News from the "Decreto Rilancio": tax incentives under the de minimis regime
Ordinary tax incentives for investing in startups and innovative SMEs
The "Decreto Rilancio" (Decree Law of May 19, 2020, No. 34) introduced a tax benefit of up to 50% for investments in startups and innovative SMEs under the "de minimis" regime.
The decree introduced an income tax deduction (not applicable to IRES subjects) equal to 50% of the amount invested as capital and premium in one or more innovative startups or SMEs, either directly or through investments in collective investment schemes (OICR) that mainly invest in startups and innovative SMEs.
The deduction applies to those who have invested in startups and innovative SMEs registered in the special section of the Business Register.
A necessary requirement to benefit from the incentive is to maintain the investment for three years. In case of sale - even partial - the benefit already obtained must be returned.
This increase to 50% in tax deductions falls under the aid granted under the discipline known as "de minimis". Each investor can independently verify the amount of aid received under the "de minimis" regime by the company in the last three years (up to a limit of €200,000) on the National Register of State Aid. Alternatively, it can be requested directly from the company of interest.
The legislator has provided some limitations. The maximum deductible investment amounts are:
- €100,000.00 per year for investments in innovative startups;
- €300,000.00 per year for investments in innovative SMEs.
Only in the case of investments in innovative SMEs, the application of the increased deduction percentage takes priority over the ordinary deduction up to €300,000. So, for example, if an investor invests €500,000 in an innovative SME and the company has not received "de minimis" aid in the last three years, they would benefit from a 50% deduction on €300,000 and a 30% deduction on the remaining €200,000.
Within 60 days of the entry into force of the "Decreto Rilancio," the implementing decree containing the regulations should have been issued. However, as of today, it has not yet been issued.
Individuals who invest in the share capital of innovative startups and Small and Medium Enterprises (SMEs) can benefit from an income tax deduction of 30% of the amount invested, up to a maximum amount of €1,000,000 per year, and the obligation to maintain the investment for a minimum of 3 years. If the tax credit exceeds the gross tax, the excess can be carried forward as a deduction for up to 3 subsequent years.
Legal entities that invest in the share capital of innovative startups and SMEs can benefit from a deduction from the taxable income (IRES) of 30% of the amount invested, up to a maximum amount of €1,800,000 per year, and the obligation to maintain the investment for a minimum of 3 years. In case of insufficient taxable base, the excess can be deducted from the overall income of subsequent tax periods, but not beyond the third, up to the amount of the excess.
The incentives for investments in innovative SMEs are applicable both for direct investments and for indirect investments through OICR and other companies that mainly invest in startups or innovative SMEs.
The right to the benefit for investments in startups or innovative SMEs expires if, within 3 years from the date of the investment, any of the following events occur:
- Sale, even partial, for consideration, of the equity investments;
- Reduction of share capital and/or distribution of reserves or other funds constituted with share premiums from the issuance of shares or stakes in startups/innovative SMEs or companies that mainly invest in startups/innovative SMEs, whose shares are not listed on a regulated market or on a multilateral trading system;
- Withdrawal or exclusion of investors;
- Loss, by the startup/innovative SME, of one of the requirements necessary for the qualification as a startup or innovative SME.
For investments in innovative startups, the loss of the requirements provided for in Article 25, paragraph 2, of Decree Law No. 179/2012 by the innovative startup due to:
- Expiration of 5 years from the date of incorporation;
- Exceeding the annual turnover threshold of €5,000,000;
- Listing on a multilateral trading system;
- Transfers free of charge or due to the death of the taxpayer, as well as transfers resulting from extraordinary transactions referred to in Chapters III and IV of Title III of the consolidated text on income taxes (Presidential Decree No. 917/1986) do not constitute causes for expiration.
For investments in innovative SMEs, transfers free of charge or due to the death of the taxpayer, as well as transfers resulting from extraordinary transactions referred to in Chapters III and IV of Title III of the consolidated text on income taxes (Presidential Decree No. 917/1986) do not constitute causes for expiration. The expiration takes effect in the tax period in which one of the causes mentioned above occurs and entails the obligation to return the tax savings already received (with legal interest). This also occurs in the case of partial sale of the investment before the mandatory holding period expires.