The Delegated Decree no.116/2014 has introduced some meaningful fiscal incentives and possibilities for the high-tech startup companies, ranging from tax reductions on business profits to a more streamlined procedure for those economic operators who want to apply for a residence or domicile permit, thus making San Marino one of the world’s most attractive Countries to start a Business in order to promote the technological innovation inside and outside the territory of the Republic.Download legal references in english language
High-tech Startup companies
In order to be acknowledged as a Start Up, economic operators must transmit their application to the Industry, Crafts and Trade Office. High-tech startup companies are exempt from the payment of the IGR tax for the first five years after the registration of the company on the Trade Register and they are also exempt from the payment of the license issue tax for the first three years of business activity.
The Delegated Decree no. 116 dated 24/07/14 sets the objective and subjective requirements in order for a company to be eligible as a Start Up: this must be established in the form of corporations and must have been qualified by a first license issue for not over 24 months after the application and the overall value of its annual turnover must be below or equal to 100,000.00 euro. The corporate purpose must be mainly technological and at least 35% of the shareholders and rights holders must be individuals with a Bachelor’s or a Master’s degree, who have already had at least a 2-year work experience in the technological sectors of the high-tech Startup Companies. The business activity period of the high tech Startup Companies can be max. 5 years that are calculated starting from the license issue.
Incentives for the high-tech Start Up companies
Share held by employees
The difference between the values of the shares or of the stocks issued by Start Up and the amount paid by the employee are not included in the employee’s aggregate income, as long as on the aforementioned amount is at least equal to the value of the shares on the date of offering. Conditions: no voting rights, shares in the company’s capital must be held consistently for at least twelve months, it must be reported in the company’s accounting records and at least on one balance sheet, and it must be recognized as financial fixed assets in the first financial statement closed at the relevant period.
Incentives for the legal and natural entities investing in the Startup companies
For the tax periods 2014, 2015 and 2016, legal entities resident in San Marino who provide contributions in cash or in kind to high-tech Startup companies are entitled to a 5% reduction from the IGR tax for an amount not above 1,800,000.00 euro (the percentage increases to 2% in case of Startups exercising their activity in certain sectors: social, renewable energies, etc..). Such entities can also deduct from the taxable income a 12% share equal to the increase in their own capital, net of the current year’s result, in each tax period .
Natural persons: For the tax periods 2014, 2015 and 2016, natural persons resident in San Marino who provide contributions incash or in kind to high-tech Startup companies are entitled to deduct from the IGR tax the 5% of the relevant investments made in the company, for an amount not exceeding 500,000.00 euro. For the corporations the amount is established by the shareholders as natural persons in proportion to the respective number of profit shares held (the percentage increases to 2% in case of Startups exercising their activity in determinate sectors).
The potential difference is offset against the amount of the gross general Income Tax of succeeding tax periods, but it shall not be extended beyond the third year, up to the same amount.
Participation exemption for non-entrepreneurs
Any capital gains realised by non-entrepreneurs as natural persons resulting from the sale of equity holdings, participating financial instruments or participating contracts in the high-tech startups and reinvested in companies that exercise the same activity and which have been set up for no more than three years, are not subject to taxation.
The exemption however cannot be above five times the cost incurred by the Start up, during the five years before the sale of the equity holdings, for the purchase or production of tangible assets other than immovable assets, of intangible assets and for the research and development costs.