Corporate and Commercial - Diritto Amministrativo e Appalti

Innovative SMEs: the Italian legislative framework

Decree Law No. 3 of 24 January 2015, known as “Investment Compact”, has extended most of the benefits previously reserved only for innovative start-ups to a broader range of companies:  innovative SMEs, that is to say, all Small and Medium Enterprises operating in the field of technological innovation, regardless of their incorporation date, business sector or stage of maturity.

Following the main guidelines of international economic thinking, the Italian legislator has recognised the key role of technological innovation for employment, competitiveness and growth.

Therefore, Italian lawmakers – by enacting Decree Law No. 3/2015 – have fostered the enhancement of the technological value of SMEs and the propagation of technological innovation throughout the domestic productive fabric.

Decree Law 3/2015 represents a “second stage” in the process of reforms started in 2012 with Decree Law 179/2012 (“Decreto Crescita 2.0”), introducing a huge and strong package of measures in support of new innovative enterprises of high technological value, i.e.“innovative start-ups”.

The concept itself of innovative start-ups and innovative SMEs indeed covers two subsequent stages of a continuous, sequential and consistent growth process. The Government’s objective is, indeed, not only to support the start-up phase of Italian innovative businesses, but also, based on the data on innovative start-ups gathered in the last two years, to speed up the size growth and strengthening of companies with a high tech business proposition.

The legislation at issue applies only to those Small and Medium Size Enterprises as defined in Recommendation 2003/361/EC[1] that meet the requirements of:

  1. being incorporated as a joint-stock company (S.p.A.), a limited liability company (S.r.l.) or a partnership limited by shares (S.a.p.a.), including cooperatives;
  2. employing fewer than 250 persons and having an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.

Moreover, in order to be considered innovative, SMEs must meet the following requirements:

  • having their headquarters in Italy or in another EU country, but at least one production site or branch in Italy;
  • having their last accounts certified by an auditor or by an auditing firm registered in the relevant register. This point requires some consideration.

The financial statements of companies incorporated as a S.p.A. and S.r.l. (who are required to appoint a supervisory body or an auditor) are statutorily subject to audit. For those S.r.l.s who are not required to appoint a supervisory body or an auditor – and, therefore, to have an audit –, the question arises of how the requirement at issue can be satisfied.

The Italian Ministry of Economic Development has clarified that, for companies who are not obliged to have their accounts audited, the requirement in question is deemed met when their accounts are audited based on a voluntary assignment by the administrative body, even if given after their approval, but in any event before filing the application for registration.

  • not having their shares listed in a regulated market;
  • not being registered as an innovative start-up or a certified incubator in the special section of the Italian Company’s Register;
  • not distributing profits;

In addition to the above, SMEs must be of an innovative character, which means they must meet at least two of the following requirements:

  • at least 3% of the higher value between their expenses and turnover must be allocated to research and development;
  • at least 1/5 of their total workforce must be PhD students, PhD holders or research fellows; alternatively, 1/3 of their total workforce must hold a Master’s degree;
  • they must be the owner, depositary or licensee of a registered patent (industrial property) or the owner of a registered original computer programme.

Innovative SMEs must register in the respective special sections of the Italian Companies’ Register created ad hoc at the Chambers of Commerce. Decree Law 3/2015 provides for significant benefits in favour of innovative SMEs from a corporate and tax point of view as well as simplified access to the “Fondo di Garanzia” and support to the process of internationalisation. More specifically, such benefits are:

  1. Flexible corporate management: the most significant derogations from company law rules apply to innovative SMEs incorporated as limited liability companies (S.r.l.). They are allowed to: (i) issue classes of shares with special rights (e.g. classes of shares that do not confer voting rights or that confer voting rights which are not proportional to the interest held); (ii) carry out transactions on treasury shares; (iii) issue participating financial instruments (quasi-equity instruments); (iv) offer equity shares to the public. Many of such measures imply a radical change in the financial structure of limited liability companies (S.r.l.), making them more similar in their structure to joint stock companies (S.p.A.).
  2. Exemption from the regime applying to companies suffering from systematic losses: during their years of operation, high-risk innovative enterprises may incur losses. If the available capital is insufficient, such losses can have a direct impact on their share capital. Where losses result in the share capital being reduced by over 1/3, the shareholders’ meeting shall reduce the capital proportionally to the losses incurred by the following financial year. A 12-month extension is granted to innovative SMEs, during the term of which their capital can be reduced proportionally to the losses incurred. While ordinary companies are required to reduce their capital by the following financial year, SMEs are allowed to do so by up to two financial years after suffering losses.
  3. Tax incentives for corporate and private investments in Innovative SMEs who have operated in the market for no more than 7 years made by individuals or legal entities. Such incentives apply both in case of direct investment in SMEs and in case of indirect investment made through other companies investing primarily in Innovative SMEs. For innovative SMEs who have operated in the market for more than 7 years, tax allowances apply only if they are able to provide a development plan for products, services or processes that are new or significantly improve the state of the art in their industry.
  4. Equity crowdfunding: in July 2013, CONSOB provided for the possibility for innovative start-ups to raise venture capital through on-line portals. As a result, Italy became the first country in the world to have introduced a specific set of rules on equity crowdfunding, allowing innovative start-ups to raise capital, also from abroad, through certified web portals.
  5. Fast-track, simplified and free-of-charge access for innovative start-ups and certified incubators to the Fondo di Garanzia[2], i.e. a Government Fund that supports access to credit through guarantees on bank loans.
  6. Increased support to the process of internationalisation provided by the Italian Trade Agency (ICE), including assistance in legal, corporate and fiscal activities, real estate and credit matters, and activities aimed at favouring the matching with potential investors.

Finally, innovative SMEs can benefit from two important measures in favour of technological innovation:

  1. Tax credit for research and development: Italian Financial Act of 2015[3] (Article 1, paragraph 35) has redefined the rules on tax credit for investments in research and development as introduced by Decree “Destinazione Italia”, postponing its effect to 2015, whilst at the same time diluting the period of fruition until 2019. Tax credit is granted to companies investing in R&D, up to a maximum yearly amount of 5 million Euros for each beneficiary. The benefit can reach 50% for investments in R&D involving the employment of highly-skilled personnel or costs for research performed extra moenia, e. in collaboration with universities and research entities or organisations and/or with other companies such as innovative start-ups. The required implementation regulations were adopted by Ministerial Decree of 30 July 2015 of the Minister of Economy and Finance, in agreement with the Ministry of Economic Development[4].
  2. Patent Box: Italian Financial Act of 2015 (Article 1, paragraphs 37-45) introduced fiscal benefits on income deriving from the use of intellectual property. So-called “Patent Box”, applicable since 2015, allows companies to exclude from tax 50% of the income sourced from commercial use of intangible assets (e.g. copyrights, industrial patents and commercial brands). The more recent Investment Compact has enhanced such instrument, fully including trademarks and commercial brands among the intangible assets falling within the scope of the tax benefit. Patent Box represents a powerful measure for attracting investment in the value of intangible capital, brands and industrial models. The relevant implementation provisions were subsequently introduced by Ministerial Decree of 30 July 2015.

In conclusion, it seems that the new package is versatile and original, especially for the solutions designed for corporate law profiles. This legislative news represents an important contribution for the innovation development. Moreover it allows Italian SMEs to be even more competitive, dynamics and innovative.


[1] Commission Reccomendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises.

[2] The “Fondo di Garanzia per le PMI” is an Italian guarantee fund for SMEs in order to ensure a partial insurance to the loans granted by lenders to small and medium enterprises.

[3] Law No. 190 of 23 December 2014, “Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato” (2015 Stability Law)”(Official Gazette No. 300 of 29-12-2014 – Ordinary Supplement No. 99).

[4] See

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