Innovative Startups

A legal definition of “innovative startup”

  • Limited companies (including cooperatives )
  • new businesses, or operational for less than 5 years
  • HQ in Italy or in another EU country, with at least a production site branch in Italy
  • annual turnover below € 5 mln
  • not listed on a regulated market nor on a multilateral negotiation system
  • do not distribute profits
  • are not a result of a company merger, split-up or selling-off
  • Develop, produce and commercialise innovative products or services with a clear technological component

Tax incentives for equity investors

For investments made in the 2017 tax year and onwards, the benefit is one of the most generous in the EU:

  • 30% deduction from gross personal income tax (IRPEF) on the sum invested by individuals, up to a ceiling of € 1 m (max. benefit: € 300,000)
  • a 30% deduction on taxable corporate income (IRES) on the sum invested by other limited companies, up to a ceiling of € 1.8 million (max. benefit: approx. € 130,000)

Holding period: 3 years

Innovative SMEs

Definition of innovative SME

SME as defined by EU law (Recommendation 2003/361/CE):
< 250 employees, < €50 mln yearly revenues,
< 43 mln € total turnover

  • HQ in Italy, or in another EU country, with at least a production site branch in Italy
  • Certified statement of accounts
  • Not listed on a regulated market
  • Meets at least 2 of the 3 following criteria:
  1. expenses in R&D and innovation are at least 3% of either its annual costs or its turnover (the largest value is considered)
  2. employs highly qualified personnel (at least 1/5 Ph.D. holders and students, or researchers, or at least 1/3 Master’s graduates)
  3. is the owner, depositary or licensee of a registered patent, or the owner of a registered software

Tax incentives for investments in innovative SMEs: implementing rules

Implementing decree, 7 May 2019:

Tax incentives for equity investments extended to innovative SMEs with some differences compared to innovative startups.
Unlike startups, the incentive is subject to constraints related to the age of the innovative SME, with particular reference to the date of its first commercial sale:

  • Fewer than 7 years: Allowed in all circumstances
  • Between 7 and 10 years: Only if the innovative SME did not generate enough incomes yet (expert evaluation)
  • No age limits: Only if the company will make new investments (e.g. develop a new product) for over 50% of the turnover of the past 3 years.

Source: Ministry of Economic Development, Directorate-General for Industrial Policy, Competitiveness, and SMEs