Definition of Innovative Startup: any companies with shared capital (i.e. limited companies, “società di capitali”), including cooperatives, whose capital shares – or equivalent – are neither listed on a regulated market nor on a multilateral negotiation system.

Requirements:

• Be newly incorporated or have been operational for less than 5 years (in any case, not before 18 December 2012);
• Have its headquarters in Italy or in another EU country, but with at least a production site branch in Italy;
• Have a yearly turnover lower than €5 million;
• Do not distrib profits;
• Have as exclusive or prevalent company object – as stated in the deeds of incorporation – the production, development and commercialization of innovative goods or services of high technological value;
• Are not the result of a merger, split-up or selling-off of a company or branch;
• The innovative character of the enterprises is identified by at least one of the following criteria:
  1. At least 15% of the company’s expenses can be attributed to R&D activities;
  2. At least 1/3 of the total workforce are PhD students, the holders of a PhD or researchers; or, alternatively, 2/3 of the total workforce must hold a Master’s degree;
  3. The enterprise is the holder, depositary or licensee of a registered patent (industrial property), or the owner and author of a registered software.

Innovative startups and certified incubators must register themselves in the respective special sections of the Business Register (startups; incubators), created and administrated by the Italian Chambers of Commerce system. The registration process, free-of–charge, takes place by transmitting to the local Chamber of Commerce an online declaration of self-certification of fulfilment of the legal requirements .

Benefits:

The measures described below are available to innovative startups immediately after registration, for a maximum of 5 years since their date of incorporation.

1. Incorporation and statutory modifications by means of a standard model with digital signature, the whole procedure can take place online and is free-of-charge
2. Cuts to red tape and fees: unlike most companies, innovative startups and certified incubators are exempted from the payment of stamp duty and fees incurred due to the obligation of entering the Business Register, as well as from the payment of the annual fee usually owed to the Chambers of Commerce.
3. Flexible corporate management: innovative startups incorporated in the s.r.l. form are allowed to: create categories of shares with specific rights (for example, categories of shares that do not attribute right to vote or that attribute such rights in non-proportional terms to the participation); carry out financial operations on their own shares; issue participative financial in-struments; offer capital shares to the public.
4. Extension of terms for covering losses: where losses result in the share capital being reduced by over 1/3, the shareholders’ meeting must lower the capital proportionally to the losses recorded by the following financial year. A 12-month extension is applied to innovative startups, during this period the capital can be reduced proportionally to the losses. While ordinary companies must lower capital by the following financial year, startups can do this for up to two financial years after they have suffered losses.
5. Exemption from regulations on dummy companies: innovative startups are not subjected to regulations concerning non-operational companies and companies registering systematic losses. Accordingly, in case they cannot get “appropriate” revenues, they are exempted from fiscal penalties applied to so-called “dummy companies”, such as the computation of a minimum income and taxable base for corporate taxation purpose (IRAP).
6. Exemption from the duty to affix the compliance visa for compensation of VAT credit: the ordinary norm calling for the application of the compliance visa for compensation  of VAT credits above €5,000, may constitute a disincentive to use “horizontal” compensation, thus limiting the capability to offset other tributes. With the exemption up to €50,000, innovative startups may receive relevant benefits in terms of liquidity during the delicate phase of investment in innovation.
7. Tailor-made labour law: Innovative Startups can hire a staff on a fixed-term contract for a maximum of 36 months. However, in derogation to Jobs Act’s provisions, innovative startups can hire personnel through fixed-term contracts of any duration, even very short, which can be renewed as many times as wished. After 36 months, the contract can be renewed only once, for 12 months maximum, leading to an overall employment duration of 48 months. By the end of this 4-year period, the fixed-term contract is automatically converted into an open-ended one. Moreover, in exception to general regulation, innovative startups with more than 5 employees are not required to maintain a statutory ratio between fixed-term and active open-ended contracts.
8. Flexible remuneration system: salaries due to workers employed in innovative startups can have a variable component linked to efficiency or profitability of the company, the productivity of the employee or the team of employees, or to other objectives and parameters for output and performance as agreed upon by the parties, including through stock options and work-for-equity schemes.
9. Remuneration through stock options and work for equity schemes: startups may offer to their collaborators, employees, and even suppliers and consultants such as lawyers and accountants, capital shares by way of additional remuneration. The revenues resulting from these financial instruments are tax deductible for both fiscal and contributory purposes.
10. Tax incentives for corporate and private investments in startups, both by individuals and by legal entities. This benefit, envisages for individuals a deduction on personal income tax (IRPEF) amounting to 30% of the amount invested, up to a maximum sum of € 1 million; for legal entities the benefit consists in a fiscal deduction on the taxable income for company tax purposes (IRAP) equal to 30% of the amount invested, up to a maximum of € 1.8 million. Starting from 2017, the incentives are contingent upon to a holding period of the shareholding in the innovative startup for a minimum of 3 years.
11. Possibility to collect capital through equity crowdfunding authorised online portals. In July 2013, Italy was the first country in the world to enact comprehensive regulation for crowdfunding instrument.
12. Fast-track, simplified and free-of-charge access for innovative startups and certifiedincubators to the SME Guarantee Fund (Fondo di Garanzia per le Piccole e MedieImprese), a State Fund that supports access to credit through guarantees on bank loans. The guarantee covers up to 80% of the bank loans granted to innovative startups and certified incubators, up to a maximum of €2.5 million per company.
13. “Fail fast” procedure: the aim of this measure is to avoid that the Innovative Entrepreneur is “stuck” for ages in bankruptcy arrangements, allowing him or her to start a new business project as soon as possible, limiting financial and reputational costs. In detail, startups are exempted from the standard bankruptcy procedure, preliminary closure agreements and forced liquidation in the event of an over-indebtedness crisis.
14. Conversion to innovative SME: successful Innovative Startups, now become “mature” companies with a sizeable experience and production value, and whose activities are still characterised by a significant component of technological innovation, can transition to innovative SME status. An “innovative SME” may be any Small and Medium Enterprise operating in the field of technological innovation, with many of the facilitations conferred to innovative startups.