Innovative SME incentives in Italy

Innovative SME Requirements

 

Innovative SMEs (Piccole e Medie Imprese - PMI Innovative) are characterized by their capacity for innovation, they must possess certain requirements that allow them to benefit from particular incentives.

 

The requirements to benefit from the Innovative SME regime are the following:

 

- less than 250 employees;

- less than € 50 million in turnover per year;

- less than € 43 million in assets on the total balance sheet;

- have the legal seat in Italy, or in another EU country, with a production site or branch in Italy;

- have a certified balance sheet;

- not be listed on a regulated market.

 

The Innovative SME must also meet at least 2 of the following 3 requirements:

 

- support Research and Development (R&D) and innovation expenses equal to at least 3% of the greater value between turnover and production cost;

- employ highly qualified personnel, with at least 1/5 of the employees being PhDs, PhD students or researchers, or at least 1/3 with a master's degree;

- be the owner, custodian or licensee of at least one patent or owner of registered software.

 

 

Innovative SMEs are registered in the special section of the Business Register

 

The status of Innovative SME is obtained by registering the company in the dedicated section of the Business Register; registration occurs by electronically sending a self-certification to the competent territorial Chamber of Commerce, which carries out checks on compliance and maintenance of the required requirements by sending confirmation every year within 30 days of the approval of the budget and in any case no later than 6 months from the end of the financial year. Failure to communicate the update will cause the automatic cancellation of the Innovative PMI from the special section of the Business Register.

 

Innovative Startup companies can transform themselves into Innovative SMEs.

 

 

Self-certification

 

Self-certification allows companies to independently certify that they possess the necessary requirements to obtain recognition as an Innovative SME, this is done by:

 

- filling out a specific form available on the Business Register website;

- the form must be filled out and signed with a digital signature by the legal representative of the company

- attaching supporting documentation.

 

Companies that issue false declarations are subject to administrative and criminal sanctions; the competent authorities may also carry out subsequent checks to verify the veracity of the self-declared information.

 

 

Tax benefits and Bonuses for Innovative SMEs

 

Innovative SMEs can benefit from incentives that apply from the date of registration in the relevant special section of the Business Register, these are:

 

• tax incentives for those who invest in the capital of Innovative SMEs;

• free and simplified access to the Guarantee Fund for SMEs;

• exemption from stamp duty for documents filed with the Chamber of Commerce;

• raising capital through equity crowdfunding campaigns;

• exceptions to ordinary corporate regulations;

• extension of the deadline for covering losses;

• remuneration through equity participation instruments.

 

 

Tax incentives for investing in the capital of innovative SMEs

 

Who invests in the risk capital of Innovative SMEs can benefit from a tax relief, the incentive is structured as follows:

 

• for natural persons, a deduction from the gross IRPEF tax equal to 30% of the amount invested, up to a maximum of € 1 million;

• for legal persons, a deduction from the IRES taxable income equal to 30% of the amount invested, up to a maximum of € 1.8 million.

 

The tax reduction is applicable to:

 

• SMEs that have made their first commercial sale less than 7 years ago;

• Innovative SMEs on the market for more than 7, but less than 10 years, if they have not yet demonstrated the potential to generate returns;

• regardless of age, in favor of Innovative SMEs that intend to start an initial investment for risk financing - based on a business plan developed for the launch of a new product or entry into a new geographic market - exceeding 50% of the average annual turnover of the last 5 years.

 

The incentives are valid for both direct investments in innovative SMEs and indirect ones through Collective Investment Scheme for Savings (Organismo di Investimento Collettivo del Risparmio, OICR).

 

 

Free and simplified access to the Guarantee Fund for SMEs

 

The SMEs Guarantee Fund (Fondo di Garanzia per PMI) is a publicly-owned fund that facilitates access to credit by granting guarantees on bank loans to SMEs; the guarantee can be applied directly and on operations carried out through Confidi (Consorzi e Cooperative di Garanzia Collettiva Fidi - Collective Guarantee Consortia and Cooperatives), it covers up to 80% of the credit granted by the bank up to a maximum of € 5 million.

 

For Innovative Startups, access to the Fund is automatic, while Innovative SMEs are subject to an assessment by the SMEs Guaratee Fund that classifies the riskiness of the operation based on 5 rating bands; companies classified in the lowest credit rating band, the fifth, are excluded.

 

 

Stamp duty exemption for documents filed with the Chamber of Commerce

 

Innovative SMEs are exempt from paying the stamp duty usually due for registration in the special section of the Register and related documents.

 

 

Raising capital through equity crowdfunding campaigns

 

Innovative SMEs (and also Innovative Startups) can raise capital from investors through “crowfunding” which has been regulated by law since 2013, which has also provided for the creation of a register of online portals authorised to promote fundraising from the public, which is managed by Consob (National Commission for Companies and the Stock Exchange) which supervises the financial markets.

 

 

Exceptions to ordinary corporate law

 

Towards Innovative SMEs set up as SRL (limited liability companies) apply of some exceptions not provided by the ordinary corporate law, so they can:

 

• create categories of company shares that do not attribute voting rights or that attribute voting rights in a measure that is not proportional to the participation;

• carry out operations on their shares;

• issue participation financial instruments;

• offer capital shares to the public.

 

 

Extension of the deadline for covering losses

 

Operating losses that cause a reduction of company capital of more than 1/3 can be reduced within the second subsequent financial year, instead of the first financial year, as is the case for other types of companies.

 

The closure of capital reductions due to losses below the legal minimum can be decided by the assembly within the following financial year.

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Remuneration through equity participation instruments

 

Innovative SMEs can pay their collaborators with equity participation instruments such as: stock options, forms of work for equity for outsourced collaborators.

 

The salary of SME employees can be established independently, with the exception of the minimum wages provided for by collective bargaining agreements.

 

 

Duration of an Innovative SME

 

The duration of the status of innovative SME is unlimited, unlike what happens for Innovative Startups whose duration is 5 years.

 

 

Differences between Innovative Startups and Innovative SMEs

 

Innovative Startups:

 

- are companies less than 5 years old;

- must have an annual turnover of less than € 5 million;

- must concern the production, development and marketing of innovative goods or services with high technological value;

- must meet at least 1 of the following 3 requirements:

• 15% of the greater of costs and total value of production concerns R&D activities;

• there must be a team made up of 2/3 personnel with a master's degree or 1/3 PhD students, research doctors or graduates with 3 years of experience in certified research activities;

• be owners or licensees of a patent or registered software.

 

Characteristics of SMEs:

 

- they have no age limits, but must have at least one certified balance sheet;

- they must have less than 250 employees;

- they can have an annual turnover of up to € 50 million and a balance sheet of up to 43 million;

- they must have at least 2 of the following requirements:

• 3% of the greater of costs and total value of production concerns R&D activities;

• there must be a team made up of 1/3 staff with a master's degree or 1/5 by PhD students, research doctors or graduates with 3 years of experience in certified research activities;

• patent holder or licensee or owner of registered software.

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