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Innovative Start-up:

In the economic language, the term Start-up indicates a phase in the life cycle of a company. Therefore, it can be said that the start-up condition corresponds to the point in which a company, after creation of a product or service, proposes it to the market.

During the start-up stage companies are bearing a high risk linked to the fact that it’s hard to forecast whether a company will be profitable and capable to reach the breakeven point to achieve the desired success. For these reasons, start-ups encounter different problems when carrying out their own initiative, especially as regards the search for sources of funding. As follows, they represent the ideal target for private equity and venture capital companies.

Start-up companies are characterized by a high mortality rate caused by many factors such as: modest size, difficulty in finding financial resources, lack of competences and entrepreneurial culture on the part of human resources and complex bureaucratic system with which it is necessary to cope.

To facilitate and encourage the growth of innovative companies with high technological value the government has implemented an appropriate regulation corresponding to the abovementioned purposes. The milestone of this initiative is the Decree Law 179/2012, also known as the “Growth Decree 2.0“, containing “Further urgent measures for the growth of the country” and converted by Parliament with the Law of 18 December 2012 no. 221.

Accepting the suggestions formulated in the report “Restart, Italy!” – elaborated by a task force of 12 experts and established in April 2012 by the Minister of Economic Development – emerged from the consultation with the main actors of the national entrepreneurial ecosystem, the 2.0 Growth Decree has introduced in the Italian legal system the definition of new innovative enterprise with high technological value in a completely new way.  The Article 25-32, without making sectorial distinctions or setting a limit linked to the age of the entrepreneur, provides new tools and measures of advantages that affect the entire life cycle of the company, from the starting point to the maturation.  However, over the years, the Decree has been gradually modified, as the development of the sector and the law must go hand in hand.

Decree Law 179/2012:

Decree 179/2012, on the basis of art. 25, has provided a series of requirements that identify an innovative start-up:

1.  Requirements during the constitution phase:

1.1. Corporate form:

They can obtain the status of innovative start-ups:

  • Capital companies: such as joint-stock companies, Limited partnership on shares, limited liability companies, also in cooperative form. This also includes the limited liability companies with reduced capital (i.e. the “I.L.C.”).
  • European Company: it is a form of company that may be established in the European Union and is governed by EU Regulation No. 237 of October 8, 2011 and which must be resident in Italy according to the article 73 of the TU. European Companies also include European cooperative companies governed by Regulation (EC) No. 1435 of 2003.

1.2. Residence in Italy:

According to the art.73 of the T.U.I.R, innovative start-ups must be resident in Italy for most of the tax period and have their headquarters and interest’s in Italy for the entire duration of the tax period.

1.3. Constitution:

The innovative start-up can be a newly established company or it may have already been established at the time when the Decree 179/2012 entered into the force, provided that this company was established and carried out business activities from no more than 60 months (5 years), as provided by 2017 Stability Law (before the regulation the term was 48 month or 4 years).

1.4. Registration in the Register of Companies:

The special section of the Business Register allows to share of personal data, activities carried out, founding members and other collaborators, the budget, relationships with other players in the supply chain, such as incubators or investors.

Registration in the special section of the Business Register takes place following the completion and submission of the application, in electronic form.

On overall it should be indicted “start-up of development, production and marketing of innovative products and services with high technological value”, specifying the nature of the products or services in question. It will be necessary to prove the correct execution of the business operations when requesting registration in the special section. The simple search does not allow to be registered in the special section of innovative start-ups.

2. Cumulative requirements:

Apart the abovementioned requirements, to be qualified as an innovative start-up, you must also possess the following cumulative requirements:

  • The company must be established and carry out business activities no longer than 60 months, 5 years (whereas before it was 48 months, 4 years).
  • The headquarter of business and interests must be located in Italy, that is, on the State Territory.
  • Starting from the second year of activity, the total annual production value must not exceed € 5 million. This value must be drawn from approved financial statements within 6 months of the end of financial year, which concerns item A) of the EC.
  • Since the establishment the company must not have distributed profits: this provision has the purpose to encourage the investment of profits in research and development of the start-up, in order to support its growth. The ban on the distribution of profits is valid for the entire period in which the company has the innovative start-up requirements, i.e. for a maximum of 5 years from the registration in the special section of the R.I.
  • The main or prevalent purpose of the company should be to develop, manufacture and promote the innovative products or services with high technological value.
  • The company must not be established on the basis of an extraordinary operation like merger or demerger, nor to be derived from a sale of a business or a business unit. The reason for such requirement is to be sure that a start-up is not a continuation of preexisting company under different legal capacity.

3. Alternative requirements:

To be qualified as an innovative start-up the company must satisfy all the conditions mentioned above, and in addition must possess at least one of the following requirements:

3.1. Spending in R & D:

The research and development cost should be equal or higher than 15% of the higher value between the cost and the value of production. This values are shown in the financial statements of the company. As during the first year there is no budget, the values are attested by a statement from the legal representative. Nevertheless, it’s necessary to compare the amount of research and development expenses without considering the costs for the purchase and rental of real estate, excluded by express provision of the law.

3.2. Qualified Team:

Employment as highly-qualified employees or collaborators:

1. At least 1/3 of the total workforce should possess PhD or carry out the PhD course in an Italian or a foreign university or to possess a Degree that has carried out research for at least 3 years at public or private research institutes in Italy or abroad,


2. At least 2/3 of the total workforce in should possess a master’s degree.

3.3. Intellectual property:

Whether the owner or custodian or licensee of a title of property intended to protect industrial inventions, biotechnological inventions, topographies of semiconductor products, new plant varieties, or holders of rights related to an original computer program registered at the public register for computer programs, provided that such rights are directly related to the corporate purpose and business activity.

Social vocational start-ups:

The paragraph 4 of the art. 25 D.L.179 / 2012 also regulates innovative start-ups, defined as “social vocation”. These are innovative start-ups that, in addition to meeting the general requirements, operate exclusively in 11 specific sectors, namely:

1. Social assistance, concerning the integrated system of social interventions and services

2. Healthcare assistance, regarding essential levels of assistance

3. Social and health care, in the field of direction and coordination for social and health services

4. Education and training, on the definition of general norms on education and on the essential levels of services for vocational education and training

5. Protection of the environment and the ecosystem, in relation to the environment and measures aimed at the application

6. Enhancement of cultural heritage, in accordance with the Code of Cultural Heritage and Landscape

7. Social tourism

8. University and post-graduate education

9. Research and provision of cultural services

10. Extra-scholastic training, aimed to prevent school drop-out and increase scholastic and educational success

11. Services instrumental to social enterprises, made up of organizations over 70% composed of organizations that carry out a social enterprise

The provisions of the aforementioned law indicate that the socially-based start-up company is identified in the social enterprise referred to in Legislative Decree 151/2006. The social enterprise can be considered part of the legal instrument of Third Sector operators; it is a particular figure of a person who reproduces the typical elements of the traditional enterprise and is characterized by the purpose of a social nature pursued and the sectors of activity that are strictly indicated.

With the term “main activity”, the activity is considered for which the relative revenues exceed 70% of the total revenues of the body that exercises the social enterprise.

The company in question must:

  • have as its object the execution of activities of social utility
  • be constituted without subjective profit
  • respect, in the case of aggregation, the regulation of groups of social enterprises

Who cannot take the status of a social enterprise:

  • public entities referred to in Article 1 paragraph 2 of Legislative Decree No. 165 of 30 March 2001
  • organizations whose statutes limit the provision of goods or services in favor of members, shareholders or participants
  • individual entrepreneurs

The innovative start-up with a social vocation is required to prepare and transmit the “Social Impact description document” to the competent Chamber of Commerce.

Measures to favor the innovative start-ups:

The measures of the decree intervene in all the phases of the life of the enterprise: from the constitution, to the development up to the crisis. The tools in favor of innovative start-ups are introduced in Articles 26 to 31 of the D.L. 179/2012.

1. Incentives in the phase of constitution:

The total exemption from the stamp duty and the administrative fees due for registration in the company register as well as the payment of the annual fee to the Chamber of Commerce. The exemption from the payment of these charges operates from the moment of the registration of the innovative start-up in the special section of the business register and ends when the innovative start-up status ceases to exist.

2. Operating losses:

In order to facilitate the development of innovative start-ups, Decree 179/2012 has provided for some exceptions to the rules of a civil law with reference to the actual operating losses for all joint-stock companies.

  • Losses over 1/3 of the capital:

There is a period within which the loss must be less than one third. This deadline is postponed to the second following year, and it should be justified in the minutes of the meeting. The extension of the 12 months can allow the innovative start-up company to complete the start-up phase and to recover from the losses accrued in the very first activities carried out.

  • Losses over 1/3 below the legal minimum:

The shareholders’ meeting, convened without delay by the directors, as an alternative to the immediate reduction of capital and the simultaneous increase of a figure not lower than the legal minimum, may resolve to postpone these decisions at the end of the following year and it would be appropriate to reasons in the minutes of the meeting.

3. Special categories of shares:

Article 26, paragraph 2 and 3, of Decree 179/2012 allows the creation of categories of units also without voting rights or with non-proportional voting rights for participation in the capital; in order to allow, also, a diversification of investment options for investors interested in entering the capital of innovative start-up companies, encouraging their growth.

4. Remuneration with financial instruments:

The government has issued provisions to facilitate access to the labor market both for internal HR (CEOs, employees and permanent collaborators) and external HR (service providers and services), through innovative forms of remuneration.

The purpose was to avoid monetary disbursements for start-ups and, on the other, to retain and incentivize management. However, the innovative forms of remuneration are difficult to be used and implemented in a company, as they are highly criticized by both workers and employers.  The reason for that is that the employee is not used to so called “business risk”, while the employer believes that the presence of such figures in the social structure can bring a certain rigidity in the decision making process and in the management in general.

a) Assignment of financial instruments to directors, employees and permanent collaborators:

According to article 27, paragraph 1 and 2, of Legislative Decree 79/2012, the directors, employees and permanent collaborators of the innovative start-ups and the certified incubator can be remunerated through the allocation of financial instruments issued by same subjects with whom they maintain their working relationship.

For “beneficiary subjects” we refer to

  • administrators
  • workers linked by an employment relationship, even if on a fixed-term or part-time basis
  • permanent collaborators, that is all the other human resources, including project workers and excluding service providers. 

“Financial instruments” shall mean all the incentives granted through the assignment of

  • actions
  • shares
  • equity financial instruments issued or rights assigned

Decree 179/2012 provides that the income earned from the assignment of the abovementioned financial instruments does not contribute to forming taxable income.

  • Assignment of financial instruments to service providers and services:

Article 27, par. 4 of Decree 179/2012 provides that, for the contribution of works and services or as compensation for credits accrued for the provision of the same, even if of a professional nature, they can be attributed shares, quotas or other participatory financial instruments (work for equity).

In this way, an innovative start-up can remunerate an external collaboration by allowing the supplier to become a partner or holder of the company’s participatory financial instruments. For “work for equity”, it is necessary to hold a social statute that regulates the issue of participative financial instruments for the contribution of works and services.

5. Facilitating conditions for hiring highly-qualified personnel:

The art.27 of Decree 179/2012 provides some simplifications for innovative start-ups or certified incubator that intends to access the tax credit for hiring highly qualified personnel.

The benefit corresponds to 35% (with a maximum limit of € 200,000.00 per annum for the company) of the company’s cost incurred for permanent hiring of :

  • personnel in possession of a PhD obtained at an Italian or foreign university if its recognized as equivalent in accordance with current legislation;
  • staff with a Master’s degree in technical or scientific backgrounds

6. Tax incentives to support start-ups:

Article 29 of Decree 179/2012 represents the reference framework for tax incentives to support investments in innovative start-ups. The tax incentive applies:

a) to the PIT (personal income tax) taxable persons referred to in Title I of the TUIR,

b) to IRES taxable persons, as per Title II of the TUIR, which make a facilitated investment in one or more innovative start-ups.

The investment can be made directly by the tax payer or indirectly through collective investment schemes (CIUs) that invest primarily in innovative start-ups (or hold shares or shares of innovative start-ups with a value of at least 70% of the total value investment in financial instruments resulting from the management report or from the financial statements closed during the abovementioned tax period).

The facilitation applies:

  • to cash contributions recorded in the caption of the share capital and the share premium reserve;
  • to investments in units of CIUs that invest mainly in innovative start-ups;

a) PIT deduction:

PIT taxable persons (that is, legal persons). The facilitation consists of a deduction of 30% of the value invested in the capital. Nowadays, the investment cannot exceed € 1,000,000 with an annual tax saving of € 300,000 (whereas before the maximum investment was € 500,000 with the rate of 19%).

b) IRES deduction:

IRES passive subjects (i.e. professional operators, non-commercial entities, individual entrepreneurs, law partnerships and family businesses).

The benefit is obvious- in the case of investment in a start-up the deduction of 30 % of the sum invested in share capital applies. In any of the tax period, the investment cannot exceed € 1,800,000 with the annual maximum tax saving/subject equal to (1,800,000 * 30% * 24%) € 129,600, considering the current rate of 24% (up to 2016 the maximum annual saving was (1,800,000 * 20% * 27.5%) 99,000 €.

The minimum term of investment retention has increased to 3 years

In order to avoid fictitious duplication of investments and to guarantee, at the same time, the introduction of new capital in innovative start-ups, the beneficiaries of the subsidized investments and the persons appointed to promote such investments are expressly excluded from the tax concession, namely:

• innovative start-ups,

• certified incubators,

• CIUs and other corporations that invest mainly in innovative start-ups.

7. Shell corporation and companies in systemic loss:

Innovative start-ups do not apply the provisions concerning the shell corporations (Art.30 of L.724 / 94) and companies in systemic loss (Art.2, paragraph 36decies, 36duodecies of D.L.138 / 2011).

In detail, the non-application of the regulation of the non-operating company implies that for the entire period in which the company has the requisites to be qualified as an innovative start-up, there is no need to perform the operational test. In the period following the one in which the innovative start-up qualification is no longer held, the company is instead required to perform the operational test.

In the same way, the discipline of companies in systematic loss does not apply to innovative start-ups throughout the period in which they maintain the requisites to be qualified as an innovative start-up. Therefore, “three years of observation” for the application of the system of companies in systematic losses starts from the tax period following the one in which the innovative start-up qualification is no longer valid.

8. Financial products:

The innovative start-ups formed in the form of L.L.C. may offer financial productsto the public through online capital raising portals. It should be noted that the management of portals for raising capital for innovative start-ups is reserved for investment firms and banks authorized for the relevant investment services, as well as for persons registered in a special register kept by CONSOB.


Undoubtedly, the main challenge faced by every start-up company is to find the funding resources necessary to start the activity and keep it alive. Obviously, during the starting phase the company is facing a number of costs.

The normal investment methods (bank credit, business angel and venture capital) are certainly feasible, but still require a degree of “maturity” of the more or less advanced start-up.

The crowdfunding tool was introduced in Italy with the Decree Law 18 October 2012, no. 169 laying down “further urgent measures for the growth of the country” (so-called Growth Decree bis), coordinated with the conversion law 17 December 2012, n. 221 and that of 18 December 2012, n.294. Decree 179/2012 introducing in Italy the possibility of setting up online portals for the collection of risk capital (Article 30), assigning to CONSOB the task of issuing discipline through online portals.

Crowdfunding defines a process whereby a group of people finance a project created by other people or organizations of various kinds. In other words, the concept can be summarized as a “collection” of financial resources made through the internet.

Italy is the first country in Europe to have specific and organic legislation relating to the equity crowdfunding alone. CONSOB has adopted a new Regulation no.18592 of 26 June 2013 “Regulation on the raising of risk capital by innovative start-ups via online portals”.

9. Simplified access to the guarantee fund for SMEs:

With the article 30, par. 6, of the D.L. 179/2012 the government has foreseen the free and simplified recourse to the Central Guarantee Fund for small and medium-sized enterprises, innovative start-ups and certified incubators. The Fund was set up with the aim to facilitate the access to credit by SMEs; the intervention of the fund consists in the granting of a public guarantee that allows the SME to obtain financing from financial intermediaries. The direct guarantee of the Fund may cover up to 80% of the amount of the exposure for principal, interest rate, contractual and late payment, up to a maximum of € 2,500,000. The guarantee request addressed to the Fund are evaluated by the Management Committee, which must give an absolute priority to the requests presented by the start-ups and incubators.

10. ICE internationalization services:

The innovative start-ups are among the companies that enjoy services provided by the Agency for the promotion abroad and the internationalization of Italian companies (ICE) and by the Desk Italy (“one-stop-shop”/”single window” for foreign investment). Both institutions have as their object the internationalization of Italian companies: in particular, the purpose of ICE is to facilitate, develop and promote Italian economic and commercial relations with foreign countries, while the Italian Desk carries out coordination functions for foreign investors who show an interest in the realization of investments of significant economic impact in Italy. In implementation of this legislative provision, the ICE has issued the “Startup Service Card” which provides for innovative start-ups to register a 30% discount on the tariffs of the services provided by the special section of the Business Register ICE.

11. Crisis, bankruptcy (FAIL FAST)

The innovative start-up is not subject to bankruptcy proceedings under the bankruptcy law, but is subject to the debt restructuring agreement and the liquidation of assets. These procedures were introduced to remedy the situations of over-indebtedness that occur if “there is a situation of persistent imbalance between the obligations assumed and the assets readily liquidated to deal with them, as well as the definitive inability of the debtor to regularly fulfill their obligations”.

12. Italy Startup Visa and #ISVsurvey

As for the attraction of highly qualified workers through the issue of entry visas, a special start-up visa was created “for those who choose to set up an innovative start-up company in Italy and ensure a business plan and availability of a minimum amount of funds “. In particular, the start-up visa can be requested by “non-EU foreign nationals who intend to set up a start-up company in Italy, also using the reception services offered by certified incubators”.

To obtain a visa, it is necessary to present a precise documentation to the competent diplomatic-consular authority. For the assessment of the projects of innovative start-up applicants, the visa is constituted by a technical committee “Italia Startup Visa” which is also called to verify the documentation provided by the applicant.

In 2016, MISE has launched a survey called ISV survey, aimed at monitoring the development of the experience of the beneficiaries of the startup visa. A summary of the results of this survey, which has remained so far for internal use, is published in the context of this Report for the first time.


As required by the decree, in 2015 MISE opened the window for Smart & Start Italia, which is the subsidized financing program for innovative start-ups located throughout the national territory and managed by Invitalia.

The purpose of this package is to finance the projects with a high technological value related to the digital economy or aiming to enhance research.

The projects must include spending programs ranging between 100 thousand and 1.5 million euro for investment in goods and for management costs. The loan consists of a zero-interest mortgage for 70% of the investment amount. The share covered by the subsidized loan reaches 80% when the social groups are composed mostly of women or individuals under 36, or include a PhD returning from abroad.

If the innovative start-up companies are located in a southern region (Basilicata, Calabria, Campania, Puglia, Sardinia, Sicily) or in the area of ​​the Aquila seismic crater, 20% of the financing is granted without charge.

14. Compliance visa for VAT credit compensation

The recent Investment Compact decree raised the threshold above which the compliance visa must be applied for the compensation of VAT credits for innovative start-ups. This obligation imposes, on the subject who intends to make use of the compensation of VAT credits, the affixing of the “compliance visa” for amounts exceeding € 15,000. The compliance visa is a certification issued by a qualified professional who certifies the correctness and veracity of the credit claimed.

15. Patent box

The 2015 Stability Law introduced the Patent box regime notion which consists of the option of subjecting income deriving from the use of some intangible assets to a preferential tax regime. Through the Patent box regime, companies can opt to exclude from taxation 50% of the income derived from the exploitation of intellectual property. The patent box is applied from 2015 for a period of 5 years and is irrevocable; however, the possibility of renewal is possible for further five years. The 50% tax exemption was applied from 2017, while in 2015 the percentage was 30%, and 40% in 2016.

With this legislative intervention government intended to pursue a threefold purpose:

  • To incentivize the placement of intangible assets held by foreign companies in Italy;
  • to incentivize the maintenance of intangible assets in Italy (or better, to avoid re-locating them abroad);
  • encourage investment in research and development activities

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