New opportunities for startups and investors: the annual Market and Competition Law 2024

The ever-changing legislative climate can be a challenge, but also an opportunity, for both companies and investors. The new annual Market and Competition Law, published in the Official Gazette on December 17, 2024, has introduced several novelties in strategic sectors of the economy, among them, that of innovative startups and SMEs, making, with respect to these realities, changes that could have a significant impact on the investment landscape in Italy. In this article, we will explore the main novelties introduced of the law in the world of innovative startups and SMEs.

Innovative Startups

First of all, the measure introduces important changes regarding the requirements and conditions for obtaining and maintaining innovative startup status. Both aspects are crucial for a startup to benefit from the advantages provided by the legislation.

Specifically, in addition to the requirements already stipulated in the industry regulations, it is clarified that the innovative startup must also be a micro, small, or medium-sized enterprise ("MPMI"), according to EU regulations, and that it must not carry out predominantly agency or consulting activities.

With regard to the conditions necessary to maintain the status of innovative startup at the Companies Registry, the measure made significant changes compared to the previous regime.

In fact, the innovative start-up, initially remains registered in the special section of the Companies Register for three years from the date of registration.

After the first three years from the date of registration, it can extend the period of stay up to five years, provided that at least one of the requirements detailed in paragraph 2-bis of Article 28 of the measure is met and, in particular:

• 25% increase in research and development expenses;
• signing of at least one experimental contract with a public administration;
• increase, between the second and third year, in revenues derived from core operations or employment by at least 50 percent;
• establishment of a capital reserve of more than 50,000 euros by obtaining a converting loan or a capital increase with a premium that is subscribed, for a minority share, by professional investors, incubators, accelerators or achieved through equity crowdfunding and an increase in research and development expenses to at least 20%;
• obtaining at least one patent.

After the first five years from the date of registration, the period of stay in the special section of the registry can be extended for two additional extension periods, of two years each (and thus for a total of four years), provided that at least one of the following requirements is met:

• a capital increase, with share premium, of at least 1 million euros to be subscribed by a collective investment undertaking, for each extension period;
• annual increase in revenues derived from core operations of more than 100 percent.

The measure also dictates transitional provisions intended to regulate the position of start-ups that, at the time of its entry into force, are already registered in the special section of the Companies Register, specifying that:

• if the start-up company has been registered in the special section of the Companies Register for more than 18 months, it will have the right to remain registered there beyond the third year provided that at least one of the requirements set forth in paragraph 2-bis (indicated above) is met within 12 months after the expiration of the third year;
• if the start-up has been registered in the special section of the Register of Companies for less than 18 months, it will have the right to remain registered in it beyond the third year provided that at least one of the requirements set forth in paragraph 2-bis (above) is met within six months after the expiration of the third year.

Investment tax incentives: what's new

The measure also intervened on the tax incentives provided for those who invest in innovative start-ups.

With regard to the Investment Tax Incentives represented by the IRPEF/IRES deduction equal to 30 percent of the investment made, it is specified that:

• They are granted for a maximum of five years from the date of registration of the innovative start-up in the special section of the business register;
• do not apply where a qualified shareholding is acquired with the investment, i.e., more than 25 percent of the share capital or governance rights of the company;
• do not apply if the taxpayer is also a service provider to the start-up, either directly or through a subsidiary or associated company, for a turnover exceeding 25 percent of the eligible investment.

With regard, on the other hand, to Incentives under the "de minimis" regime, represented by an IRPEF deduction equal to 50 percent of the investment made, the measure specified that:

• As of January 1, 2025, the deduction percentage increases to 65 percent;
• are granted only in relation to investments made in innovative start-ups that, at the time the investment is made, are found to be duly registered in the special section of the Companies Register until the third year from the date of registration;
• do not apply where a qualified shareholding is acquired with the investment, i.e., more than 25 percent of the share capital or governance rights;
• do not apply if the taxpayer is also a service provider to the start-up, directly or through a subsidiary or associated company, for a turnover exceeding 25 percent of the eligible investment;
• any disposal, even partial, of the investment before three years does not result in forfeiture of the benefit for cases of disposal that are independent of the taxpayer's will;
• in the case of converting investments, the deduction accrues from the date of the disposition of the transfer of the invested sum, provided that this sum is entered as a capital reserve.
• these incentives no longer accrue for investments made in innovative SMEs, unlike previously.

Incubators and accelerators: expansion and new opportunities

The new law has intervened on the definition of certified incubators, which, following the entry into force of the regulatory text, includes not only entities that carry out support activities, but also all those entities that carry out support and acceleration activities for innovative start-ups, providing, as well, for the establishment of a special section of the Business Registry in which these entities can register.

It turns out, therefore, that the number of entities that will be able to apply for registration in the special section of the Companies Register has been significantly expanded.

Also with regard to certified incubators and accelerators, the measure establishes that, starting in 2025, a tax credit equal to 8 percent of the amount invested by the certified incubator and/or accelerator in the capital of innovative start-ups will be granted - whether the investment is made both directly and indirectly (through undertakings for collective investment (OICR) or other companies that invest primarily in innovative start-ups).

In this case, the investment is eligible for relief up to a maximum of €500,000 per year and must be maintained for at least three years. Any disposal, even partial, of the investment results in forfeiture of the benefit.

Additional provisions to encourage investment in innovative start-ups

Finally, the Law introduces a number of provisions aimed at further encouraging investment, both institutional and private, in innovative start-ups.

Regarding measures to promote investment by institutional entities, the Law intervened on the investment benefits introduced by the 2017 Budget Law and consisting of a tax exemption on capital gains (capital gains) generated by qualified investments made by pension funds.

Specifically, as of 2025, in order to continue to benefit from this tax break, at least 5 percent of the total qualified investments made by these pension funds must be allocated to venture capital funds, a percentage that is set to increase to 10 percent as of 2026.

Regarding measures to promote investment by private entities, on the other hand, the measure expanded the conditions for obtaining the so-called "Investor VISA." This is a special residence permit, lasting longer than 3 months, granted to foreign nationals who want to invest in Italy.

With the entry into force of the new law, Investor VISA is granted not only to foreign investors who invest at least €500,000 in Italian companies or €250,000 in innovative startups, but also to all those foreign investors who allocate at least €500,000 in Venture Capital Funds.

A future of opportunities

the annual Market and Competition Law introduces a series of measures designed to transform the investment landscape in Italy. Changes to the requirements for staying on the business register, enhanced tax incentives and new provisions in favor of certified incubators and accelerators are concrete signs of a regulatory intent geared toward stimulating innovation and strengthening the Italian entrepreneurial ecosystem.

Tax measures, such as the deduction for investments in innovative startups and the tax credit for incubators and accelerators, represent significant incentives, especially for those wishing to invest in high-potential startups. Added to this are interventions to encourage institutional investment and the entry of foreign capital, thus creating a favorable environment for both local and international investors.

In sum, the new law not only facilitates the growth of start-ups, but also offers new opportunities to attract capital, stimulating a steady flow of innovation.

For anyone who is trying to understand and make the most of these changes, the message is clear: regulatory innovation brings with it a range of possibilities for businesses and investors alike. Through equity crowdfunding, it is possible to actively participate in these changes and help shape the future of innovation in Italy.

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