What Startup Innovativa Can Do For Italian Startups

You have a great idea, you also have the money to seed your startup and start to test the market as per lean startup directions. You also start to sell your ideas, get some money, paying invoices for goods and consultants. Now what? If you live in some countries like UK you might be fine but not if you are in other countries like Italy. Here, selling something without a fiscal ID can create relevant troubles with tax authorities.

So what’s the general advice? Once you start to make some money, start to think to incorporate your company. Don’t think to esotic offshore structures (initially, costs would be much higher than benefits) but do it locally minimizing costs and trying to get as much benefits as possible. Also, keep in mind that having a company is very beneficial when showing up to prospecting customers especially in the B2B domain: a serious company would normally rate your seriousness while banks might be much more confident in releasing loans. Let’s see more specifically what you can do in Italy.

Every year, the world bank publishes a business analysis ranking countries by their ability to support businesses (click here for details). It comes with no surprise to see Italy in the 50th place in the category “starting a business”. The reason is easy to understand: Italian laws are quite complex, subject to interpretations and most of the time more tailored to avoid tax frauds and raise fees than helping growth and entrepreneurship.

All those “complications” lengthen times to set up a company, and add up relevant costs (authorisations, certificates and the likes). For the last 20 years, the Italian government has tried to find a solution but, most of the times, new laws were simply added to a previous one generating a greater mess and adding complexity. Probably, only within the last 4 years some efforts brought improvements. The general idea is that only by facilitating startups it will be possible to sustain the economic growth and reduce the unemployment rate. This is an ambitious goal that is still not showing the expected results.

A New Company Form: Startup Innovativa

Back in 2012, through the “Decreto Crescita 2.0”, a new company form was introduced and added to the complicated Italian scenario. The new name “startup innovativa” is a form tailored for innovative businesses with high technology value (digital, industrial, social, agricultural, etc). The government’s idea was to offer tools and advantages for the whole company life cycle (seed, growth, maturity).

Benefits

The benefits offered by this kind of company are pretty relevant.

• First of all there is an exemption from paying several annoying fees (both yearly and lamp sum).
• Governance was another point of differentiation; for a company registered as SRL (limited liability) it’s possible to differentiate vote rights and company quotas; also in case of losses (quite common during the first years of a startup’s life) there is a one year allowance before reducing capital.
• In addition, to favourite young talent employability, a “startup innovativa” is allowed to use temporary contracts for a period spanning between 6 and 36 months (with further 12 months). This was done to limit the bad behaviour to hire young people forcing them to open a VAT ID.
• Equity crowdfunding is another topic the legislator focused on. Thanks to a special Consob act, those companies are allowed to run crowdfunding campaigns through certified portals. This is a very new way of financing for Italian companies and it might be very promising especially for companies engaged in the social sector.
• Last but not least, a “startup innovativa” can apply for a privileged loan, 80% guaranteed by the Italian government. In this case the state authority is not doing any further due diligence, basically accepting the bank response (which is accepting the missing 20% risk)
• And eventually, taxation. The intervention pointed to 2 directions:
  • lowering startup costs, discounting hiring expenses related to high skilled people (35% of the first year hiring costs) and
  • favouriting investment in those companies with (on average) a corresponding 20% on yearly taxation reduction (this applies both to private and company investors). Discount rates can be stretched in case of investment on a social enterprise.

It appears pretty visible that there are several benefits to use this kind of company and indeed, at the time being, 4786 companies were formed following this framework. Of course, a company’s form doesn’t determine its success but can help the growth and success rate.

Requirements

At this time, one question rises: what are the requirements? In brief:

1. yearly gross revenue must be lower than 5M EUR
2. the company must be less than 48 months old
3. the holding and main activity must be in Italy

Also, one of the following conditions must be met in order to incorporate:

• R&D expenses must be at least 15% of production costs
• ⅓ or more of the employees must hold a phd (or currently studying a phd in Italy or abroad), or ⅔ or more must have a M.Sc. degree
• company must hold a patent (or at least the rights to use it)

For those further interested, you can refer to the official website. Generally, nothing related to Italian laws come easy but sometimes complexity offers rooms to exploit an advantage. Keep reading my articles and I’ll guide you through others interesting Italian opportunities for startups!

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