Why is it a good idea to open an innovative start-up in Italy?
The Italian government has implemented a special legislative package to favor the creation and development of innovative start-ups in Italy, furnishing legislation that is among the most favorable in Europe.
For non-EU citizens who wish to invest or begin an innovative start-up in our country, specific programs have been prepared, known as Italia Start-up Visa and Italia Start-up Hub. These programs guarantee facilitated taxation and simplified regulation. (For more information: https://www.vannucciassociati.it/agevolazioni-stranieri-in-italia-fisco-per-investitori-e-lavoratori/)
Made in Italy is a fundamental driver for upgrading start-ups, and Italy is becoming fertile ground for establishment and growth of innovative start-ups. This is connected to a strong governmental efforts to develop a robust ecosystem of start-ups aimed at offering solid incentives for investments and opening the way to new instruments for accumulation of capital, allowing these innovative realities to benefit, among other things, from flexible and made-to-measure labor laws. The benefits offered by Italy touch on various levels: from business law, to labor law and consensual procedures, to taxation and financial profiles.
The main concessions for innovative start-ups are in terms of:
1. Financing through Smart & Start Italia;
2. Financial guarantees through the Fund for PMIs (small and medium sized businesses);
3. Economic supports through Equity Crowdfunding;
4. Incentives for investment in innovative start-ups;
5. Simplification of the dependent workers regime;
6. Fiscal supports through Work for Equity;
7. Fiscal support connected to the Patent Box.
In addition to fiscal, financial, and economic measures, those wishing to establish an innovative start-up in Italy will enjoy ample protections and many administrative advantages, as well as wide flexibility for action − such as, for example, the possibility of counting on financial instruments strictly adapted to the business world and of creating sectors of action with specific privileges.
Furthermore, the Italian State, precisely because it recognizes the obvious economic difficulties that an innovative start-up may face during its early stages, has planned a special insolvency procedure (fail fast) to substitute for a bankruptcy procedure. Crises will be subject exclusively to the procedures of over-indebtedness settlement and assets liquidation. In this way, investors are classified as “subjects who cannot fail”.
The fresh start instrument − that is, the ability to formulate agreements for re-structuring and composition of debts in order to start again with a new project, as well as quick liquidation without penalizing consequences − is also present.
Modes of financing and facilitating innovative start-ups:
1. Smart & Start Italia
Financing represents a large part of the help offered by the Italian State to start-ups. The Smart & Start Italia measures are reserved to innovative start-ups located throughout the national territory, enrolled under the appropriate special section of the business registry and possessing requirements specified in article 25 of legislative decree n. 179/2012. The start-ups should be established within 60 months of the date that the request is presented and should be classifiable as small in size. Even physical persons who intend to establish an innovative start-up can present the request for such concessions. Also, foreign businesses can obtain these concessions if they promise to establish at least one operative office on Italian soil. Smart & Start Italia finances business plans, of a value between 100,000 and 1.5 million euros, having significant technological and innovative content − that is, product development, services or solutions in the fields of digital economy, artificial intelligence, block-chain and internet of things, or those presenting economic enhancement of public and private research system results (research spinoff).
The subsidized financing obtainable through Smart & Start is
- without interest;
- for a maximum duration of 10 years;
- for up to 80% of admissible expenses.
The amount of financing can be raised to 90% if the start-up is entirely made up of women and/or young people under 35 years of age, or calls for the presence of at least one expert with the title of Ph.D. (or equivalent) earned within the last six years, engaged abroad in research or teaching activity, in a stable way for at least three years.
2. Guarantee Fund for PMIs
Another distinctive element of the financing on Italian soil is free and simplified access to the Guarantee Fund for PMIs. The guarantee covers 80% of the loan and can be up to 2.5 million euros for businesses. In September 2020, thanks to this support Italian innovative start-ups have received overall bank financing of over 1.4 billion euros, subdivided into 8000 single operations. Since the instrument was launched in 2013, 4609 start-up have benefitted, for an average of about 191,000 euros per single operation.
3. Equity Crowdfunding
Another instrument is Equity Crowdfunding, in other words obtaining financing without having to resort to a bank loan. Financiers supply capital, in large or small amounts, which enters as equity (capital). This capital does not have to be paid back because for all practical effects the financiers, when they decide to invest, obtain shares in the company. Furthermore, this can also be a significant marketing tool. When a campaign begins, the investors’ responses serve as a stamp of validation of the project itself. Based on the feedback received, it is possible to test in advance whether the business idea is pleasing to the public/investors.
4. Incentives to Investing in Innovative Start-ups
Italy offers various fiscal incentives for investment in innovative start-up capital. Fiscal benefits are granted within the de minimis limits, according to regulation n. 1407/2013. The maximum amount of aid granted to an innovative start-up or PMI should not exceed 200,000 euros over three financial periods.
Investors in innovative start-ups can detract from their gross tax an amount equal to 50% of the investment, up to a maximum of 100,000 euros, for a maximum detraction of 50,000 euros per tax period. This is an alternative to the ordinary concession, intended for larger investments without the limits called for by the de minimis regime. In this case, the maximum amount of investment varies:
For physical persons, there is an IRPEF detraction of 30% of the contributions made, up to 1 million euros, for each tax period.
For legal entities, there is an IRES deduction from earnings equal to 30% of contributions, up to 1.8 million euros, for each tax period.
(For further information: https://www.vannuccieassociati.it/it/detrazioni-fiscali-fino-al-50-per-chi-invese-inimprese-innovative/)
5. Work Regime for Innovative Start-Ups
It is important to observe an innovative start-up’s internal system − that is, how its work is regulated. For innovative start-ups in Italy, the flexible work regime is in force. D.Lgs. n. 81/2015 established that innovative start-ups do not fall under the limit of 20% for temporary employees compared to the overall number of permanent employees. So the entrepreneur who innovates is stimulated to evaluate personnel needs, definitely with greater freedom, in relation to the progress of their own commercial activity.
A further benefit introduced in favor of these entrepreneurial initiatives regards the regulation of temporary contract extensions. If on the one hand even innovative start-ups are limited to a maximum overall duration of temporary contracts equal to 36 months, on the other hand they are free to renew temporary contracts without having to respect the so-called stop and go period of 10 to 20 days, which for most employers should take place between one hiring and another. Furthermore, the maximum limit of 5 extensions of temporary contracts within a 36 month period is not applied.
6. Equity Participation Instruments of Innovative Start-ups
Innovative start-ups can pay internal subjects as employees or administrators, and external subjects, through equity participation instruments. Through stock option plans, beneficiaries can only be employees or administrators of the company itself, while under the work for equity plans, external subjects may also be included. While stock options only attribute participation option rights, work for equity calls for attributing shares themselves, not the right to acquire or sign up for shares. Work for equity is therefore an instrument that can adapt well to various needs, as well as remunerating those external to the company, such as the primary providers of a start-up. Overall, earnings derived from this instrument are not included as taxable earnings, neither fiscal purposes, or for contributory purposes. Furthermore, except for a minimum required by collective agreements, the parties are perfectly free to establish fixed and variable components of the salary, agreed upon, for example, on the basis of the company’s efficiency or profitability, worker or work group productivity, or other objectives and parameters of profitability, also using instruments of participation in the company’s equity.
(More information in the article: https://www.vannuccieassociati.it/it/capitalizzazione-societa-work-for-equity/)
7. Patent Box Procedure and Innovative Start-up Incentives
Another fiscal incentive for innovative start-ups is directly obtainable from the nature of its own structure, that is, research and development. The patent box consists of a fiscal incentive applied to earnings deriving from the use of intangible assets and intellectual property, by which the business carrying out research and development activities can exclude from the taxable base 50% of earnings deriving from the use, even jointly, of certain intangible assets, such as:
i. software protected by copyright;
ii. patents for industrial inventions, whether granted or in course of being granted;
iii. biotechnological inventions and certificates of complementary protection;
iv. patents or certificates for topographies, plant varieties, and semi-conductors;
v. designs and models;
vi. utility models;
vii. business know-how.
How to begin a Start-up in Italy: what we can do for you
Thanks to our experience and professionalism in the fiscal and administrative sectors, we can furnish support and help during your first steps in the innovative start-up world. We can help you evaluate all aspects of your own entrepreneurial project.
Our studio, MGI Vannucci & Associati, has many recognized years of experience in fiscal consultancy for businesses. Furthermore, thanks to numerous collaborations with certified incubators and professionals in the sector, we can create a network of fundamental contacts for developing your ideas.
If you need more details and information, please contact us through the “contact form” at our webpage. We will advise you, to establish the best personalized solution most suited to your needs.