Would you like to turn an innovative idea into a real business? In this article, we provide information about how to set up a start-up in Italy, including what an innovative start-up is and its advantages, requirements, costs and taxes.

What's in this article?

• What is an innovative start-up?
  
• Advanced technology: The main feature of an innovative start-up
  
• What are the advantages of setting up a start-up?
  
• How to set up an innovative start-up
  
• Payment optimisation tools for your start-up
  
• Costs for setting up a start-up
  
• How much tax does a start-up pay?
  
• The future of an innovative start-up: What happens after the first five years?
  

What is an innovative start-up?

An innovative start-up is a special type of business designed to promote technological development and skilled employment and attract investment in Italy. Introduced by Legislative Decree No. 179/2012 and updated by the Annual Law on Competition No. 193/2024, this type of company is not a separate legal entity; it is a special status that can be assumed by a corporation – including cooperatives – that meets certain criteria set forth in the legislation.

What sets an innovative start-up apart is its focus on innovation. These companies must be actively engaged in the development, production or marketing of high-tech goods or services, with a business model based on research, experimentation and the use of new solutions.

Achieving innovative start-up status provides access to a range of benefits designed to support the initial phase and growth of the business. The main advantages include fiscal and corporate simplification, easier access to credit and risk capital, tax incentives for investors and simplified procedures for hiring highly qualified personnel.

Differences between a start-up and an innovative start-up in Italy

The term "start-up" is often used to refer to any recently launched business, especially if it is linked to digital or technological business models. However, from an Italian regulatory perspective, there is no official recognition for generic start-ups.

Only companies that meet the requirements set out by law and obtain innovative start-up status are eligible for specific benefits and safeguards. In other words, setting up a start-up in the broad sense does not automatically grant the benefits provided for innovative start-ups. It is necessary to prove the innovative nature of the business and apply for registration in the Special Section of the Business Register.

What are the requirements for setting up an innovative start-up in Italy?

Before proceeding to set up your start-up, check that you meet the requirements set out by law. This type of company must have the following features:

• Incorporation less than five years ago
  
• Headquarters in Italy or another EU country but with a production subsidiary in Italy
  
• Annual turnover of less than €10 million
  
• No distribution of profits
  
• Development, production or marketing of products or services with high technological value
  
• No incorporation as a result of extraordinary transactions – such as mergers or demergers – or as a result of the transfer of an existing company or business unit
  
• At least one of the three innovation requirements: research and development expenditure equal to or greater than 15% of costs; at least one-third of the staff must be highly qualified; or ownership of patents or registered software
  

Therefore, an innovative start-up is not a legal form but an actual special status designed to stimulate research, hire skilled employees and attract risk capital.

Special section of the Business Register

From the time of incorporation, your innovative start-up must be registered in a Special Section of the Business Register dedicated exclusively to this type of company. Registration is not automatic. You must apply for it by attaching a statement of compliance with certain requirements. Doing so will allow you to access benefits for innovative start-ups provided for by law.

Statement of compliance with requirements for innovative start-ups

To maintain innovative start-up status, it is necessary to submit a self-certification of requirements to the Chamber of Commerce each year. This document confirms ongoing compliance with the conditions required by law (e.g. non-distribution of profits, innovative activities, research expenditure). Failure to submit the self-certification form will result in the loss of benefits.

One of the new features introduced in 2025 is the possibility to remain registered in the Special Section for up to seven years – instead of the five years previously allowed – if your company can prove that it is in a scale-up phase (i.e. transitioning from an initial validation and development phase to a phase of rapid growth).

Advanced technology: The main feature of an innovative start-up

The requirement that innovative start-ups develop, produce or market goods or services with high technological value is key to the regulatory definition. This is what really sets an "innovative" start-up apart from a new business.

The law does not provide an exhaustive list of sectors or products; however, the prevailing interpretation is that the requirement is met when the company integrates or is based on advanced, original and not easily replicable technologies. For instance, this category can include the following:

• Digital solutions and software: Cloud platforms, artificial intelligence (AI), machine learning algorithms, augmented or virtual reality, advanced automation software, Internet of Things (IoT) applications
  
• Industrial technologies: Robotics, additive manufacturing (i.e. 3D printing), new materials, advanced industrial automation, optimisation of production processes in various sectors through the use of AI
  
• Life sciences products or services: Innovative medical devices, advanced diagnostics, technologies applied to health and well-being
  
• Renewable energy and sustainability: Energy efficiency systems, innovations in electric mobility, circular economy technologies, solutions for decarbonisation
  

Innovation can relate to both the technical aspect of the product or service and the model with which it is designed or delivered. In many cases, what makes the difference is also the start-up's ability to offer radically new solutions with respect to the current standard in the relevant sector.

Lastly, it is important that the technological content be clearly described in the bylaws and business plan so the company can prove the innovative nature of its activities during the start-up's launch phase and audits.

What are the advantages of setting up a start-up?

Setting up a start-up in Italy can offer an array of advantages, especially if your company is recognised as an innovative start-up. This status strengthens the company's reputation and provides access to tax incentives, social security contributions and simplified procedures designed to encourage the creation and development of high-tech businesses.

Why set up a start-up?

Below is an overview of the main benefits of setting up a start-up:

• Tax incentives for investors: Investors can benefit from an income tax deduction of up to 65% for investments made under the "de minimis" regime and an ordinary deduction (i.e. falling outside the de minimis regime) of 30%, thus fostering access to private capital.
  
• Free and simplified access to the Guarantee Fund for small and medium-sized enterprises (SMEs): Innovative start-ups can obtain state guarantees for bank loans at no additional cost and with simplified procedures.
  
• Subsidised loans through Smart & Start Italia: Companies across Italy – especially in the South – can access grants and low-interest loans.
  
• Simple conversion to an innovative SME: Once your start-up exceeds the size limits, it can evolve into an innovative SME whilst retaining many of the benefits acquired.
  
• Exemption from Chamber of Commerce fees and stamp duties: During the period of registration in the special section of the Business Register, start-ups are exempt from paying certain administrative charges.
  
• Equity crowdfunding to raise capital: You can fund your business through authorised online portals, providing access to a wider audience of investors.
  
• Italian Trade Agency (ITA) services for internationalisation: Innovative start-ups can take advantage of the ITA's services free of charge for promotion on foreign markets.
  
• Exceptions to ordinary corporate law: Certain simplifications are provided. For instance, in the event of initial losses, innovative start-ups are not required to immediately recapitalise or dissolve the company. They can also issue participatory financial instruments in a more flexible manner, involving investors or collaborators without having to immediately transfer company shares. Furthermore, a digital signature can be used to incorporate the company, avoiding the involvement of a notary in certain cases and simplifying the business' launch.
  
• Flexible work legislation: Start-ups can enter into fixed-term contracts without having to specify the reasons required by law. This can make recruiting new resources easier during the early stages of your business.
  
• Value-added tax (VAT) credit offset without approval: Innovative start-ups are exempt from the requirement to obtain approval for offsetting VAT credits up to €50,000 per year.
  
• Quick dissolution: If unsuccessful, legislation provides for simplified procedures for closing down the business, reducing the time and costs involved in the liquidation process.
  

How to set up an innovative start-up

Setting up a start-up combines strategy, digital bureaucracy and financial planning. The following is a detailed overview of the ten main steps for setting up an innovative start-up and starting business in full compliance with regulations:

Validate the idea and create a business plan

Conduct market research, interview potential customers and perform technical feasibility tests (i.e. proof of concept). This is a preliminary check to see if the idea behind your start-up can be technically achieved with the resources, technologies and skills you currently have available.

At this stage, you need to draw up a simplified business plan containing necessary information, such as the problem to be solved, your solution, your competitive advantage, revenue streams and financial projections.

Choose a legal form

Decide whether to set up a simplified limited liability business (S.r.l.s.), a limited liability business (S.r.l.) or, in cases where significant capital is being raised, a joint-stock business (S.p.A.). The S.r.l.s. is the cheapest option, but all corporations can obtain innovative status.

Draft bylaws and articles of incorporation

You can use the free standard template provided for an S.r.l.s. or draw up customised articles of incorporation. In the articles, make sure to include a corporate purpose that is clearly innovation-oriented. The purpose should be in line with the requirements for obtaining innovative start-up status.

Complete the Single Business Communication (ComUnica) procedure

With the ComUnica procedure, you can obtain the following with a single electronic submission:

• Tax code
  
• VAT number
  
• Registration of your innovative start-up in the Business Register
  
• Italian National Social Security Institute (INPS) and Italian National Institute for Insurance against Accidents at Work (INAIL) status
  
• Certified email (PEC) address
  

Innovative start-up status reduces the administrative costs of the procedure by approximately 50% because innovative start-ups are exempt from stamp duty and administration fees.

Register in the Special Section of the Business Register

If your company meets the requirements to be considered innovative, you can proceed with registration in the Special Section dedicated to innovative start-ups after registering with the Business Register. The application must be submitted to the relevant Chamber of Commerce with an attached statement of compliance that includes the requirements for innovative start-ups, a business plan and technical documentation supporting the innovation.

Registration allows you to access the benefits provided by law and sends a positive signal to investors, partners and business incubators. From there, the company must annually confirm that it continues to meet the requirements for innovative start-ups by submitting a specific self-certification. If the company fails to do so, it will be removed from the section and lose the associated benefits.

Open a dedicated checking account

Choose a financial institution or technology partner that offers modern solutions, such as application programming interfaces (APIs) and integration tools with major online payment providers. This allows you to automatically and securely manage your incoming and outgoing payments from day one, both on your website and on any marketplace. A good payment infrastructure is important to ensure smooth transactions and a high-quality customer experience, especially if you operate in e-commerce or digital services.

Protect intellectual property

Protecting intellectual property is important to safeguarding the innovative value of your idea. If you have developed a product, software, logo, trade name or original technical process, carefully consider registering your trademark, patent or software. This way, you can prevent imitations and infringements in addition to enhancing the value of your company when raising capital or forming partnerships.

To support companies that invest in protecting their intangible assets, the Ministry of Enterprises and Made in Italy (MIMIT) makes specific, non-repayable grants available. Amongst the best known are the Marchi+ (Trademarks+), Brevetti+ (Patents+), and Disegni+ (Designs+) calls for proposals, which cover up to 80% of the costs incurred for the registration and protection of intellectual property, with a maximum limit for each programme. These contributions can also cover legal advice, translations, expert reports and promotional activities related to registered rights.

Develop a funding plan and incentives

Prepare a clear fundraising plan outlining the project's characteristics, financial requirements and growth strategies to potential investors. Explore the opportunities offered by the following:

• Invitalia calls for proposals – such as Smart & Start – which provide subsidised and non-repayable loans for new innovative businesses
  
• Regional funds, managed by region or Chamber of Commerce
  
• Equity crowdfunding (i.e. online platforms that allow private individuals to invest in exchange for company shares)
  
• Venture capital (i.e. specialised funds that invest in start-ups with high growth potential)
  

Recruit staff

After setting up your start-up, consider what professional roles you might need to help your business grow. You can hire employees on flexible employment contracts or offer alternative incentive schemes for specific skills. Schemes can include profit sharing or the allocation of company shares for roles such as developers, marketing managers or specialised technicians.

Specifically, stock options allow employees to purchase shares in the company at a predetermined price in the future, provided that certain company targets are met. Work-for-equity plans, on the other hand, allow you to compensate employees for part of their work by offering them shares in the company. This approach helps keep initial cash costs down whilst also getting the team more involved and motivated to contribute to the success and growth of the start-up.

Launch the business and monitor the results

Once you have set up your business, launch the first version of your product or service, and start gathering initial feedback from customers. It is important to constantly analyse results and evaluate metrics such as the number of visitors to your website, number of actual customers acquired and costs incurred whilst growing your business. This information can be useful for improving the business, attracting new investments and preparing the required documentation for annual self-certification in a timely manner.

Payment optimisation tools for your start-up

If you are about to set up an innovative start-up, choosing the most effective payment solutions right from the start is a crucial step. Stripe Payments, with its payment optimisation suite, allows you to accept online payments easily and securely, with support for more than 135 currencies and local payment methods, ideal for a start-up with international ambitions. If your business model involves operating as a platform or marketplace, with Stripe Connect you can accept payments from customers and automatically send the relevant fees to suppliers, partners or vendors. Stripe Connect also handles tax and beneficiary identity verification, so you can focus on your business without having to build complex infrastructure from scratch.

Security is equally crucial in the early stages of a start-up: Stripe Radar uses machine learning to detect and block fraud in real time, improving transaction security without compromising user experience. Lastly, to increase the number of authorised payments, you can rely on tools for improving authorisation rates, including Smart Retries (which re-attempts payments at the most favourable times) and Adaptive Acceptance (which uses machine learning to optimise payment requests in real time based on the issuer and context).

Costs for setting up a start-up

The costs involved in setting up a start-up can vary depending on the legal form chosen, level of customisation of the articles of incorporation and professional services involved. Here is a general overview for an S.r.l. or an S.r.l.s.:

How much does it cost to set up an innovative start-up?

How much tax does a start-up pay?

In fiscal terms, innovative start-ups are subject to the same ordinary taxation as corporations; however, in certain circumstances, they can benefit from various incentives and exemptions that reduce overall costs in the early years of business. This includes, for instance, exemption from stamp duty or income tax deductions of up to 65% for investors. In other words, there is no special tax regime with reduced rates, but there are advantageous measures that make the tax burden more sustainable than for other traditional businesses, especially during the early stages.

The main taxes and contributions you will need to consider if you are thinking about setting up an innovative start-up are as follows:

• Italian corporate income tax (IRES): 24%
  
• Italian regional tax on productive activities (IRAP): 3.9%
  
• VAT: Standard rate at 22%
  
• INPS: A minimum percentage of 24%
  
• Dividend withholding tax: 26%
  

IRES

The main tax payable by a corporation is IRES, which is levied on corporate profits. The standard rate is equal to 24%. Here is more information on IRES and how to calculate it.

IRAP

IRAP is applied to the net production value generated in each region. The standard rate is 3.9%, but some regions offer specific incentives for new businesses, particularly innovative start-ups. Please also note that IRAP does not allow the deduction of labour costs, which can increase your taxable income if you have employees.

VAT

VAT is a tax applied to most goods and services sold in Italy. When you set up a business, you will need to add VAT to your sales prices (i.e. output VAT), and you will be able to recover the VAT paid on goods and services purchased for the business (i.e. VAT credit). On a regular basis – every month or every quarter – you will have to pay the government the difference between the VAT collected and the VAT incurred. This system is used in many other European countries and is one of the core elements of the Italian fiscal system.

INPS

If you are a working shareholder in your start-up, you will need to register with the INPS separate fund or the artisans and traders fund, depending on your business. The rate in the separate fund is approximately 26.07% for 2025. For the other funds, there are both percentage rates (i.e. 24%-26%) and fixed amounts to be paid irrespective of the income generated.

With regard to hiring employees, the legislation provides incentives that allow for a reduction in labour costs during the first years of business:

• The 2015 Stability Law
  Law No. 190/2014, Art. 1, Paragraphs 118-124 introduced a total exemption from social security contributions payable by employers for 36 months, up to a maximum of €8,060 per year for each worker. This includes employees on permanent contracts during 2015 and does not specify an age limit.
  
• The 2021 Budget Act
  Law No. 178/2020, Art.1, Paragraphs 10-15 renewed The 2015 Stability Law. It limited the incentive to new hires under the age of 36 and extended it for the following three years, with some amendments. The incentive has continued through subsequent extensions.
  

Because of these tax breaks, you can significantly reduce your staff costs, especially if you decide to retain key employees from the early stages of your start-up. To apply the exemption correctly, you should check the relevant INPS bulletins each time and consult your employment adviser.

Dividends and profit distribution in an innovative start-up

One of the primary requirements for obtaining and maintaining innovative start-up status is a commitment to refrain from distributing profits. This restriction applies for the duration of the company's registration in the Special Section of the Business Register and allows access to the tax and administrative benefits provided for by the legislation.

In the long term, however, you can distribute profits to shareholders once your status as an innovative start-up has expired or if you voluntarily choose to relinquish it. In such cases, distributed profits are subject to a withholding tax of 26%, if received by resident individuals.

Although the law allows profits to be distributed to shareholders after the tax break period, you should consider reinvesting profits, at least in the company's early years. This can support growth, improve market positioning and attract investors. Reinvesting profits is often seen as a positive indicator of financial strength and entrepreneurial ambition, especially by angel investors and venture capitalists.

Tax breaks for investors

There are incentives available to those who invest in your start-up. Individual investors can obtain a personal income tax (IRPEF) deduction of up to 65% of the amount invested, within certain limits. This can make your business more attractive to angel investors and external financiers and can help you launch your start-up and raise initial capital.

The future of an innovative start-up: What happens after the first five years?

If you decide to set up an innovative start-up, you can enjoy several benefits; however, it is important to remember that innovative start-up status is not permanent. Instead, it has a maximum duration of five years from the date of incorporation, except for specific exemptions provided for by law. At the end of this period, the company is automatically removed from the Special Section of the Business Register and loses all benefits for innovative start-ups, such as tax, corporate and social security exemptions.

However, this transition is a natural evolution in the life cycle of a business. If your business has grown steadily, you can access new forms of support designed for the consolidation phase. One of the most common options is to become an innovative SME, a category introduced to support companies that have moved beyond the early stages but continue to invest in improvement. Innovative SMEs enjoy similar benefits as start-ups – albeit to a lesser extent – and must meet specific requirements in terms of research and development expenditure, qualified staff or intellectual property.

Alternatively, your company can continue to be an ordinary corporation, no longer benefitting from special status, but with the possibility of approaching the market in a more structured manner. In some cases, if the company proves that it is in a scale-up phase, the 2025 Budget Law allows the status to be extended up to seven years.