In Italy innovative startups are regulated by Decree Law 179/2012 art.25 comm.2. Through the support measures that the law introduced, over the decade new companies have appeared, which, according to the latest data from Mise, currently are more than 14 thousand in total.
What is an innovative startup?
In Italy, the concept of innovative startup was born in 2012, through the Decreto Crescita 2.0 (D.L. 179/2012). With this decree, the legislature intervened to encourage a transition of Italian industry toward high-tech products and sectors.
If the requirements and characteristics outlined in the decree are met, they enable Italian companies to access various fiscal, administrative and financial benefits.
Thus, an innovative startup is a young company based in Italy whose exclusive or predominant business purpose is the development, production or marketing of products or services with high technological value.
Legal form of innovative startup companies
Decree Law 179/2012 defines innovative startups as “Capital companies also established in cooperative form…“. Therefore, one of the requirements to be an innovative startup is to be a corporation.
Thus, depending on the size and organizational aspects of the company, it will be possible to choose one of the legal forms of corporations as follows:
- Public limited company (in Italian S.p.A.);
- Limited partnership with share capital (in Italian S.a.p.a.);
- Limited Liability Company (in Italian S.r.l.);
- Simplified limited liability company (in Italian S.r.l.s.);
- Co-operatives
Depending on the needs or peculiarities of the business, one form may be obviously preferable to the other.
What legal form cannot an innovative startup take?
When establishing an innovative startup, it is not possible to choose a legal form other than a corporation. For this reason, innovative startups cannot be either sole proprietorship or partnership (in Italian s.s., s.n.c., s.a.s.).
“INNOVATIVE”: legal form or status?
Having outlined the legal forms of a startup, we will explain what “innovative” stands for.
Generally speaking, every company has its own life cycle:
- Birth (or start);
- Growth (development)
- Maturity and eventually
- Fall.
During the first stage of its life cycle, the company is engaged in raising financial resources, raw materials, human capital and has to face huge initial costs, low sales volumes resulting in de facto losses. These features are proper of the early stage of companies, which is precisely called Startup.
Then, the term innovative does not refer to a particular legal form, but it is rather an adjective, a status, given to those startups which differ from the other by their high technological content, meeting several requirements. This allows them to register in the special section of the Commercial Register “Innovative Startups” and thus access a number of benefits established specifically to support the development of these companies, especially in its early stages.
What is required in order to be an innovative startup?
Registration in the special section of the Commercial Register dedicated to Innovative Startups (which confers the status to the company) is possible only upon recognition of possession of specific requirements, classified into “objective” and “subjective.”
Objective requirements of an innovative startup
According to the relevant regulation (DL 179/2012, art. 25, com. 2) an innovative startup is a corporation, whether or not incorporated as a cooperative, that meets the following objective requirements:
- Newly established enterprise or not more than 5 years old;
- Being resident in the territory of the state or residence in the EU but with production headquarters in Italy
- Turnover not greater than 5 million
- Not listed on a regulated market or multilateral trading platform;
- Prohibition of profit distribution
- Its mission focues on the development, production and marketing of products or services with high technological value;
- Not started from extraordinary transactions (demerger, merger or sale of business unit).
Subjective requirements of an innovative startup
In addition, possession of at least 1 of the following 3 requirements is added to the abovementioned ones:
- The at least 15% of the greater of turnover and cost of production is spent in R&D and innovation;
- The staff employed consists of:
- at least 1/3 PhDs, PhD students or researchers, or
- at least 2/3 with master’s degrees;
- it is also repository, licensee or owner of at least one patent or registered software.
Corporations that meet the requirements listed above can apply to the Commercial Registry to be enrolled in the special section “innovative startups.”
Confirmation and loss of the requirements of an innovative startup
Confirmation of the requirements is done through a special self-certification form called comunicazione unica that the representative must complete. This self-certification should be filled out only after updating the company profile on the business registry portal.
The portal must be updated after the filing of the budget and by June 30th.
Not completing the company profile on the Commercial Registry website prevents the submission of the form resulting in the failure to confirm the requirements and the loss of Status and its benefits.
Once the profile has been updated, it will be possible to submit the form for confirmation of requirements, which must be submitted 30 days after the filing of the financial statements and no later than 6 months after the end of the fiscal year.
In case of companies that stipulate a deadline of 180 days from the end of the fiscal year for convening a meeting to approve the financial statements, the annual statement of maintenance of requirements must be filed within 30 days from the approval of the financial statements and in any case within 7 months from the end of each fiscal year, subject to compliance with the first deadline of 30 days from the approval of the financial statements.
Benefits for an innovative startup
Innovative startups can start benefiting from the measures introduced from the very date of registration in the special section of the Commercial Register. However, benefits last 5 years and, once expired, they can switch to the innovative SME regime.
Accessing capital resources
Some benefits have been introduced in order to allow innovative startups to access capital resources, such as:
- Tax incentives for investment in the capital of innovative startups, which provides a 50% tax deduction (Irpef) for Individuals who decide to invest in the startup;
- Free and simplified access to the SME Guarantee Fund, i.e., the possibility of being guaranteed directly by the State;
- The platform of the Ministry of Economic Development, Smart & start Italia, which provides public note for proposals, financing up to €1.5 million for project purposes;
- Raising capital through equity crowdfunding campaigns, meaning it allows startups to seek capital on platforms aimed at an undistinguished mass of investors.
Exemptions for innovative startups
In addition, startups are exempt from:
- From chamber fees and stamp duties;
- From the obligation to affix the stamp of conformity for compensation of VAT credits (mandatory, however, for all other types of companies for credits exceeding €5,000).
Further benefits
- International business internationalization services (ICE);
- Flexible work arrangements (permanent or fixed term contracts that do not provide for standard hours or fixed locations);
- Remuneration through equity instruments (such as stock option).
Finally, they receive support from:
- Loss carryover greater than 5 fiscal years;
- Non-applicability of the rules on shell companies and systemic loss since throughout the period of registration in the special section, startups are not required to undergo the operability test on revenues or losses (Article 26 of the Decreto Crescita-bis);
- Fail Fast, a procedure used in the event of a startup’s failure that provides for the avoidance of bankruptcy law and access to debt crisis provisions.