporate taxable base equal to 30 per cent of the amount they have invested (either directly or indirectly, for example through an investment fund or other companies investing mainly in innovative startups) in the corporate capital of innovative startups [iv]. The tax deduction may not exceed € 1.8m for each fiscal year. Investors shall keep their equity participation in the innovative startup for at least three consecutive fiscal years, otherwise they will lose any tax benefit. In addition to the above, under certain terms and conditions, innovative startups might benefit from a tax credit equal to 35 per cent of the costs incurred in case of hiring highly qualified employees through open ended employment contracts.[v] Finally, innovative startups will not be subject to the tax treatment provided for the so-called ‘shell and dormant companies’ which have to pay taxes on a minimum taxable income which is determined on a presumptive basis without taking into account the income or losses effectively reported by the company.[vi]
[i] Law Decree No. 179 of 18 October 2012, passed into Law No. 221 of 13 December 2012 as further amended. The last amendments have been introduced by Law Decree No. 3 of 24 January 2015, passed into Law No. 33 of 24 March 2015;
[ii] The category of the limited liability company also includes the simplified limited liability company (‘società a responsabilità limitata semplificata’). The category of the limited liability company with reduced share capital (‘società a responsabilità limitata a capitale ridotto’) has been repealed by art. 9 of Law Decree No. 76 of 28 June 2013 (passed into Law No. 99 of 9 August 2013).
[iii] Law no. 145 of 30 December 2018 has increased the percentage of the tax benefit from 30 to 40 per cent of the investments made by the individuals in 2019. The entry into force of such increase is subject to approval by the European Commission.
[iv] Law no. 145 of 30 December 2018 has increased the percentage of the tax benefit from 30 to 40 per cent of the investments made by companies and other entities subject to IRES, other than innovative startups, in 2019. The percentage rate increases from 30 to 50 per cent in case the entity purchases the entire share capital of the innovative start-up and keeps the investment for at least three years. The entry into force of such increase is subject to approval by the European Commission.
[v] Reference is made to Article 27-bis of Law Decree No. 179 of 18 October 2012 (passed into Law No. 221 of 17 December 2012), Article 24 of Law Decree No. 83 of 22 June 2012 (passed into Law No 134 of 7 August 2012) and the Ministerial Decree issued on 22 February 2013.