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 offers interesting rules on depreciation, R&D tax credits, patents box and one of the most generous flat-tax rates in the EU for citizens who transfer their residence to Italy. The Corporate Income Tax (IRES) is 24% on all income produced within the scope of the company.
Thanks to these reforms and to the strength of its industry, Italy ranks 7th in the Global FDI Confidence Index 2022, ahead of Switzerland, Sweden, 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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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 who has been working abroad for at least 3 years and is willing to return to Italy.
Patents and R&D
- INNOVATION AGREEMENT - The Innovation Agreement aims at projects concerning industrial research and experimental development activities with eligible costs at least equal to €5 MLN for the development of new products, processes or their improvements. Projects may have a duration of at least 18 months and not exceeding 36 months. Mix of grant and soft loan. Eligible subjects may also apply as a network. Applying companies must have at least two approved financial statements. Funds availability is announced by the Ministry of Economic Development.
PATENT BOX - a tax deduction for R&D expenses associated to qualified intangible assets. It allows companies to deduct an extra 110% of their qualifying R&D expenses from their tax base, as well as the normal 100% deduction, to make a total 210% deduction
R&D CIRCULAR ECONOMY - The aid supports the transition of economic activities towards a circular economy model, supporting R&D projects aimed at a more efficient and sustainable use of resources. Purposes:
- industrial production conversion;
- making production processes more efficient in terms of time and resources used and less impacting on the environment in terms of reducing greenhouse gas emissions
- recovering materials and minimizing waste.
The projects must be carried out in one or more local units with eligible expenses between €500 K and €2 Mln, with a duration ≥ 12 months and ≤ 36 months.
PATENTS+ * - The incentive supports micro, small and medium-sized enterprises (SMEs) for the purchase of specialized services related to patents. The expenses related to the following fields are eligible: industrialization and engineering (feasibility study, planning, prototypes, etc.); organization and development; technological transfer (proof of concept, due diligence, NDA, etc.). The aid provides a grant of max €140,000 up to 80% of the eligible costs. This limit can grow up to 100% for applying companies established after university/academic spin-off operations.
DESIGNS+ * - The incentive aims to support micro, small and medium-sized enterprises (SMEs), even newly established, for the purchase of specialized services aimed at the enhancement of single/multiple designs and models registered starting from January 1st 2018. The aid provides a grant up to 80% of the eligible costs, up to €60,000.
BRANDS+ * - Incentive of the Ministry of Economic Development (DGTPI-UIBM) aimed at favoring the registration of national trademarks abroad, both at European level (at the EUIPO, European Union Office for Intellectual Property) and internationally (at WIPO , World Intellectual Property Organization), with the aim of supporting the innovative and competitive capacity of Italian companies. Granting and provision of non-repayable incentives for the purchase of specialized services aimed at encouraging the registration of Community trademarks (MEASURE A) and / or international trademarks (MEASURE B). Up to €25,000.
* “First come, first served” measures, allocated at specific periods during the year and refunded on an annual basis.
TAX CREDIT FOR RESEARCH AND DEVELOPMENT, TECHNOLOGICAL INNOVATION, DESIGN AND AESTHETIC CONCEPTION -
Measure aimed at fundamental research, industrial research and experimental development in the scientific and technological field.
Depending on the activities, the tax credit is recognized in an amount equal to 10% of the relative base of calculation, taken net of other grants or contributions received for any reason for the same eligible expenses, up to a maximum annual limit of € 5 million.
DEVELOPMENT CONTRACT - The Development Contract supports large investments in the sectors of industry, tourism and environmental protection. It is made up of one or more investment projects combined to an interconnected research, development, and innovation project, for a minimum capex of €20 mln (€7.5 mln for agricultural products transformation projects). Multiple parties might apply to the network contract. Projects presented by foreign companies providing an investment of at least € 50m gain access to the Fast-Track procedure. It may also include the construction of public utility infrastructure. It includes:
non-repayable grant towards facilities
non-repayable grant towards expenses
The incentives depend on the type of project, the location of the initiative, and the size of the company.
Additional funds for Fast-Track will be accessible to companies investing in the Green Economy, Biomedical and Telemedicine sectors.
- DIGITALIZATION - The incentive supports the digital transformation of SMEs’ production systems by financing the adoption of technologies consistent with the Industry 4.0 plan. Solutions that can be financed include:
- advanced manufacturing solutions
big data and analytics
technologies related to digital supply chain solutions.
Benefits are granted on the basis of a nominal percentage of eligible costs and expenses of 50% (10% in the form of a contribution, 40% in the form of subsidized financing).
- (NEW) SABATINI LAW 2023 - The measure subsidises investments in Instrumental Assets by micro and SMEs and is designed to support the purchase (or leasing) of machinery, equipment, plants, capital goods for productive use and hardware, as well as software and digital technologies. Government subsidy plus a public contribution equal to the interests on the loan stipulated with the bank, up to an annual rate of 2.75% for ordinary investments and 3.575% for investments in digital or green technologies. Coverage up to 80% of the total, <5 years duration for an amount between €20,000 and €4 million.
- 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.
An extremely favorable tax regime has been valid since 2020 for anyone who moves to Italy for at least 2 years, working mainly in Italy – more that 183 days a year - provided he or she has previously been a tax resident in a foreign country for more that 2 years.