Understanding the 2024 Tax Benefits for Innovative Start-Up Investments

Maxi Tax Deduction for Investments in Innovative Start-ups

In 2024, a substantial tax deduction is expected for investments in innovative start-ups, with a tax relief of up to 300,000 euros.
Let’s dive into how tax breaks work and the specific amounts involved.

Investing in Innovative Start-ups

Investing in start-ups and SMEs can be highly beneficial as there are two types of deductions available: a traditional 30% deduction and a reinforced 50% deduction.
The 2017 Budget Law introduced a significant tax relief for those investing in risk capital of start-ups, conditioned upon holding the investment for at least three years.

How to Obtain Tax Benefits for Investments in Innovative Start-ups and SMEs

What Is an Innovative Start-up?

Investments in innovative start-ups are fiscally facilitated to ensure their liquidity and successful business initiation.
But what exactly constitutes an innovative start-up? Understanding this is crucial to unlock the envisaged tax breaks.

Firstly, in terms of legal form, it must be a capital company, possibly cooperative.
Furthermore, to qualify as a start-up, it should not be older than 5 years.
Additionally, the company must be located in Italy, the EU, or EEA member states.

The start-up’s core activity should focus on developing innovative products and services with high technological value.
Importantly, it must not originate from the merger, split, or transfer of other activities, affirming its genuinely new establishment.

Similarly, innovative SMEs share these characteristics without the 5-year restriction.
A start-up attains innovative status through digital sign-up in the special section of the Business Register.

30% Deduction for Investments in Start-ups

The 30% deduction for those investing in risk capital of innovative start-ups or innovative SMEs was introduced by the 2016 Law No.
232 (2017 Budget Law).
This measure became effective on January 1, 2017.
The maximum investment eligible for deduction is 1 million euros, allowing a maximum deduction of 300,000 euros (30% of 1 million euros).

Investors can choose to deduct the sum in the year of expenditure or spread it over the following years, up to the third year, indicated on line Rp80 of the Pf Income model.

To qualify for the deduction, the sole requirement is to retain the investment for at least three years.
Premature selling of shares before this term not only nullifies the benefit but also necessitates the return of the deduction received, increased by penalties and interests.

The investment can be made by individual or corporate investors.
In the latter case, a 30% Ires tax deduction can be claimed on a maximum of 1.8 million euros, subject to a 3-year investment retention period.

Documents to Retain for the 30% Deduction

Investors benefiting from the 30% deduction for investing in innovative start-ups or innovative SMEs must maintain documentation proving the incurred expenditure for potential tax audits.
This includes a company declaration detailing the investment, issued within 60 days of the investment.

Additionally, a copy of the benefiting company’s business plan must be retained, outlining detailed business projections covering current and future profitability and sales.

50% Deduction for Investments in Innovative Start-ups

The 2020 Relaunch Decree strengthened the deduction for risk capital investments in SMEs and innovative start-ups, elevating the deduction rate from 30% to 50% of the investment made.

The maximum deduction amounts are 100,000 euros per tax period for investments in start-ups and 300,000 euros for investments in innovative SMEs.

While these limits apply, investors can still benefit from the 30% deduction up to 1 million euros.
The 3-year investment retention rule and possibility of deducting the amount in subsequent tax years within the third year remain unchanged.