Summary of Regulatory Changes Introduced by Law No. 193 of December 16, 2024, and Law No. 162 of October 28, 2024, Highlighting the Changes Compared to Previous Legislation

NEW DEFINITION OF INNOVATIVE STARTUP

The definition of an innovative startup has been updated with Law No. 193/2024 to include more specific requirements, aligning with European directives and market needs. According to the new regulation, an innovative startup must:

• Be classified as a micro, small, or medium-sized enterprise (SME) according to Recommendation 2003/361/EC, with an annual turnover of less than €50 million or total assets not exceeding €43 million (a startup owned by a large enterprise is therefore excluded);
• Have a social object exclusively or predominantly focused on the development, production, and commercialization of innovative products or services with high technological value;
• Exclude the predominant activity of consultancy; thus, startups primarily operating as agencies or providing consultancy services are no longer included in the category;
• Invest in research and development, allocating at least 15% of annual turnover or operating costs to innovative projects;
• Demonstrate a significant technological component through registered patents, developed software, or highly qualified teams.

EXTENSION OF THE SPECIAL SECTION REGISTRATION IN THE BUSINESS REGISTER UP TO 5 YEARS

By modifying the definition of an innovative startup, the “standard” duration for remaining in the special section of the Business Register has been reduced to three years, although certain requirements make it possible to extend this period.

Maximum Duration: Innovative startups can remain registered in the special section of the register for up to 3 years.

To qualify for the extension to 5 years in the registry of innovative startups, at least one of the following 5 requirements must be met:

A) A revenue increase from core business operations (or from activities identified under item A1 of the income statement), or employment growth, exceeding 50% from the second to the third year;

B) Research and development expenditures increased to 25% of total production value, compared to the previous 15% requirement;

C) The obligation to enter into experimentation contracts with at least one public administration or large enterprise;

D) The creation of a capital reserve exceeding €50,000, through obtaining funding via convertible financing or a capital increase at a premium that results in a minority stake held by a third-party professional investor, certified incubator or accelerator, regulated investor, business angel, or through equity crowdfunding via an authorized platform, along with an increase to 20% in research and development expenditures;

E) The acquisition of at least one patent.

Transitional Provisions for Already Registered Startups: Innovative startups registered in the special section of the Business Register as of the date of entry into force of this law have the right to remain registered beyond the third year, provided that they meet the new requirements as follows:

• For startups registered in the register for less than eighteen months, they must comply within six months from the expiration date.
• For startups registered in the register for more than eighteen months, they must comply within twelve months from the expiration of the third year.

Startups that no longer meet the criteria for innovative startups due to this law, if conditions apply, may re-register.

EXTENSION OF REGISTRATION IN THE SCALE-UP PHASE TO A MAXIMUM OF 9 YEARS

Startups in the scale-up phase can extend their registration for up to a maximum of 9 years, provided that at least one of the following two additional requirements is met:

• A revenue increase from the core business operations (or activities identified under item A1 of the income statement) exceeding 100% annually.
• A capital increase at a premium by a collective investment scheme, amounting to over €1 million for each extension period;

TAX INCENTIVES FOR INVESTMENTS IN STARTUPS

Individuals
Individuals who invest in the capital of innovative startups are granted a 30% tax deduction for a maximum investment amount of €1,000,000, provided the investment is maintained for at least three years. The deduction can be applied to the IRPEF (Personal Income Tax) in the year of investment and in the subsequent periods, but no later than the third year.
Alternatively, for investments made by individuals under the de minimis regime, the IRPEF deduction increases to 65% starting from January 1, 2025 (previously 50% until 2024), up to a maximum of €100,000 per year.
This measure, introduced to further encourage investments in innovative startups, is subject to the “de minimis” regime, which limits the total amount of state aid an enterprise can receive.
The increase in the deduction under the de minimis regime applies provided that the investment does not result in a qualified participation exceeding 25% of the company’s share capital or governance rights. The right to the deduction does not apply if the taxpayer is also a service provider to the startup, directly or through a controlled or associated company, for a turnover exceeding 25% of the investment being benefited.
The deduction under the de minimis regime applies only to innovative startups up to the third year of registration in the special section of the business register.
The maximum deductible investment cannot exceed €100,000 per tax year and must be maintained for at least three years.

Legal Entities
Companies subject to corporate tax (IRES), other than innovative startups, are granted a 30% deduction on IRES for investments, up to a maximum amount of €1,800,000, in the capital of one or more innovative startups, provided the investment is maintained for at least three years.

Investment Limit
NEW: The incentives do not apply if the investment generates a qualified participation exceeding 25% of the share capital or governance rights, or if the taxpayer is also a service provider to the startup, directly or through a controlled or associated company, for a turnover exceeding 25% of the eligible investment.

TAX INCENTIVES FOR INVESTMENTS IN SMEs
The opportunity to benefit from a 50% IRPEF tax deduction on investments of up to €300,000 made by individuals in the capital of innovative SMEs expires on December 31, 2024. (The investment must be maintained for at least three years).

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