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Italy: Law on Start Up Companies and Other Stimulus Measures

(Nov. 6, 2012) Regulation No. 179 of October 18, 2012, on Further Urgent Measures for the Country’s Growth, was published in <?Italy's Official Gazette No. 245, of October 19, 2012, as Ordinary Supplement No. 194. (Decreto-Legge 18 ottobre 2012, n. 179, Ulteriori misure urgenti per la crescita del Paese [hereinafter Regulation No. 179], GAZZETTA UFFICIALE DELLA REPUBBLICA ITALIANA (Oct. 19, 2012).) The Regulation entered into force on October 20.

Regulation No. 179 covers in its ten sections: the Italian Digital Agenda and identity (including articles on a national database of the resident population and the digital address of each citizen); digital management and open-ended data (covering, e.g., electronic transmission of documents and measures for electronic innovation in the transport system); the digital agenda for education; digital health; resetting the digital divide and e-money; digital justice; research, innovation, and the ‘smart’ community; insurance and the financial market; measures for the creation and development of innovative start-up companies; and additional urgent measures for the country’s growth. (Id.)

Articles 25-32, on start-up companies, may be of particular interest. Regulation No. 179 provides that a company incorporated under Italian law or a European company (Societas Europaea), which is resident and subject to taxation in Italy, may qualify as a start-up if it:

· is unlisted and the majority of shares representing share capital and voting rights are held by natural persons;

· has been established for no more than 48 months and is not the result of a merger or split or the sale of a company or unit;

· has its principal place of business and interests in Italy;

· as of the second year of operation, does not have a business turnover in excess of €5 million (about US$6.5 million);

· does not distribute and has not distributed profits;

· has as its corporate objective the development, production, and marketing of innovative products or services of high technological value. (Id. art. 25; Giulia Gallo, Italy: Incentives for Start-Up Companies – Law Decree Published, TAX NEWS SERVICE (Oct. 24, 2012).)

In addition, the company has to satisfy at least one of the following requirements: its research and development expenditure is at least 30% of the costs or the total value of production of the start-up, whichever is greater; at least a third of its employees or consultants are highly-qualified individuals with advanced degrees; or it holds or licenses at least one industrial patent right directly related to its corporate objective and business activities. (Regulation No. 179, supra; Gallo, supra.) The Regulation also provides for “certified incubators,” corporations that lend services to support the creation and development of innovative start-ups and that meet certain criteria. (Regulation No. 179, art. 25(5).)

Under article 26 of Regulation No. 179, a start-up company is exempt from stamp duties and fees related to its registration and from the annual Chamber of Commerce fee. (Gallo, supra.) Even if an innovative start-up company is constituted as a limited liability company, it may issue non-voting shares to the public, institute stock-options, and offer work-for-equity schemes. Remuneration through such schemes will not be subject to social security contributions nor will it be included in the taxable income of administrators, employees, and co-operators. (Id.) The Regulation also addresses remuneration through financial instruments for personnel of start-ups and incubators (Regulation No. 179, art. 27), and it contains provisions on the employment relationship (e.g., use of the fixed-term contract) in the start-ups. (Id. art. 28.)

Article 29 provides for incentives for individual and corporate investors, in order to encourage investment in innovative start-up companies. For the tax years 2013-2015, individuals who invest in a start-up company will be able to deduct from the tax due 19% of the amount invested, or 25% if the start-up is in the energy sector, with the maximum annual deduction being€500,000 (about US$647,000). (Gallo, supra.) Companies that invest in a start-up will be eligible for a deduction from their taxable income of 20% of the amount invested, or 27% for an energy sector start-up, with a maximum available annual deduction being€1.8 million (about US$2.3 million). (Id.)