In Italy, there are various concessions for innovative start-ups. These companies have pre-and post-incorporation benefits with investment incentives and tax benefits on finance and jobs. Let’s find out together.
Innovative Startups: subsidies in all phases
The innovative startup has access to a series of concessions that are reserved for the particular activity carried out. In fact, the startup produces and sells products and services that are new to the market or in any case made with high-tech processes. Benefits are provided to help those who start a business of this type:
- before the constitution (e.g. exemption from some taxes)
- on investments (for shareholders and for the company)
- on dedicated loans (e.g. non-repayable loans)
- in terms of work (e.g. different methods of remuneration for collaborators)
- other incentives than ordinary companies
To access all the benefits, just comply with the startup requirements. The innovative company that meets the required characteristics, in fact, is registered in the special section for startups of the Business Register and can access the concessions. Furthermore, the Relaunch Decree (dln34 / 2020) and the rules issued to counter the economic crisis linked to the coronavirus pandemic have recently expanded the incentives. Let’s see them in detail.
1. Start-up subsidies before the establishment
To open an innovative startup there is an exemption from the payment of some taxes. The fees to the Chamber of Commerce for the first year and stamp duties are not to be paid. The only taxes to be paid are the registration tax of € 200 and the notarial archive fee of € 27.50. With the startup, therefore, about € 400 in taxes are saved compared to setting up an ordinary company.
Before March 29, 2021, it was possible to establish a startup even without a notary through an online procedure. This option allowed further savings on opening costs but the procedure required a very long time and little customization of the company’s bylaws. Following a decision by the State Council, the online constitution procedure was blocked. To date, the only alternative to start this company is the constitution with a notary.
With our startup constitution service, you can open your startup in 7 days with 1 year of legal support 100% online. The service costs € 999 + VAT + approximately € 200 in taxes and includes everything necessary to set up the company at the notary with the assistance of experienced professionals.
After the establishment, you can create tailor-made contracts and request consultations with professionals for any need of the new company (eg contracts for suppliers and customers, commercial agreements, trademark registration, privacy and website terms, and conditions).
2. Tax advantages for innovative startups
The shareholders who set up the company can benefit from a tax deduction of 30% on the invested capital. The deduction is applicable up to a maximum investment limit which changes according to the type of member. For a natural person, the maximum deductible investment is € 1 million. If the shareholder is a company this limit rises to € 1.8 million. To benefit from the deductions, the investment must be maintained for at least 3 years.
Furthermore, those who invest in an already established startup (e.g. new partners) can deduct up to 50% for a maximum investment of € 100,000. This possibility is reserved for natural persons only and before the investment is made, the request must be submitted by the company on a platform managed by the MISE (Ministry of Economic Development). If the investment exceeds € 100,000, the investor will still be able to take advantage of the standard deduction rate of 30% for the excess and up to € 1 million.
There is also an important subsidy provided directly for the company. If the startup incurs expenses in research and development (eg for the creation of prototypes) it will be able to obtain a tax credit equal to 20% of the expenses incurred. This measure is foreseen until the end of 2022 on a maximum expenditure of € 4 million.
3. Concessions on dedicated loans
For innovative startups, there is also various facilitation in terms of financing. Among the most important we mention:
- Access to the guarantee fund for innovative companies: it is a public fund that facilitates access to credit by granting guarantees on bank loans disbursed. The guarantees cover up to 80% of the amount of the loans, up to a maximum of € 2.5 million
- Equity crowdfunding: it is a collection of capital authorized by CONSOB (the body that deals with the protection of investors in the Italian market) dedicated to innovative companies. The collection is carried out on web platforms where groups of people make liquidity available in exchange for shares in companies
- Interest-free or non-repayable loans: there are various calls for tenders launched by public and private organizations reserved for startups to obtain subsidized investments. One of the most important is the ” Smart & Start “, called by the Minister of Economic Development which provides funding up to a maximum of € 1.5 million for each company
4. Start-up incentives on the subject of work
With regard to employment contracts, innovative companies can stipulate fixed-term contracts with a duration of up to 36 months, without having to indicate any reason. At the end of the 36 months it is possible to renew the fixed-term contract for a further 12 months, provided that the stipulation takes place before the competent territorial labor inspectorate. This facility is valid only in the first 4 years after the company is incorporated.
Start-ups can also remunerate workers and collaborators through share capital participation instruments (e.g. stock options or work for equity). The income deriving from the assignment of these instruments is not taxable either for tax purposes or for contributory purposes.
5. Other concessions for innovative startups
An extension of the deadline is foreseen for an innovative company to cover any losses of the company. If the losses result in a reduction of the share capital of more than one-third of its amount, the startup must reduce the loss to less than one-third within the next 2 years (instead of within the first year, as for ordinary SRL). To give an example: Alfa SRL, an innovative company, has a share capital of € 30,000. In 2020, following a loss of € 25,000, the capital is reduced to € 5,000 (over 1/3 less than the initial capital). The company will have until the end of 2022 to bring the share capital back to more than € 20,000.
After the first 5 years of activity, the company loses its startup qualification and becomes in effect an ordinary company. However, at the end of this period, it is possible to convert the startup into an innovative SME (small or medium-sized enterprise with high technological value). This company follows its own legislation, but like an innovative startup, it enjoys many tax benefits, some of which are completely identical (e.g. access to the dedicated guarantee fund).
Finally, the startup that carries out research and development activities can adhere to the new tax regime of the ” patent box “. In practice, it is possible to exclude from the income up to 50% of the revenues realized for the use of software, patents, know-how, and more generally of any intangible asset. For example, if you grant the annual use license for software at a price of € 100,000, the company will pay tax only on € 50,000 (50% of the amount collected).