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Italian Government Incentives

The Italian incentive system offers a wide array of opportunities and possibilities: from financing for the purchase of machinery and equipment to regulations facilitating the start-up of new businesses, with special provisions for enterprises run by women.

Furthermore, the law keeps track of trends and developments in the economy and in society in general.
Thus a series of instruments, the existence of which was unimaginable only a few years ago, allow for technological investments or interventions for environmental protection or innovation.

These are aimed at the development of computerised communication and marketing systems, thus providing financing for e-commerce, or of laws that facilitate an increase in employment levels or that open the way to the internationalisation of enterprises.

The regulation of incentives, regardless of their form and nature, is currently based on community regulations regarding government assistance to companies.
The available incentives originate in regional laws, national laws or European Community planning (structural funds, EU programs and so on, made available to member countries).

As regards size, businesses are divided into large, small-and-medium-sized (SMEs).
Small and medium-sized enterprises, (SMEs) and micro enterprises.Beginning on 1 January 2005, the definition of SMEs, which are the main recipients of the funds disbursed in the form of incentives, meets the criteria contained in Recommendation 2003/361/EC, adopted by the European Commission on 6 May 2003, which introduced a new category of micro enterprise.

Small and medium-sized and micro enterprises meet the following criteria:
a maximum of 10 employees for micro companies, 50 employees for small companies, and 250 for medium-sized ones;
maximum turnover not exceeding 2 million euro for micro businesses, 10 million euro for small and 50 million euro for medium-sized companies;

control of corporate capital: the company may not be more than one quarter controlled (25%) by companies or groups not falling within the category of small to medium-sized company.

As regards location, it is necessary to distinguish between incentives applicable to the entire national territory and those applicable to particular areas which, based on specific economic criteria, are at a significant disadvantage from an economic point of view.

In these so-called "depressed" areas, greater incentives are available when making certain types of investments. The areas in question are the following:

Objective 1 areas (Title 1, Heading I, Article 3, EC Regulation 1260/99): Regions in which GDP per capita, based on data of the last three years, is less than 75% of the Community average.
In Italy these regions are: Campania, Apuglia, Basilicata, Calabria, Sicily, Sardinia and Molise - the latter is only entitled to receive temporary support (see below).

Objective 2 areas (Title 1, Heading I, Article 4, EC Regulation 1260/99): areas in industrial decline in which the unemployment rate is greater than the average rate of the Community in the last three years, as well as rural areas with a low level of socio-economic development.

In this case, the areas concerned are towns or even parts of towns.

Temporary support system (Title 1, Heading I, Article 6, EC Regulation 1260/99): also defined as phasing out, this is temporary financial support for areas included in a priority Objective area, either 1 or 2, but which no longer fulfil the criteria for that type of objective. The aim of this is to allow regions and areas no longer eligible for funds to exit in the system gradually.

Article 87.3 c: added to depressed areas are also those towns that can take advantage of further concessions as they benefit from a special exception set forth in article 87.3.c of the consolidated version of the Treaty establishing the European Community.

Financial incentives and tax relief
The interventions and incentives in favour of enterprises are grouped into two main categories: financial incentives and tax relief.

There are two main types of financial incentive:
Capital contributions calculated as a percentage of allowable expenses; since this is a grant, it does not require repayment of capital or of interest.
Interest subsidies, aimed at reducing the interest rate applied to financing provided to the company and normally based on a medium to long-term time frame.

Tax relief is considered to be indirect, as it does not take the form of direct contribution but of exemptions or reductions in the tax burden.
This reduction may occur in two ways:
Direct reduction of the taxable base
Credit or tax bonus that can be used to offset taxes.

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