Incentives for innovative start-ups and technology companies in Italy

Introduction

Since 2012, Italy has built an entire regulatory ecosystem dedicated to those wishing to do business in innovation and technology, providing tax relief for investors, interest-free loans and tax credits for research. This sector-specific legislation is generally revised with each annual Budget Act, and in 2026 too, a number of long-standing measures were substantially amended.

This article provides an overview designed for those looking at Italy as a potential start-up founder or an established entrepreneur wishing to understand which incentives they may be eligible for.

The definition of an innovative start-up under Italian legislation

Many of the incentives described below are not available to just any business, but require the status of an innovative start-up, a legal designation introduced by Decree-Law 179/2012 (the so-called ‘Start-up Act’) and significantly revised by Law 193/2024, which came into force on 18 December 2024.

The main requirements

The main requirements for obtaining this status are as follows:

• to be a micro, small or medium-sized enterprise as defined by the European Union (Recommendation 2003/361/EC);
• to have as its primary corporate purpose the development, production and marketing of innovative products or services with high technological value (enterprises whose primary activity is consultancy or agency work are excluded);
• be registered in the special section of the Companies Register, via an online application to the Chamber of Commerce;
• meet at least one of the following three criteria:

1. research and development expenditure representing an adequate proportion of the value of production;
2. the predominant employment of highly qualified staff (PhD holders, researchers);
3. ownership of a patent or registered software related to the business’s activities.

The duration of the status following the 2024 reform

Previously, the status of ‘innovative start-up’ was automatically granted up to a maximum number of years. Law 193/2024 has radically reformed the legislation, and the process is now structured in phases.

• initial phase: maximum duration of 3 years from incorporation, subject to the requirements set out above;
• first extension: up to 5 years in total, but only if the company demonstrates at least one of a number of additional growth and development requirements (for example, an increase of more than 50 per cent in turnover or employment from the second to the third year, R&D expenditure reaching a certain ratio of the value of production, or a trial contract with a public administration);
• ‘Scale-up’ phase: beyond the fifth year, further two-year extensions are possible, subject to specific and even more stringent financial criteria (for example, a capital increase with a share premium exceeding one million euros subscribed by an institutional investor);
• those who fail to meet the requirements are transferred, if eligible, to the special section of the Companies Register reserved for innovative SMEs, a status reserved for a more mature phase. From 2026, this status will benefit from a significantly more limited package of tax incentives, as we shall see shortly.

The non-tax benefits of the status

Being registered as an innovative start-up entails a series of operational simplifications designed to reduce costs and red tape in the early years:

• total exemption from stamp duty and Chamber of Commerce administrative fees for compliance obligations related to the status;
• the option to remunerate staff, suppliers and directors with shares in the company (work for equity), with favourable tax treatment;
• exceptions to ordinary company law, for example in the creation of share classes with different rights, even for limited liability companies (S.r.l.);
• priority and free access to the SME Guarantee Fund, with public coverage of up to 80 per cent of the bank loans requested;
• the option to raise capital via authorised equity crowdfunding platforms;
• more favourable business insolvency regulations in the event of the business project’s failure.

The (uncertain) tax incentives for those investing in 2026

One of the aspects that makes an innovative start-up attractive to private investors and business angels is the possibility, for those investing risk capital, to obtain a tax relief through the mechanism of tax deductions.

In this regard, 2026 has been a year of significant instability and, at the time of writing, the situation is still awaiting confirmation.

Historically, Article 29 of Decree-Law 179/2012 provided for an IRPEF tax deduction (for individuals) or an IRES tax deduction (for companies) equal to 30 per cent of the amount invested, up to a high annual ceiling — one million euros for individuals and 1.8 million for companies.

This measure was classified as state aid subject to authorisation by the European Commission. The previous authorisation expired on 31 December 2025, and the Italian Government failed to submit its application for renewal in time.

At the same time, the 2026 Budget Law did not introduce a replacement measure. From 1 January 2026, it is therefore considered that the deduction is no longer available for new investments, given the lack of a new European authorisation.

However, an enhanced IRPEF tax relief remains in force for individuals only, granted under the European ‘de minimis’ Regulation (Regulation (EU) No 2831/2023), with certain key limits available on the official MIMIT website:

• eligible investment up to €100,000 per tax year;
• the obligation to hold the stake for at least three years;
• the requirement for the beneficiary start-up to submit a prior application via the MIMIT platform before the investment is made;
• compliance with the ceiling of €300,000 in “de minimis” aid received by the start-up over three financial years.

The Smart&Start Italia zero-interest loan

In addition to incentives for investors, there is a government scheme designed specifically to support the development of start-ups, which consists of a significant subsidised finance facility.

The Smart&Start Italia scheme, managed by Invitalia on behalf of the Ministry of Enterprise and Made in Italy, consists of a zero-interest loan, without collateral, covering up to 80 per cent of certain eligible expenses (a percentage that may rise to 90 per cent for start-ups predominantly made up of women or people under 36, or with a PhD holder on staff).

The amount disbursed can range from €100,000 to €1.5 million, and furthermore, in the southern regions, between 30% and 35% of the loan may be provided as a non-repayable grant.

Innovative start-ups established for no more than 60 months are eligible to apply for this scheme, as are groups of individuals not yet incorporated as a company and foreign companies intending to open an operational office in Italy.

The scheme is always open and managed on a ‘first-come, first-served’ basis; in other words, there are no rankings or fixed deadlines, and applications are assessed in chronological order.

R&D Tax Credit and Patent Box: incentives open to all technology companies

Not all Italian incentives for innovation require ‘innovative start-up’ status. Two schemes, in particular, are open to any company investing in research, development or intellectual property. At present, the main ones are as follows:

• Research and Development Tax Credit: equal to 10 per cent of eligible expenditure, up to a limit of 5 million euros per year per beneficiary. It is a long-term scheme, guaranteed by law until the 2031 tax year, which makes it more predictable than other incentives;
• Patent Box: this consists of a super-deduction of 110 per cent of the costs incurred for research, development and maintenance of eligible intangible assets (copyright-protected software, patents, protected designs and models), for the purposes of IRES and IRAP. Once exercised, this option binds the company for five financial years.

The two measures can be combined, but subject to a complex coordination mechanism that prevents the same expenditure from qualifying for the benefit twice.

The Technological Innovation tax credit has not been extended, whilst the Design tax credit remains in force and has been strengthened.

Conclusions on the evolving landscape

Ultimately, the Italian system of incentives for innovation is generous but not stable over time: rates, ceilings and even the very existence of a measure can change from one year to the next, often for reasons linked to European authorisations on state aid rather than to decisions on Italian domestic policy.

For this reason, before drawing up an investment plan or applying for funding, it is always good practice to check the legislation in force for the relevant year.

References

– MIMIT (Ministry of Enterprise and Made in Italy) — sezione Startup innovative: https://www.mimit.gov.it/it/impresa/competitivita-e-nuove-imprese/start-up-innovative

– MIMIT (Ministry of Enterprise and Made in Italy) — Incentivi fiscali “de minimis” per investimenti in startup e PMI innovative: https://www.mimit.gov.it/it/impresa/competitivita-e-nuove-imprese/start-up-innovative/incentivi-de-minimis

– Invitalia — Smart&Start Italia: https://www.invitalia.it/incentivi-e-strumenti/smartstart-italia

– Agenzia delle Entrate (Revenue Agency) — sezione agevolazioni per ricerca, sviluppo e innovazione: https://www.agenziaentrate.gov.it

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