200 million euros have been allocated for the year 2020 for innovative startups. Openness to the use of participatory tools. Tax incentives for private investors. One year extension of stay in the relevant special section of the commercial register.
The Law Decree 19 May 2020, n. 34, so-called relaunch decree, provided for the strengthening, throughout the national territory, of the interventions in favor of innovative start-ups.
The intention of the legislator is to encourage the raising of capital for those innovative start-ups and SMEs that still have reduced production values in order to enhance their capitalization and therefore encourage their growth and more generally to bridge the gap between Italy and other EU countries in venture capital aimed at these categories of businesses.
The reference provision consists of art. 38 of the decree itself, entitled “Strengthening the ecosystem of innovative start-ups”.
The regulation is aimed at strengthening public support for the birth and development of innovative start-ups, acting within the “Smart & Start Italia” measure, the main national facilitating instrument aimed at this type of company, established by the decree of the Minister of Development. report 24 September 2014 and recently revised by decree of the same Minister dated 30 August 2019, implementing the latest “Growth Decree” (article 29, paragraph 3, of the decree-law 34/2019).
It should be remembered that the measure in question (Smart & Start Italia) consists of those incentives aimed at supporting new Italian entrepreneurship through the birth and growth of innovative start-ups. These must be no more than 60 months old and entered in the special section of the commercial register. The measure finances projects between € 100,000 and € 1.5 million through the telematic portal prepared by Invitalia (https://www.invitalia.it/cosa-facciamo/creiamo-nuove-aziende/smartstart-italia).
Start-ups that present an entrepreneurial project of significant technological and innovative content or even oriented towards development in the field of digital economy can benefit from the aforementioned benefits.
Currently the “Smart & Start” project concerns innovative start-ups based throughout Italy, with a privileged treatment reserved for startups located in the Basilicata, Calabria, Campania, Puglia, Sardinia, Sardinia, Sicily and areas of the seismic crater territory.
As was also pointed out in the explanatory report to the decree, it emerges, in consideration also of the moment of emergency that our national system is experiencing, “the need of startups for public support to develop their business characterized mainly by innovative ideas that distinguish them from other companies“.
In light of the above, the objective pursued by the new support measure is oriented on two fronts: on the one hand, through a increase in the financial envelope of the measure (DL 34/2020, art. 38, paragraph 1), on the other, expanding the action capacity of the measure (DL 34/2020, art. 38, paragraph 2).
With reference to the second intervention profile (strengthening of the action capacity of the measure), the standard intends to complete the support provided to innovative start-ups, which is limited, in the previous configuration of the “Smart & Start Italy” measure, to the initial stages of the life cycle of companies.
Startups by their nature have greater liquidity needs than those of other small businesses and even when they start billing and have good revenues, they need additional funds to consolidate and “climb the market”. Therefore, an evolution of the instrument was deemed necessary Smart & Start Italy, which leads to extend the scope of intervention of the tool, so far, as mentioned, focused on the initial stages of the life cycle, thus allowing start-ups worthy of consolidate its development through contributions in terms of equity also by private and institutional investors.
To meet these needs, paragraph 1 of the rule in question refers to a decree of the Minister of Economic Development for the regulation of new methods of intervention of the measure that go in the aforementioned direction.
In particular, the conversion of the Smart & Start Italy loan to certain capitalization conditions of companies may constitute a valid incentive suitable for promoting the entry of private individuals into the share capital. The new facilitating instrument will therefore allow the conversion of debt into a participatory instrument, accompanied by the entry into the share capital of an investor or by the increase in the capital itself, the return of which will be linked to the corporate return. Thanks to this operation it will be possible start-up capitalization supported and the necessary liquidity will be granted to the startup itself in order to develop its business.
In addition to this important perspective of measurement innovation, the standard provides, in paragraph 2, the activation of a new line of intervention to be added to the smart & start measurement, aimed at:
- facilitate the meeting between innovative start-ups and the system of incubators, accelerators, universities, innovation hubs etc. through a non-refundable contribution for the acquisition of the services provided by these subjects;
- to strengthen the innovative start-ups in equity, by encouraging, in a phase following the incubation / acceleration process, the investment in start-ups by qualified investors (“Smart Money” measure). The granting of the aforementioned contributions, to be paid pursuant to the “de minimis” general regulation (EU regulation no. 1407/2013), will be governed by a decree of the Minister of Economic Development, to be adopted within 60 days from the date of entry into force of the decree-law.
The first of the aforementioned measures is also particularly indicated in the present emergency phase, to provide liquidity for the acquisition of the incubation and acceleration services of the start-ups in their initial development phase, especially for those companies not yet able to present a mature planning for Smart & Start financing.
In paragraph 3 art. 38 the endowment of the “Venture Capital Support Fund” is increased, established pursuant to art. 1, paragraph 209, of law no. 145 of 2018, to which they are assigned additional resources of 200 million for the year 2020. In particular, the paragraph provides for an extraordinary intervention – through the increase in the endowment of the “Venture capital support fund”, established pursuant to art. 1, paragraph 209, of law no. 145 of 2018 – to face the pandemic emergency in favor of startups and innovative SMEs to be implemented through investments in capital, also through the subscription of participatory financial instruments, according to the methods that will be adopted by decree of the Minister of Economic Development.
Paragraph 4 equates only innovative start-ups – in the case of research contracts extra muros – universities and research institutes for the purpose of increasing the relevant eligible expenses pursuant to art. 1, paragraph 200 of law 160/2019.
The paragraph 6 art. 38, DL 34/2020, finally reserves one 200 million euro share of the SME guarantee fund in favor of innovative start-ups as defined by article 25, paragraph 2, of decree-law n. October 18, 2012 n. 179, converted, with modifications by law 17 December 2012, n. 221. In the light of the refinancing made by the Relaunch Decree, for an amount of 4 billion euro (article 34), it is believed that the fund has adequate capacity to meet the reserve made by this paragraph, without causing new or greater management difficulties.
3. One year extension of stay in the special section of the business register of innovative start-ups
Paragraph 5 extends the stay in the special section of the business register of innovative start-ups referred to in article 25, paragraph 2, of Law Decree 18 October 2012, n. 179, converted with amendments by law no. 221. Any deadlines foreseen under penalty of forfeiture of access to public incentives and or for the revocation of the same are extended by 12 months. This forecast is necessary given the negative effects on the economy produced, for 2020, on the whole start-up sector. For the purposes of the fifth paragraph, the extension of the stay in the special section of the business register does not apply for the purposes of the use of the tax and social security contributions provided for by current legislation.
Paragraphs 7 to 9 introduce a facilitated tax regime aimed exclusively at individuals who invest in startups or innovative SMEs. In particular, paragraph 7 provides for a tax deduction of 50% of the sum invested by the taxpayer in the share capital of one or more innovative start-ups directly or through collective investment savings organizations that invest mainly in start-ups. innovative. The maximum deductible investment cannot exceed € 100,000 in each tax period and must be maintained for at least three years.
Paragraph 8 provides the same tax deduction for taxpayers who invest in Innovative SMEs. The aforementioned concessions are granted pursuant to Regulation (EU) no. 1407/2013 of the European Commission of 18 December 2013 on de minimis aid.
Other countries have adopted similar programs such as the UK Seed Enterprise Investment Scheme and the Belgium Tax Shelter for start-ups program.
The purpose of the measure is to stimulate investments of a limited amount which are an essential part of the life cycle of an innovative start-up, both in the initial stages and in its transition to an innovative SME, once the 5 years have elapsed since joining the section special register of companies.
Precisely because it is aimed exclusively at individuals, it completes and supplements the framework of measures aimed at stimulating the participation of innovative start-ups and SMEs in capital, which is currently based on two pillars:
- tax incentives for investments made by natural and legal persons in start-ups and innovative SMEs which focuses on a higher investment cut (tax concessions of 30% up to € 1 million for individuals and 30% up to € 1.8 million for legal entities);
- the National Innovation Fund which intervenes with direct and indirect investments in qualified minorities in the capital of innovative companies with generalist, vertical or Funds of Funds, to support start-ups, scaleups and innovative SMEs.
The aforementioned paragraphs are intended to encourage capital raising for those innovative start-ups and innovative SMEs, enhance their capitalization, encourage growth and bridge the gap between Italy and other EU countries in venture capital.
Paragraph 10 (Investor Visa for Italy) concerns the halving of the minimum thresholds for the attraction of investments towards joint stock companies and innovative start-ups.
Law 11 December 2016, n. 232 (“2017 Budget Law”) introduced (art. 1, paragraph 148) a new type of visa dedicated to non-EU citizens who intend to make significant investments in strategic areas for the economy and for Italian society; for this purpose, article 26-bis, entitled “Entry and residence for investors”, which provides that non-EU citizens who can apply for a visa, are added to Legislative Decree 286/1998 (Consolidated Law on Immigration) they invest in one of the following types: 2 million euros in medium-long term government bonds; at least 1 million in Italian joint stock companies (500 thousand euros in the case of innovative start-ups pursuant to law decree 179/2012); at least 1 million euro for donations in the cultural, environmental and social fields. The definition of the procedures and procedures for applying for a visa authorization is left to an implementing decree, issued by the Minister of Economic Development, with the concert of the Minister of Foreign Affairs and International Cooperation and the Minister of the Interior, on 21 July 2017. The visa clearance application procedure, managed by the Ministry of Economic Development, takes place through the investorvisa.mise.gov.it platform.
From the first implementation phase of the Investor Visa program, it emerges that the measure has so far met with limited interest. The provision referred to in paragraph 10 therefore aims to encourage the use of the program, with particular emphasis on forms of investment of a productive nature, by halving the financial thresholds for transactions directed towards capital companies (from 1 million to 500 thousand euro) and, in particular, towards innovative start-ups (from 500 thousand to 250 thousand euro). The latter, in particular, face a significant delay in terms of the availability of risk capital compared to other innovative European companies. The Dealroom.co 2019 report, for example, highlights that in the third quarter of 2019 the size of the Italian venture capital market was 13 times smaller than in the United Kingdom, 10 times less than in Germany, and 5 times less than France.
The reduction of the financial threshold would make Italy more competitive in the European context, which currently has 20 national residence schemes for foreign investors. The report “Citizenship and residence schemes for investors in the European Union” published by the European Commission at the end of 2018 highlights that Italy is positioned in the range of countries that have the highest financial thresholds. Countries like France and Spain require significantly lower financial resources. While paragraph 7 provides for the reduction of the minimum thresholds for the types of investment in joint stock companies and innovative start-ups, paragraph 8 aligns the amount of the corresponding minimum financial resources required from investors.
6. Specific incentives for video game production
Further rules were then prepared to encourage Italian video game production (see paragraphs 12 to 18 of art. 38 of Legislative Decree 34/2020).
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