Italy represents a flourishing breeding ground for the establishment and the development of innovative companies such as innovative start-ups. On the one hand, a new legislative framework has renewed the approach towards public support to entrepreneurship. On the other hand, the presence of new incentives for investments capital have been put in place.

To some extent, an innovative start-up may represent a decisive step ahead towards innovation in Italy. In fact, technological-oriented products and services have a dominant position in the global market. In this sense, Italy has the responsibility to provide business with all those legal instruments that may allow to fill the gap with other countries.

VGS lawyers have already advised clients willing to initiate an investment project in Italy. In this sense, the following aspects represent the cornerstones that any entrepreneur shall take into consideration when starting a start-up undertaking in Italy.

Legislative on Innovative start-ups

With the purpose of creating the proper conditions, the law 221/2012 includes many policy proposals and the definition of innovative start-ups. In dealing with its clients, VGS professionals already set out the following main characteristics of innovative start-ups:

• be new or have been incorporated for less than 5 years;
• have their headquarters in Italy or in another EU country (an Italian production site is a minimum requirement)
• have a yearly sales revenue lower than €5 million
• do not distribute profits;
• trading goods or services of high technological value;
• They shall not be the result of corporate actions;

In this context, “innovation” means that at least fifteen percent of the company’s expenditures can be attributed to research and development. Again, one-third of the workforce are Ph.D. Students or research students and two-thirds of the total workforce has a Master’s Degree. Additionally, being innovative means also being the depositary, licensee, or owner of a technological patent.

Opting for the incorporation of innovative start-ups means achieving some benefits in terms of tax, corporate and labour related advantages. For instance:

• The payment of stamp duty and fees concerning company registration are not due;
• In the event the innovative start-ups is incorporated as a Limited Liability Company (Societa’ Responsabilità Limitata), there is some corporate flexibility that may involve the shares of the company. For instance, a specific category of shares connected with certain rights;
• Provisions regarding those companies that are not operational or experience systematic losses do not apply to innovative start-ups;
• Innovative start-ups can hire through a fixed term contract for a maximum length of 36 months. The renewal of such contract can last 12 months only. After that, the contract is converted into an open-ended one.

VGS lawyers’ clients have been also interested in tax-related advantages connecter with the incorporation of an innovative start-up. VGS has usually pointed out the following aspects:

• Tax credit for the employment of highly qualified staff during the first year of the new working relationship;
• Tax incentives for corporate and private investments in start-ups that apply both in case of direct investments in start-ups and in case of indirect investments by means of other companies investing predominantly in start-ups.

One relevant advantage VGS lawyers have pointed out is the possibility to collect capital through authorised equity crowdfunding. Collective investment undertaking (“CIUs”) that invest predominantly in innovative start-ups and SMEs can use equity crowd funding as well. Again, the transfer of shares of innovative start-ups and SMEs is dematerialised.

VGS lawyers have already supported business projects in dealing with the flourishing reality of innovative start-ups in Italy. Given the broad type of regulations involved, it is always important to rely on professionals with experience on this field.