Italy’s new policy outlook

for attracting foreign investment

Stefano Firpo General Manager MEDIOCREDITO ITALIANO

Destination Italy: opportunities for HNWI and companies Embassy of Italy in Buenos Aires Consulate General of Italy in San Paolo

September 3-5, 2019

1. A new Investor Visa for Italy a smart visa for investors and philantropists

2. A success story: Italia Startup Visa a visa for innovative entrepreneurs from all over the world

3. Measures to boost and attract investments in Italy National Plan on Industry 4.0, the Italian Startup Act

4. Special tax regimes for new residents and investors

new solutions for HNWI, large investors, pensioners…

Contents

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The 2017 Budget Law introduced in Italian immigration law

(Consolidated Text of Immigration Law)

a new type of visa, valid for 2 years,

for non-EU citizens who make an investment in

strategic assets for the Italian economy and

society, or that wish to make a

philanthropic donation.

The investment must be made within

3 months of the visa issuing, and maintained for its entire duration.

The legal provision was further defined by the following implementing acts:

• Interministerial decree of the Minister of Economic Development,

with the Minister of Interior and the Minister of Foreign Affairs,

published on 21 July 2017;

• Policy guidance, approved on 16 November 2017.

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Investor Visa for Italy: legal references

€2M in Gvt. bonds

€1M in an Italian

limited company

€500,000 in an innovative

startup

€1M donation in

selected fields

culture, education, immigration management, scientific research, cultural and natural heritage

1. Italy’s new investor visa: a smart visa for investors and philanthropists

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A user-friendly procedure with the following characteristics:

• It is fully digitised:

application submission and all

further communications take place

through a custom-made web portal;

• It is fast-track: the clearance to issue the

visa («nulla osta») is released within 30 days

of the application date;

• It is bilingual: website, application forms, written guidance and

«customer care» services are available both in Italian and English;

• It is centralised: the Secretariat (formed at the DG for Industrial Policy of

the Ministry of Economic Development) acts as the single contact point for

visa applicants. It also co-ordinates the inter-institutional Committee that

issues the nulla osta to the investor visa.

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Investor Visa for Italy: how it works

Until August 2019, we received

10 investor visa applications.

8 obtained a positive evaluation.

Countries of origin: x2 Russia

x2 Israel

x2 China

x1 South Korea

x1 Brazil 6

Investor Visa for Italy results up to now

Type of investment: listed companies (x4),

Innovative startups (x2) and Government bonds (x2)

Launched on 24 June 2014, Italia Startup Visa is

aimed at non EU entrepreneurs who want to

establish an innovative startup in Italy,

introducing a new procedure to issue

self-employment visas.

The procedure is:

• fast: it never takes more than 30 days

• centralised: it is based on a Committee of

representatives of the Italian innovation ecosystem, coordinated by the

Ministry of Economic Development

• free-of-charge

• completely online 7

More information:

italiastartupvisa.mise.gov.it

2. Italia Startup Visa: a visa for talented entrepreneurs

102 applications received in 2018 only

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16 pending evaluations 232 accepted 206 rejected

454 applications

Italia Startup Visa: an ever-expanding programme

data at June 30, 2019

1

23

4 5 8

9

22 24

35

14 26

61

30 29 36

24 23

34

21

15

20

2014Q2

2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

• Average age of successful applicants: 36,8 years.

• >90% of successful applicants are graduates (engineering, management, design…).

• A large share of applicants have already had entrepreneurial initiatives – some are serial startup founders. Many other were managers, engineers or IT specialists in large firms, or students.

Italia Startup Visa: an ever-expanding programme

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data at June 30, 2019

x4 x2

49 countries of origin

x2

x1

x1

x2

x1

x1

x2

x1

x1

x1

x92

x6

x25

x22

x36

x85

x39

x29

x1 x2

x1

x4

x4

x3

x9

x5

x3

x3

x3

x1

x1

x2

x1

x4

x1

x2

x3

x3

x1

x1

x1

x1

x1

x1

x1

x1

x1

Patent Box: 50% tax break on IP-related income

(eligible IPR: patents, copyrighted software, know-how, industrial models)

R&D Tax Credit: tax credit on incremental R&D expenditure:

50% for in-house and R&D outsourced to universities, research centers, innovative startups & SMEs)

25% for other expenditure (e.g. consulting, materials…)

Hyper-depreciation: depreciation deduction for I4.0 enabling technologies is increased by 170% for investments under €2.5m, by 100%

for investments under €10m, and by 50% for investments up to €20m. The result is a large, multiannual tax relief for

SMEs and large corporations alike.

Tax credit for Industry 4.0 on the job training Any Italy-based firm can deduct from income tax 40% of costs sustained to train personnel in I4.0 fields.

Corporate income tax lowered to 24% flat rate (from 27.5%) in 2017

New ruling procedure for qualified investors individuals and corporations investing >€20m in Italy may get binding advance assurance on their tax treatment upon a ruling procedure with the Italian Revenue Agency

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3. Tools to boost and attract investments: National Plan on Industry 4.0

Country Effective tax rate

2017 Ranking

Italy -33.18% 1

Ireland -3.39% 2

Hungary -0.52% 3

… … …

Portugal 5.48% 8

Spain 5.50% 9

France 6.73% 10

UK 7.45% 12

Netherlands 8.69% 15

… … …

USA (California) 21.97% 32 (2nd to last)

Germany 22.19% 33 (last)

The most favourable fiscal regime for innovation worldwide! (Digital Tax Index 2018)

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The Italian Startup Act: a legal definition of «innovative startup»

Introduced in late 2012 (d.l. 179/2012), the Italian Startup Act is a comprehensive legislative framework

aimed at facilitating the creation and the growth of new hi-tech companies.

“Innovative startups” are defined as newly-founded

(less than 5 years old) unlisted limited companies, which have an

annual turnover lower than €5M, and a focus on

technological innovation.

The latter is identified by at least one of the following indicators:

1. significant R&D expenditure (>15% of total annual costs)

2. highly-qualified team

3. IP rights

Companies that fulfil the requirements can (self-selection)

register as innovative startups at their local Chamber of

Commerce and benefit from a vast array of policy measures.

The support measures are designed to help them throughout

their whole life-cycle (first steps, growth, maturity)

and to affect the national startup ecosystem as a whole

(investors, incubators, universities…)

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• More flexible corporate management fewer legal constraints on governance – works like an inc. with the costs of an ltd. (e.g. non-proportional voting rights for shareholders, longer times to replenish capital after losses)

• Some more flexibility on fixed-term contracts

• Internationalisation support by the Italian Trade Agency lower consulting fees, free-of-charge participation to events

• Stock options and work-for-equity schemes are not taxed as income

• Exemption from certain corporate registration duties and fees

• Conversion to innovative SME status «mature» startups (e.g. by age and size) can keep most of the benefits previously applied by shifting to this parallel special status

Online, free of charge incorporation innovative startups are the only companies in Italy that can be incorporated without a notarial deed. Over 2,000 have done so in the last 2.5 years, saving approx. €2.000 each

Special measures for innovative startups non-financial benefits

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30% tax relief for seed- and early-stage investors

One of the most generous schemes of its kind in Europe (see next slide)

Equity crowdfunding

for startups since 2013, for any company since 2017 – and booming since 2018

Favourable rules on «carried interest» (not just for startups!)

income deriving from holding shares with preferential rights in a company/institutional fund is subject to corporate tax (24% flat rate) rather than personal income tax (top marginal rate 43%).

Debt finance: fast-track access to a Public Guarantee Fund for SMEs

a highly popular initiative: approx. €1bn of facilitated loans issued in 5 years

Special measures for innovative startups: financial benefits

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Europe’s most favourable tax regime for VC tax breaks for seed- & early-stage investment

Since 2012, whoever invests in the equity of an

Italian innovative startup benefits from robust

tax breaks.

The 2017 Budget Law raised the rate of the incentive as follows:

• 30% (previously 19%) of the sum

invested in innovative startups by individuals

is deducted from personal income tax (IRPEF),

up to a ceiling of €1 million (previously €500,000)

• 30% (previously 20%) of the sum invested by companies

is deducted from taxable income (IRES), up to a ceiling of

€1.8 million.

In addition, as of 2017 incentives apply to investment targeting all innovative

SMEs, regardless of their maturity stage.

Holding period: 3 years.

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Access to risk finance: a 30% tax break for seed- & early-stage investments

The incentive can be claimed for:

Direct investment in registered innovative startups no particular limitations – provided that the company stays in business and “keeps innovating”

Indirect investments through CIUs and VCs the benefit is a function of the amount invested by the fund and of the percentage of shares held by the investor in the fund

Direct investment in registered innovative SMEs Claimable since 2019 for investments made after 2017. Additional conditions to comply with EU law, based on the date of the first market sale:

• < 7 years: no restriction

• 7 < x < 10 years: Independent assessment on funding needs

• < 10 years: firms must plan new investments for >50% of their past turnover

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€46M Former innovative startup

€13M Innovative SME, former innovative startup

€10M Innovative startup

€100M Innovative SME

€10M Innovative startup Osservatorio Startup Hi-Tech

Milan Polytechnic University

77 82 63 76 101 107

215 35 47 57 71

81 98

154

35

126

229

0

100

200

300

400

500

600

700

2012 2013 2014 2015 2016 2017 2018

VC investment mass (€M)

Formale Informale Estero

112 129 120

331

217

147

598

Italy’s VC market: still comparatively small, but some signs of growth are visible

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4. Lump sum tax regime for new residents: requirements

Concept The 2017 Budget Law introduced a lump sum tax on foreign-source income and gains for individuals (whether Italian or foreign nationals) that acquire Italian tax residence.

The option is valid for 15 years.

Requirements

1. The individual must have been non tax resident in Italy in at least 9 of the 10 years prior to the first year of effect of the option;

2. The option must be communicated in the annual tax return.

Notion of eligible income

Income is deemed to be foreign-sourced and is consequently covered by the substitute tax when: a. the asset from which the income is derived is located abroad, or b. the activity through which the income is produced is performed abroad, or c. the paying entity is resident abroad. 18

Lump sum tax regime for new residents: how it works

Effects

All foreign-source income and gains are subject to an annual lump sum tax of €100,000;

Such income and gains are not subject to any additional income taxation, even if remitted to Italy;

All Italian source incomes and gains are subject to ordinary taxation.

Extension to dependants

The substitute tax regime can be extended to one or more qualifying family members against the payment of an annual substitute tax of €25,000 per family member benefitting from such a regime.

Cherry picking

The individual can opt to not apply this special regime on income and gains realized in a certain foreign country (therefore ordinary tax regime with foreign tax credit will apply); the exclusion may allow the individual to benefit from reduced taxation/treaty relief in the State where the income and gains are sourced (and foreign tax credit in Italy). 19

The Italian Revenue Agency (Agenzia delle Entrate)

received ≈550-600 requests so far

2017: > 100 applications

2018: >250 applications

2019: > 400 applications

75% of applications come from residents of other EU countries:

1st 2nd 3rd Besides generating direct revenues the policy is intended

to produce spill-over effects on consumption, investments,

etc.

Lump sum tax regime for new residents: results so far

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Americas and Asia make up the rest (Latin America: 10%)

New ruling procedure for qualified investors: requirements

Since 2015, natural persons, companies, and funds that invest in Italy over

€20 million (before 2019: €30 million) may apply for a special ruling

procedure with the Italian Revenue Agency to get binding advance

assurance on:

• fiscal treatment of the investment

• eligibility for incentives and special regimes

• compliance with Italian legislation on tax elusion

• applicability of VAT and income tax

Key condition: the investment must have significant and lasting spill-overs

on employment (assessed case by case).

Investment by consortia and taking place over multiple years are also

eligible.

Applicants must file a detailed description of the investment, of the

occupational impact foreseen, and an outline of the fiscal treatment that

s/he considers appropriate.

The Revenue Agency has 120 days to respond: in case of silence, the

application is intended as accepted.

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Special treatment for pensioners that move South a 7% tax rate on all income

Who: Recipients of non-Italian pension income

that move their tax residence to a Southern

Italian region, in a municipality with less

than 20 000 residents, and that have not

been fiscally resident in Italy for the last 5

years.

What: A 7% income tax rate is applied on all

foreign income (not just pension income).

The option is valid for 5 years.

How: The tax is paid as a lump sum once a year, at

time of filing the yearly tax declaration.

Cherry picking is allowed (see res non dom

scheme).

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Abruzzo Apulia Basilicata Campania Calabria Molise Sardinia Sicily

^ Amalfi (Campania) 5 102 residents

Global ranking for FDI attractiveness: Italy enters the top 10

Country Ranking

2018

Var. 2017-2018

Var. 2016-2018

United States 1 - -

Canada 2 +3 +2

Germany 3 -1 +1

United Kingdom 4 - +1

China 5 -2 -3

…

Switzerland 9 +3 +2

Italy 10 +3 +6

India 11 -3 -2

Singapore 12 -2 -2

Italy ranks 10th in the A.T. Kearney

Foreign Direct Investment Confidence

Index for 2018 – a jump of 6 six spots

in 2 years, more than any other country

in the top-10.

The National Plan for Industry 4.0 is

explicitly mentioned in the report as a

likely strong driver for foreign

investment, in spite of increased

political risk and middling economic

growth.

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Thank you for your attention.

Contact us:

investorvisa@mise.gov.it info.italiastartupvisa@mise.gov.it

Visit our websites

mise.gov.it investorvisa.mise.gov.it italiastartupvisa.mise.gov.it

Stefano Firpo Director General for Industrial Policy, competitiveness and SMEs Italian Ministry of Economic Development

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