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Ticino approves tax reductions for start-ups and business angels

30/04/2018

As part of the tax reform, Ticino voted last Sunday in favor of a tax relief for investments in innovative start-ups. The reform makes investments more attractive for business angels and eliminates taxes for prize money.  

Last Sunday the vote on the fiscal and social reform took place in Ticino. The proposal was approved by a narrow majority of 50.1%. The tax reform is part of the strategy of the Department of Finance and Economy (DFE) to support the development of innovative projects. The new reform is in line with the New Innovation Law (Linn) which introduced in December 2015.

The reform includes three measures to encourage investment in innovative start-ups.

  • taxation of investments made by individuals in start-ups: This measure aims at encouraging and favoring investments by individuals in start-ups by making the investment more attractive from a taxation point of view. The proposal provides that the amount paid as investment in a start-up will be deducted from income tax in the tax period and taxed at an extraordinary rate as capital of 1% on an annual basis. The start-ups must be registered in Ticino and has to have its administration the Canton. This measure is granted only from a minimum investment of CHF 50,000 up to a maximum investment of 80% of the investor's taxable income in Ticino.
  • donation tax exemption: Non-repayable contributions to start-ups will be exempted from donation tax. This measure aims to solve the problems inherent in the awarding of prizes and seed money following competitions.
  • reduction in the rate of capital tax for startups: capital tax will be reduced from the current 1.5‰ to 0.01‰. As for the tax recovery provided for companies that have received a tax exemption (art. 11 of the Law for Economic Innovation (LInn)), the rules for the recovery of tax will apply if, in the five years following the taxation of the start-up capital at the reduced rate, it leaves the canton.

The measures will apply only to companies that are highly innovative and are limited to three tax periods.

(Giacomo Pellegatta)