Want to become innovative SME but don’t know how? We will explain it to you. Innovative SMEs are small and medium-sized Italian companies with a particular feature: the ability to innovate. They are the second evolutionary stage of innovative start-ups, as they are their natural continuation.
If you are an entrepreneur and your dream is to become an innovative SME (innovative SMEs have countless advantages, more on that later…) you have come to the right blog. Read on.
Table of contents
What are innovative SMEs?
Introduced by art. 4 of decree law 3/2015, later converted into law no. 33 of 24 March 2015, innovative SMEs are a new type of enterprise. They are joint-stock companies, also in the form of cooperatives, to which the resources already allocated to innovative start-ups by the Decreto Crescita 2.0 in 2012 are largely attributed.
Why were they created?
The reason for the emergence of innovative SMEs lies in the need to strengthen the competitiveness of emerging companies by facilitating the widespread dissemination of innovations and the creation of new jobs.
In short, innovative SMEs were created for:
- promote sustainable growth, technological development and employment;
- contribute to the dimensional strengthening of innovative start-ups and the creation of a more innovation-friendly ecosystem;
- promote technology transfer processes, valorisation of research and the attraction of talent and capital from abroad to Italy.
What are the benefits of being an innovative SME?
Innovative SMEs are granted most of the benefits so far reserved for innovative start-ups (law 221/2012):
- flexible rules for corporate management;
- equity incentive plans, which are subject to favorable tax rules for the remuneration of employees and consultants;
- equity crowdfunding campaigns to raise capital;
- easier access to bank credit;
- tax incentives for investment.
A prerequisite for benefiting from the above-mentioned advantages is that companies are registered in the special section of the Companies Register reserved for innovative SMEs.
Innovative SMEs incentives list
Here is the list of incentives dedicated to innovative SMEs:
- tax incentives to invest in the capital of innovative SMEs;
- free and simplified access to the SMEs Guarantee Fund;
- exemption from stamp duties for documents filed with the Chamber of Commerce;
- raising capital through equity crowdfunding campaigns;
- internationalisation services to companies (ICE);
- derogations from ordinary company law;
- extension of the deadline for loss coverage;
- derogation from the discipline on shell companies and companies with systematic losses;
- remuneration through equity instruments.
Let us now see them in detail.
1. Tax incentives to invest in the capital of innovative SMEs
As of 1 January 2017, a tax relief is available for those who invest in venture capital for innovative SMEs. The incentive is structured as follows:
- for individuals consists of an IRPEF tax deduction of 30% of the amount invested, up to a maximum of 1 million euros;
- for legal entities in a deduction from IRES taxable incomeof 30% of the amount invested, up to a maximum of 1.8 million euros.
To whom are they addressed?
The tax incentives are aimed at:
- all small and medium-sized enterprises that made their first commercial sale less than 7 years ago;
- innovative SMEs on the market for more than 7 but less than 10 years, if they have not yet demonstrated the potential to generate returns;
- regardless of age, to innovative SMEs intending to launch a new product or enter a new market with an investment of more than 50 per cent of average annual turnover over the last five years.
The incentives apply to both direct investments in innovative SMEs and indirect investments through Organismo di Investimento Collettivo del Risparmio (OICR).
2. Free and simplified access to the SMEs Guarantee Fund
Free and simplified access to the SMEs Guarantee Fund is available to all small and medium-sized companies. It’s a public capital fund that facilitates access to credit by granting guarantees on bank loans. The guarantee can be applied either directly or on operations carried out through bank credits and covers up to 80% of the credit disbursed by the bank up to a maximum of 5 million euros.
While access to the Fund is automatic for start-ups and incubators, for innovative SMEs there is an assessment that classifies the riskiness of the operation on the basis of 5 rating bands. Companies ranked in the lowest, fifth, creditworthiness band are excluded.
3. Exemption from stamp taxes for documents filed with the Chamber of Commerce
All innovative SMEs enjoy exemption from the stamp taxes due for registration in the special section of the Companies Register, as is also the case for innovative start-ups. Secretarial fees and annual chamber fees are not included.
4. Raising capital through equity crowdfunding campaigns
In 2013, Italy regulated the equity crowdfunding market, including the creation of a special register of authorised online portals. Initially only for innovative start-ups, it was then gradually extended to innovative SMEs. The instrument is managed by the Commissione nazionale per le società e la borsa (Consob), which supervises the financial markets.
5. Internationalisation services to businesses (ICE)
It’s nothing more than a 30% discount on the purchase of ICE services (excluding external costs). Interested companies must highlight their status by submitting their Chamber of Commerce certificate.
6. Derogations from ordinary company law
Innovative SMEs set up as limited liability companies enjoy certain exemptions from ordinary company law. It’s therefore possible:
- create categories of units with particular rights (e.g. categories that do not grant voting rights or grant rights that are not proportional to the shareholding);
- carry out transactions on their shares;
- issue participatory financial instruments;
- offer capital shares to the public.
7. Extension of deadline for covering losses
Another relief concerns cases in which operating losses lead to a reduction of the company’s capital by more than one third. The deadline by which the loss must be reduced to less than one third is postponed to the second subsequent financial year instead of the first. For capital reductions due to losses below the statutory minimum, the shareholders’ meeting may resolve to postpone the decision until the end of the following financial year.
8. Exemption from the discipline on shell companies and companies with systematic losses
Innovative SMEs are generally not subject to the discipline of shell companies and companies with systematic tax losses. Therefore, if they earn ‘non congruous’ revenues or have a systematic tax loss, they are not subject to tax penalties.
9. Remuneration through equity instruments
All innovative SMEs have the possibility to remunerate their employees through work-for-equity schemes, such as stock options and external service providers. In addition, the parties can independently determine the fixed and variable components of remuneration (with the exception of the minimums stipulated in collective agreements).
What requirements does an innovative SME have?
An innovative SME meets the following requirements:
- residence in Italy or in another country belonging to the European Economic Area but with a production site or branch in Italy;
- having produced the certification for the latest balance sheet or consolidated balance sheet, if any;
- not be listed on a regulated market;
- not be registered at the same time in the special section of innovative start-ups.
Furthermore, an SME is innovative if it meets at least two of the following three subjective requirements:
- incurred expenditure on research and development (R&D) and innovation amounting to at least 3% of the higher of turnover and cost of production;
- employs highly qualified staff (at least 1/5 PhD, PhD students or researchers, or at least 1/3 with master's degrees);
- is the owner, custodian or licensee of at least one patent or holder of registered software.
How to become an innovative SME?
To be able to fully benefit from the incentives dedicated to innovative SMEs, one has to be a SME in all respects, according to the definition provided by the EU regulations (EU Recommendation 2003/361/EC), i.e. have:
- less than 250 employees;
- less than 50 million euros turnover per year;
- less than 43 million euros in assets on the balance sheet total.
Companies meeting the listed requirements can obtain innovative SME status by registering in the special section of the Companies Register. To register, a self-certification must be sent telematically to the competent territorial Chamber of Commerce, which, after due checks, will send confirmation once a year within 30 days of approval of the balance sheet and in any case no later than 6 months after the end of the financial year.
Registration is also available to companies already registered in the special section of the Companies Register dedicated to innovative start-ups. However, it is necessary to de-register from that section (a procedure that can be requested by the legal representative at any time). Every innovative start-up can transform into an innovative SME thanks to a simplified and continuous transition mechanism that allows it to continue enjoying compatible benefits without interruption.
The passage is as follows:
- loss of one of the constitutive requirements for start-ups;
- request for deletion from the special start-up section of the Companies Register;
- application for registration in the special innovative SMEs section of the Companies Register.
- maintaining compatible benefits indefinitely.
Self-certification
Introduced by decree law 3/2015, self-certification allows companies to independently certify that they meet the requirements for being recognised as an innovative SME.
It’s necessary to fill in the appropriate form available on the Companies Register website. The document must be filled in and digitally signed by the lawyer of the company and then filed with the Registry together with the supporting documentation.
Companies that make false declarations are subject to administrative and criminal sanctions. The competent authorities may carry out a posteriori checks to verify the veracity of self-declared information.
Updating Information
Innovative SMEs must update the information provided at least once a year. In addition, within 30 days of the approval of the financial statements and within 6 months of the end of the financial year, the company’s legal representative must confirm that the company still meets the requirements by submitting a new self-certification to the Register. Failure to file will lead to ex officio cancellation from the special section.
What is the difference between start-ups and innovative SMEs?
Innovative start-ups differ in a few criteria:
- are less than five years old;
- their annual turnover is less than 5 million euros;
- concern the production, development and marketing of innovative goods or services with high technological value.
Finally, to be innovative they must meet at least 1 of the following 3 requirements:
- 15% of the higher value between production costs and research and development (R&D) activities;
- 2/3 of the staff consists of PhDs or 1/3 of PhD students or graduates with at least 3 years of experience in scientific research;
- have filed a patent or own registered software.
SMEs, on the other hand, have no age limit, but must have at least one audited balance sheet. As mentioned above, they must have fewer than 250 employees, an annual turnover of less than 50 million euros and a balance sheet of up to 43 million euros. Finally, to be innovative they must possess at least 2 of the following requirements:
- 3% of the higher value between production costs and R&D activities;
- team consisting of 1/3 master's degree graduates or 1/5 PhD or PhD students with at least 3 years of experience in scientific research;
- have filed a patent or own registered software.
How long does innovative SME status last?
The duration of innovative SME status is unlimited, unlike that of innovative start-ups, which lasts 5 years.
Why should I prefer an innovative SME as a partner in a European project?
In addition to Italy, innovative SMEs represent a value for those involved in EU project management. Indeed, being an innovative SME brings certain competitive benefits:
- faster and more flexible decision-making;
- a higher degree of creativity and ability to innovate;
- operation in certain market niches;
- social impact;
- alignment with European policies;
- the ability to internationalise business.
Which JO Group companies are innovative SMEs? All
JO Group is a group of innovative SMEs active in Europe since 1998. The core businesses are the digital transition of SMEs and consulting on European grants.
JO Consulting
JO Consulting, the first company of the group to be founded, is the beating heart, the spearhead of EU project management. The core business is consultancy in Italian and European grants.
JO Consulting offers support to companies, associations and public entities to access non-reimbursable financing, interest-free financing, tax credits, vouchers, etc. Its credibility enables it to build solid international partnerships, which are reflected in European projects.
VITECO
VITECO, another innovative SME of the group founded in 2004, develops e-learning platforms and serious games throughout Europe. It specialises in the conversion of learning objects into SCORM format, the industry standard.
VITECO does not deliver online courses but develops learning management systems (LMS) for public and public schools, training organisations and CME (Continuing Medical Education) providers. All platforms (e-Logos, MedicalFAD and JO Docet Easy) are ISO 9001:2015 and ISO/IEC 27001:2017 compliant).
HT Apps
HT Apps has been developing user-friendly apps and web-apps for European projects, companies and freelancers since 2004. The main products are the JO Hall management system, the JOBy virtual time attendance tracking app and the ULOI (Universal Learning Object Integrator) data interchange module for tracking learning objects within LMSs. Finally, HT Apps also develops solutions for agritech.
PMF Research
PMF Research, founded in 2003, is a research and development (R&D) centre in the field of information and communication technologies (ICTs). It develops European projects with a strong innovative impact ranging from augmented reality (AR) and virtual reality (VR) to the Internet of things (IoT), from artificial intelligence (AI) to blockchain and big data. PMF Research collaborates with research institutions, prestigious universities, Italian and European companies, often within international partnerships/consortia.
IPPOCRATE AS
IPPOCRATE AS, founded in 2004, is the fifth innovative SME in the cluster. It deals with topics such as digital health, e-health and m-health. It also cooperates with companies, research centres and academic institutions at both national and European level. IPPOCRATE AS’s activities range from healthcare software development to telemedicine adoption solutions for European projects.
Why choose JO Group’s innovative SMEs?
Because JO Group is a holonic system based on innovation. Thanks to the diversification of its business lines, it can cover various sectors and thus be the ideal partner for the realisation of European projects.
The group’s historical memory remembers a continuous growth, especially in the decade 1998-2008, which was followed by the exploit towards Euro-design.
JO Group also has 2 business branches:
- IPPO Engineering (a branch of IPPOCRATE AS) focuses on renewable energy, environmental sustainability and the green economy;
- Moka Adv (branch of PMF Research), web agency specialised in:
- international digital marketing for European projects;
- website development and e-commerce;
- advertising or publicity (adv);
- search engine optimisation (SEO);
- search engine marketing (SEM);
- social media optimisation (SMM);
- direct e-mail marketing (DEM);
- motion graphics and graphic design;
- video marketing.
In addition, 2 NGOs are part of the cluster:
- JO Education | Innovation Hub Catania, a hotbed of Sicilian innovators with the mission to make the Metropolitan City of Catania, where JO Group is based, a smart city;
- Europe Direct Catania e-Medine, territorial centre of the European Commission, committed to the promotion of European values and active and digital citizenship.
There are a total of 9 companies, 10 with JO Group, that have made innovation their core business. The group’s 5 limited companies are all innovative SMEs and therefore benefit from the incentives mentioned therein.
Se vuoi sviluppare un progetto europeo e avere più chance di vittoria, contattaci. Fisseremo una call per capire se può esserci una partnership.
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