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Italy Proposes Measures To Incentivize Startups

by Ulrika Lomas, Tax-News.com, Brussels

09 October 2012


Following the issuance last month of a preliminary report on policies to encourage start-up businesses in Italy, the government has now issued a decree through which the major part of those policies, including tax incentives, will be introduced.

While the decree contains further measures to encourage growth in the Italian economy, it deals mainly with the implementation of the Italian government’s digital agenda.

For the first time in Italy, the decree provides a legal definition of a start-up company. They are defined as those firms which are unlisted on a stock exchange, resident and subject to taxation in Italy, and, above all, have as their objective the development of innovative high-technology products or services. However, it has been emphasized that start-up companies can be set up in various sectors, not only in the high-technology sectors but also in all productive sectors, including the most traditional.

To qualify they should also be owned at least 51% directly by individuals; have been established for not more than four years; not have been formed following a merger or corporate sale; have a business turnover not greater than EUR5m (USD6.5m); and not be paying dividends.

In addition, such a company should satisfy at least one of the following criteria: sustain research and development expenditure amounting to at least 30% of the greater of total costs and value of production; employ highly-qualified individuals amounting to at least one third of its total employees; or be the holder or licensee of, for example, a trademark connected to its productive activity.

Such firms, even if not constituted as a limited company, will also be allowed, for example, to issue non-voting shares and to institute stock options and work-for-equity schemes to provide employee incentives. Remuneration by way of such incentives will not form part of an employee’s taxable income, or be subject to social security contributions.

In fact, it is agreed that, for the three fiscal years 2013 through 2015, both individual and corporate investors in a start-up business will be able to subtract or deduct from their taxable income a part of the amount so invested, either directly or by way of specialized start-up funds.

Set-up expenses of a start-up company will also be reduced by exempting it from stamp duties and fees related to its registration, while its annual fee due to the Chamber of Commerce would also be abolished.

After four years of operation, or if any of the other start-up qualifications are exceeded in the intervening period, the above benefits would be revoked and the company would continue its operations under normal corporate regulations.

TAGS: individuals | tax | investment | small business | business | tax incentives | law | employees | equity investment | fees | legislation | venture capital | stamp duty | Italy | tax breaks | regulation | research and development

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