Innovative Small and Medium-sized Enterprises (Innovative SMEs) represent a strategic pillar for Italian technological innovation, benefiting from a regulatory framework designed to support their growth and competitiveness. The favorable regime, introduced by Article 4 of Decree Law 3/2015 and made permanent in 2017, offers tax advantages and operational tools comparable to those for innovative startups, with particular attention to the expansion and consolidation phases.

A crucial aspect, often overlooked, concerns the transition from innovative startups to the status of innovative SMEs: a passage that allows companies to maintain important tax benefits even after exceeding the typical time limits of startups.

Innovative SMEs are capital companies (LLCs, Corporations, cooperatives) or equivalent entities operating in sectors with high technological content, regardless of the production sector. To access the benefits, they must satisfy both cumulative and alternative requirements:

Cumulative requirements:

• Residence: in Italy or in EU/EEA countries with a production site in Italy
• Certified financial statements: by auditors registered in the Register of Statutory Auditors, with a three-year appointment
• Absence of listing on regulated markets

Alternative requirements (at least two):

• R&D expenditure ≥ 3% of production value, including personnel costs, prototyping, and patent protection
• Qualified personnel:
  • ≥20% employees with doctorates or three years of certified research experience
  • ≥33% with master’s degrees
• Ownership of industrial property rights (patents, registered software) directly related to the company’s business activity

Registration in the special section of the Business Register takes place through a Unified Communication, accompanied by self-certification of requirements and annual updates by June 30th. Failure to communicate results in cancellation within 60 days, with monetary penalties of up to €5,000.

• Company name, corporate purpose, and description of innovative activities
• List of shareholders and investees, certified financial statements in XBRL format
• Details of R&D expenditure and intellectual property rights

Personal Income Tax Deductions:

• 30% on investments up to €1,000,000 annually for individuals
• 50% under the de minimis regime for contributions ≤€300,000 (2020-2024), with tax credit for excesses

Corporate Income Tax Deductions:

• 30% on investments up to €1,800,000 annually for companies

Exemptions:

• Capital gains on the sale of equity investments for individuals
• Remuneration through stock options exempt from taxes and contributions

Investments must be maintained for at least 3 years, under penalty of forfeiture of benefits. The overall ceiling for eligible contributions is set at €15 million per SME.

Innovative startups that exceed 7 years from the first commercial sale can transition to the status of innovative SMEs, provided they demonstrate that they are in an expansion phase. This transition requires:

• External evaluation of growth potential (mandatory within 10 years from the first sale)
• Business plan for new products/markets, with investments ≥50% of the five-year average turnover

• Continuity of tax incentives beyond the time limits of startups
• Access to dedicated financing (e.g., Central Guarantee Fund)

• Loss of requirements: Cancellation from the Register within 60 days, with obligation to return the benefits
• Purchase of shares from third parties: Not included among eligible investments, as specified by the interpello response 219/2024

Equity crowdfunding is only allowed for the issuance of new shares, excluding secondary market transactions.

Starting from 2025, the personal income tax deduction rate for investments in innovative SMEs will return to the standard rate of 30% on investments up to €1,000,000 annually for individuals. This represents a return to the structural regulations after the period of enhanced incentives currently in force.

For 2024 only, the following still applies:

• A temporary de minimis regime with a 50% personal income tax deduction for investments up to €300,000 (Law 193/2024 which modified Article 4 paragraph 9-ter of Decree Law 3/2015)
• The possibility to use as a tax credit any excess of the deduction over the gross personal income tax (introduced by Law 162/2024)

Innovative SMEs constitute an essential means to extend the life cycle of startups, ensuring continuity in R&D investments. However, the complexity of the compliance requirements (financial statement certifications, personnel requirements) requires careful planning with specialized professionals.

The interaction between tax incentives, alternative finance instruments, and internationalization policies outlines a virtuous model, albeit still underutilized by Italian companies.

Article 4 DL 3/2015, Ministerial Decree 7.5.2019, Law 193/2024.

Disclaimer: This article is for informational purposes only. For personalized advice, contact Taxdry professionals.