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Italy – benefits for employees of innovative start-ups

Written by
Toffoletto de Luca Tamajo, working in employment law since 1925.
Employees of innovative start-up companies in Italy enjoy special tax breaks on part of their pay package. Details of this regime and conditions for its application are set out here.


In Italy, innovative start-up companies enjoy many benefits, including benefits for their employees. The only companies that can take advantage of these incentives are those that are defined as innovative start-up companies according to the terms of a piece of legislation enacted in 2012, and that are therefore registered in a special section of the register of companies.

Registration is only available to companies that meet all the requirements provided for in the law. These include the following:

  • The company has not been incorporated for more than 60 months.
  • The company must be resident in Italy.
  • The total revenues for the second year of activity cannot be higher than EUR 5 million;
  • The company does not distribute profits.
  • The company’s activity is the production and sale of innovative products or services with high technological value.
  • The company invests in research and development at least to the extent provided for in the law.
  • At least one third of the employees has a degree or is a researcher.


Regarding benefits for employees of an innovative start-up, the law provides that their total remuneration is made up of a salary element that cannot be less than the minimum salary provided for in the applicable collective bargaining agreement and of a variable remuneration element linked to the efficiency or profitability of the company, to the productivity of the employees or the team, or to other objectives or parameters of performance agreed between the parties. Variable remuneration can include the assignment of options to buy shares of the company and/or the transfer of such shares at no cost to the employee.

The income deriving from the assignment of financial instruments or similar rights (including options to buy shares or other financial instruments of the start-up) by an innovative start-up to its directors, employees or independent workers does not constitute employment income and is therefore exempt from both tax and social security contributions.

This benefit applies only on condition that those financial instruments or rights are not bought back by the innovative start-up itself or any company, which controls or is controlled by the innovative start-up. Any capital gain realised through the sale of these financial instruments is subject to the ordinary tax regime for capital gain in Italy (i.e. currently 26%).

The special regime above applies only within the first five years from incorporation of the start-up.