Inteview with Francesco Nobili of the Biscozzi Nobili law firm, providing assistance and tax advice to Italian SMEs since the 1970s.

 

 

In your experience, in what sectors (management, finance, marketing, etc.) should Italian SMEs improve to compete better on the world market?

We’ve been assisting entrepreneurs and traditional family companies for decades, and we’ve noticed that Italian companies, especially SMEs, have particular strengths derived from the ongoing tradition of Italian creativity, which has helped establish "Made in Italy" as a synonym for excellence worldwide. In this respect Italian SMEs are competitive, because their business models combine their traditional family intuition with the innovative drive of young talents, which now translates into the numerous start-ups coming into the market. At the same time, however, these companies find themselves in difficulty at critical moments in their life cycle, mainly during:

• growth phases, including international expansion, which requires new finance;

• generational hand-down, which must be managed correctly to avoid sometimes total destruction of the value that’s been created over the years.

In our experience, excessive dependence on the banking channel can slow down growth because traditional forms of financing are often inadequate, whereas the challenges imposed by the global market require financing tools that are flexible, not excessively burdensome and adaptable to specific needs. Some of the legislative interventions of recent years have been designed to fill the gap in the financial market in Italy, to the main advantage of SMEs wishing to make a "jump in quality": minibonds, crowdfunding, the revision of financial bills, and last but not least the so called “P.I.R.” – which are saving plans with important tax benefits for subscribers - and incentives to encourage listing. Accessible finance is undeniably one of the main levers to support competitiveness, and companies are aware of this, as evidenced by the high level of participation in the Elite project.

From a managerial point of view, another critical aspect of our SMEs is to be found in the widespread "informality" of company management and centralisation of decisions in the hands of the sole entrepreneur. This inadequacy, or worse, complete absence of a rational and structured governance mechanism, can make relations with international partners difficult and also lead to deadlock situations during generational transitions.

From this point of view, a culture of innovation must be promoted, starting with the perception of company know-how and culminating in legal protection for it (for example, introducing safeguards for secrecy or patenting) and economic optimisation, in which the recent major tax incentives also play a part.

Once the culture of innovation has been enhanced, the next "natural" step would be to exploit the existing tax incentives that are designed to foster innovation: super and hyper amortisation, the Research and Development credit, the 4.0 training tax credit, the discipline of "innovative start-ups" and the introduction of the Patent-Box, for example.

Among the services you offer, many aim to provide tools for improving company competitivity. What advantages do you offer companies that embark on this path?

Our services are focused precisely on the elements that we consider critical for company growth and competitiveness. The guidelines along which we direct our advice are:

• pushing towards internationalisation and new investments, with a consequent increase in capital;

• impulse towards innovation and enhancement of intangibles;

• corporate governance and management of generational change.

We provide comprehensive advice in these areas, including structuring operations from an economic and legal standpoint, definition of the most appropriate governance structures, management of the fiscal variable (in both the consultancy and litigation phases), and the evaluation of financial statements and audit services.

Our strength as a firm is that we can provide 360° assistance to our clients with our team of over 50 professionals including lawyers and chartered accountants at our Milan office, and external collaboration with national and international partners (for the internationalisation process, for example), while maintaining a "boutique" profile with a personal approach.

Managing taxation is also very important: i) from a "preventive" point of view, as a lever for creating value by optimising available incentives, monitoring tax risk with check-ups and compliance, entering into dialogue with tax authorities - ie ruling procedures), ensuring maintenance of the "tax reputation", and ii) through assistance with litigation or pre-litigation procedures, the search for settlement solutions and recourse to international dispute resolution instruments to minimise charges related to assessments.

We have experience in dealing with taxation (or double taxation) disputes, which are typically generated as a result of international expansion on issues such as transfer pricing, company residence, branch taxation, treaty application, etc; we also manage the foreign aspects of these issues through our consolidated relationships with a network of professionals.

So, to answer the question in brief, we could say that the advantages for those who employ our services are mainly the comprehensive, integrated advice that we provide, and the diversified experience which when combined with the technical expertise of our staff and continuous professional updating, means we can offer "tailor-made" solutions for every single client.

 

 

One of the tools you offer companies is tax relief linked to the Patent-Box, an incentive to invest in research & development and a good way to combat the "brain drain", protecting Made in Italy and Italian ingenuity. How are companies effectively taking advantage of this benefit? Which sectors are mainly involved?

The introduction of the "Patent-Box" was undoubtedly an important event in our country, first of all because it represents an important tax incentive that has allowed Italy to keep up with other countries (by halving taxation on income produced by using intangibles developed by the company), and restore Italy as an attractive proposition.

Secondly, the process for the recognition of this reduced taxation has broken away from the previous situation of conflicting dynamics with the tax authorities, and introduced a period of dialogue with the new strategic framework of the Revenue Agency. Remember that in most cases access to the benefit is subject to an agreement being reached with the Revenue Agency on the identification of calculation criteria, and 435 agreements were concluded in 2017.

Since this regulation was first introduced with the 2015 Stability Law - even before the implementing provisions were enacted - we sensed the potential of the provision and took part in specialist training events to establish a collaborative relationship with the Revenue Agency right from the start.

In our experience companies are also perceiving this tool and their relationship with consultants and the tax authorities as a good opportunity for in-depth investigation of the dynamics of value creation, and related consequences for financial data. In other words, going back to what we have highlighted as one of the weaknesses of Italian SMEs - namely the poor perception of their intangible heritage - the introduction of this benefit has also brought with it an increase in sensitivity towards the theme of value creation and its (financial and non-financial) disclosure, and passed it on to stakeholders (current and potential), which is also crucial for seeking new finance.

There is no doubt that this potential has been perceived by companies too.

According to data released by the Revenue Agency, in 2015 when the subsidy was first introduced, 4,500 applications were submitted, with Lombardy in pole position (1,200 requests), followed by Veneto (706 requests) and Emilia Romagna (636 requests). These are the exact places where we commenced our consulting activity, but interestingly most of the requests came from companies with a turnover of between 10 and 50 million euros, demonstrating the "flywheel" effect on SMEs.

The initial success of the Patent-Box was mainly linked to brands, which were targeted for first-level application of the facility by a transitional regulation introduced by the OECD, and which our legislator was able to apply, but now and into the future (this regulation is now fully operational) the incentive is aimed at supporting actual technological innovation, ie industries that develop know-how, patents and software.

Many of our clients, like us, have recognised the importance of this facility - the Campari group, for example, which we have supported through the entire process leading up to the signing of the Patent-Box agreement with the Revenue Agency - and we have many other clients in the same position. For our part, the agreements concluded so far have proved to be of undoubted advantage for taxpayers, even though they have required considerable time and commitment on our part and that of our clients.

This facility and the process of obtaining it is an encouragement to high technology companies with significant margins to seriously engage in the accurate mapping and protection of their intangible heritage, and in research and development, to invest financial and human resources and thus guarantee the preservation and creation of jobs for the benefit of the whole country.

How many years have you been providing value added advice in this specific sector?

Our tax department has recently accomplished the milestone of 40 years of practice, having been created in the late '70s by professionals from international consulting firms. The corporate law section was created in the late 1950s. The firm that started out as a close partnership has grown constantly, with the inclusion of the taxation and corporate departments, to achieve its current organisational structure, and now includes over fifty professionals.

The integrated tax and law firm operates as a professional association, and is independent and autonomous with respect to the multinationals in this sector; it traditionally handles business problems, both domestic and international, using a network of foreign contacts where required.

As I mentioned before, since the company started out we have concentrated on supporting entrepreneurs in the growth process, internationalisation and generational transition.

In recent years we have concentrated in particular on taxes on innovation across the various sectors, monitoring the successive fiscal incentives over the years including the Patent-Box, and also credits for research and development and incentives for industry 4.0 (the so-called "super and hyper-amortisation" and credits for "training 4.0"). With Patent-Box, for example, our firm participated in the training events promoted by the Revenue Agency aimed at a restricted group of consultants, and was subsequently involved in some of the first agreements to be concluded, which represented and still represent a sort of "framework" for managing other procedures. We have thus achieved a certain expertise in developing methods for calculating the facility, protecting the interests of our clients and taking an active part in the dialogue with the Revenue Agency.

Has the type of customer changed over the years? If so, in what way?

Throughout our long experience we can say that the type of customer has not changed, considering that we’ve always focused mainly on family businesses. But the challenges our "typical" customers have been exposed to have certainly changed; challenges that our firm has always supported them with, guaranteeing balanced management of the legal and fiscal problems that come up from time to time.

We have also noticed that regardless of their profile (international, Italian or foreign), all our clients have long identified "tax reputation" as a critical factor in their success or failure - and strong negativity if it were to fail - and there is consequently greater interest in the fiscal variable than previously.

The most interesting news today is that even SMEs are involved in the challenges of searching for new funds and using modern "fintech" tools, as evidenced by the massive success of the Elite project. In this context, our firm is a logical partner to offer companies aiming for growth the guarantee that every risk and every element of uncertainty related to the fiscal variable will be managed securely, and that the optimum legal process will be followed when making decisions.