Innovative startups and innovative SMEs: requirements to obtain the qualification
The two types of companies, innovative start-ups and innovative SMEs, although similar to one another, are characterized by different levels of maturity as the former is in an embryonic stage of life, while the latter is already in a consolidated phase. To obtain and maintain the qualification of innovative start-up, the company must be a capital company, not listed, established for less than 60 months, and have residency in Italy or in the EU/EEA, with a registered office in Italy. It must not distribute profits, and its corporate purpose must involve the development of innovative products or services, excluding agency and consultancy activities. It must qualify as a microenterprise or SME, with an annual turnover of less than 50 million euros (Recommendation 2003/361/EC) and, from the second year of operation, the production value must not exceed 5 million. Moreover, it must fulfill at least one of three alternative requirements (R&D expenses, qualified personnel, ownership of patents) (Article 25, Law Decree 179/2012). It must not have been established following a merger, spin-off, sale of a business, or a business branch. A start-up can remain in the special section of the companies register for up to three or five years. Innovative SMEs, introduced by the “Investment Compact” decree (Law Decree 3/2015), do not have time limits and must have their financial statements certified by an auditor. In this case as well, they must meet the size requirements of microenterprises or SMEs.
Advertising and representation expenses, a criterion for distinction
With ordinance no. 25143/2025, the Court of Cassation addresses the issue of representation and advertising expenses, stating that the distinction between these two categories is based on the objectives pursued. Representation expenses are intended to enhance the company’s image without implying a direct increase in sales, while advertising expenses have direct promotional purposes for products and services. The regulations in force since 2008 (art. 108 paragraph 2 of the TUIR) allow for the deductibility of representation expenses, provided that they are reasonable and relevant. Ministerial Decree of November 19, 2008 specifies that such expenses must be incurred without compensation, for promotional purposes, and must meet criteria of reasonableness. The Court reiterates that the distinction should not be based solely on the absence of cost but on the objectives of the expenses. The judges clarify that the indications from the Ministerial Decree can help identify representation expenses, emphasizing that the function and nature of the expense are determining elements.
Transfer of VAT plafond, necessary conditions
The Italian Tax Office, in its response to inquiry no. 200 dated August 4, 2025, clarified that the VAT ceiling is not transferable to the assignee unless stipulated in the contract for the transfer of the business unit. If the assignee is a foreign entity, it must be identified for VAT purposes in Italy. The case involved an Italian company transferring a business branch to an English legal entity, which then transferred it to a new company in Italy. The inquiry sought to determine whether it was possible to transfer the VAT ceiling. The Agency cited Article 8, paragraph 4 of Presidential Decree 633/72, which regulates the transfer of the VAT ceiling only in the case of a business lease, and extended the principle to transfers and contributions based on previous resolutions. Two conditions must be met: continuity of the activity and assumption of legal relationships. In the specific case, these conditions do not exist: the transfer is not mentioned in the contract, and the English assignee does not have a VAT position in Italy. Therefore, the transfer of the VAT ceiling is not possible.
Two distinct VAT groups for the same economic group
With the response to inquiry no. 211, the Italian Tax Office has established that an economic group can form two distinct VAT Groups in Italy under Title V-bis of DPR 633/72. In the case examined, the foreign parent company BETA controls the Italian company BETA and, through the Austrian Gamma, the foreign company ALFA, which has a secondary establishment in Italy (ALFA Italia) and controls DELTA. Starting from 2021, a VAT Group was established between BETA and its Italian subsidiaries. ALFA now intends to create a VAT Group with ALFA Italia and DELTA, raising the question of coexistence with the BETA Group. The Agency confirmed that the groups can coexist, provided that the conditions of legal control are respected. It is not permitted for there to be other foreign companies in the control chain. ALFA is confirmed to have the necessary financial link, and the option for the new VAT Group can be exercised starting from year Y+1, despite the registration of ALFA Italia in the Business Register occurring after July 1 of year Y.
Strengthened derivation for corresponding surface rights
The document number 2 of the Italian Tax Office measure of August 7 delves into the fiscal impact of fees for the temporary grant of a surface right. For the purposes of determining the taxable income, for entities applying the OIC, the principle of reinforced derivation outlined in Article 83, paragraph 1-bis of the Tuir applies, according to which “the criteria for qualification, temporal allocation, and classification in the financial statements provided by the respective accounting principles are relevant.” Consequently, the consideration for the establishment of a temporary surface right is regarded as business revenue and not a capital gain, as recorded in the financial statements. This interpretation is confirmed by Resolution 37/E/2018 and supersedes the previous orientation of Resolution 112/E/2009, which treated the establishment of the right as a taxable capital gain immediately or in installments.
Burdensome financing under the lens of transfer pricing
The transfer of funds between companies belonging to a multinational group but operating in different countries is a central theme in the transfer pricing regime. The Italian Tax Office tends to prefer the application of theoretical average rates or those applied by the Italian parent company, arguing that such rates may be more appropriate than those actually applied to the financing provided to foreign subsidiaries. However, the uncritical adoption of “standard” reference rates may prove inappropriate if the receiving company does not have efficient access to credit from third parties under similar conditions. In such contexts, it is necessary to evaluate the economic substance of the transaction rather than limit oneself to the form. The Regional Tax Commission of Lombardy, in ruling no. 456/25, referred to the SGI ruling (C-311/08) of the European Court of Justice, emphasizing that when a resident company grants an “extraordinary” advantage to a subsidiary in another member state, the tax administration can take corrective action as long as it demonstrates that the transaction lacks economic validity or is fictitious and assigns an appropriate comparable rate (requalifying the amount of the “benefit”). The Hornbach-Baumarkt ruling (C-382/16) was also cited, which addresses the taxpayer’s right to demonstrate that an intragroup transaction may still present a legitimate economic justification. The judges concluded that the tax administration must prove the actual execution of the financing transaction, identify “comparable” market rates for similar transactions, taking into account the creditworthiness of the enterprise and the specific conditions of the subsidiary. In the case analyzed, the foreign subsidiaries had difficulties obtaining external credit while the Italian parent was interested in supporting the operational continuity of the group. In this case, the adoption of a zero-interest rate, if duly justified from a reasonable balance perspective, does not appear to contradict the principles of community and Italian transfer pricing.
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