Since 2016, the Italian Government has been introducing a bundle of reforms aimed at making the country more competitive and attractive in terms of investment. As a result, Italy now has very competitive depreciation rules, R&D tax credits, patents box and among the most generous flat-tax rates in the EU for citizens who transfer their residence to Italy. Corporate Income Tax has been reduced to 22.5%, while further reductions are expected in 2022 (20.5%).

Thanks to these reforms and to the strength of its industry, Italy ranks 9th in the Global FDI Confidence Index 2020, before Switzerland and Spain.

 

 

Many are also the Personal Fiscal Incentives introduced by the Italian Government. Among those, a 70% income tax exemption for new residents in the Country and a 90% tax exemption for Teachers and Researchers

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STARTUPS

The Italian government supports the growth of innovative startups established for no more than 60 months with a strong technological dimension. To be eligible for registering as an innovative startup to the special register of companies, the company must meet these main requirements: 

  • < €5m turnover
  • at least 30% of the company's costs are destined to R&D
  • 2/3 of the employees own a Master's Degree or 1/3 owns a PhD or has conducted research in the past 3 years
  • the company is the owner of a licence or a patent

Innovative startups can access flexible employement and fiscal schemes, and can leverage on a 30% tax relief for individuals and companies investing in their project to raise funds (cap at €1m for individuals, €1.8 for companies).

 

  • SMART&START ITALIA - an interest-free loan covering up to 80% of eligible expenses (€ 100k-1.5 mln) to support the creation and growth of innovative startups founded by no longer than 60 months Interest-free loan up to 80% of the total investment (10y repayment). Up to 90% if the startup is composed exclusively by women or people aged <35, or if it includes at least one Italian PhD working abroad and willing to return in Italy.

PATENTS AND R&D

  • PATENT BOX – a tax break on IP-related income that since 2019 has been extended until a 50% depreciation

 

  • R&D TAX CREDIT – aiming at encouraging investments in the R&D sector, it is a tax credit up to 50% of the increase of annual R&D expenses which can be used in order to reduce the amount of income tax or Regional Tax on Productive Activities, as well as of social security contributions.

LARGE INVESTMENTS

  • DEVELOPMENT CONTRACT –  it supports large and innovative investments in manufacturing, tourism and environmental protection for greenfield and expansion projects of more than € 20 mln (€ 7.5 mln for food processing) presented by one or more companies also in joint form. Straight grants, grants and soft loans can be allocated for an amount up to 75% of the total eligible expenses. Fast-track procedure for investments >€ 50 mln.

CAPITALIZATION

  • ACE – Allowance for corporate equity developed to encouraging the capitalization of companies by cutting net income and mitigating different tax treatments applied to companies funded with debt/equity. The benefit entails a notional deduction from corporate income taxable base on company revenue (IRES) equal to the net increase in the “new equity” employed in the company, multiplied by a yearly determined rate (1.3% for FY 2020).

 

EMPLOYMENT

  • EMPLOYMENT – Firms that employ workers under the age of 35 are granted a reduction in the labor taxes for the first three years of their employment, up to a maximum of 3,000 euros per year. The age limit will be reduced to 30 years starting from 2021.

 

  • INDUSTRY 4.0 TRAINING – the reform provides for a 40% tax credit on the cost of personnel employed in training courses for the acquisition and consolidation of skills in “4.0” fields. This is expected to enhance new development of 4.0 skills, as well as diffusion of new technologies and expansion of R&D activities. 

ENERGY EFFICIENCY

ENERGY EFFICIENCY – the Energy Efficiency National Fund has a total budget of € 310m to support energy efficiency investments on buildings, plants and production processes. The aid consists in a soft loan up to the 70% of the total eligible investment (between € 250k and € 4m), a guarantee on individual financing operation, up to the 80% of the investment, for a total amount between € 150k and € 2.5m.