New business activities carried out in an individual or freelance professional form, whose owners have not exercised, in the twelve months prior to the submission of the application, an economic activity comparable to that for which they request access to the following benefits, are recognised:

1. exemption from the payment of the first license fee;
2. for the following three years of activity, exemption from the payment of the annual license fee;
3. for the first five tax periods, reduction of the expected rate equal to 50%. The taxpayer has the right to postpone the start of the tax exemption period no more than the third tax period following the start of the new activity; 
4. IGR tax credit on staff training, technological innovation and development programs, whose criteria are defined by a special delegated decree.

The benefits also apply to capital companies whose members have not exercised, in the twelve months prior to the submission of the application, activity of a company similar to that for which they request access to the following benefits, when:

1. contracts of newly established companies;
2. at least one employee is hired, including the administrator even if not registered on the job starter lists, provided that he is hired full-time, within six months of the issuance of the license, and an additional employee within twenty-four months of the issuance of the license. 

The maintenance of the requirements for members in the event of the sale of quotas or shares and the bond provided for in letter b) is an essential condition to maintain the benefits.
The benefits provided for in letters a) and b), apply, under penalty of forfeiture, from the date of issuance of the license or, if free professional self-employment, at the time of registration with the Labour Office.
The benefits provided for in letters c) and d), apply at the option of the beneficiary, without prejudice to the time limits provided for therein.
The cessation of the requirements provided for entails the forfeiture of the facilities for the current and subsequent exercises.
The provisions They also apply to cooperative societies if and to the extent compatible.   In the event that the new activity concerns the exploitation of intangible assets, the use of the benefits provided for by this article is subject to the limits and conditions provided for by Decree – Law 28 June 2018 n.76.

Tax incentives for increased employment

Economic operators, including freelancers, who hire workers from the start-to-work lists are granted an IGR tax credit to the extent and in the manner defined.

For the purposes of applying the provisions, “average number of employees” means the algebraic sum of all employees hired in the reference tax year, weighted by the number of months of the year in which they are employed by the economic operator. The month of employment is considered to be one in which the employee is employed for at least sixteen calendar days. Each part-time worker must be considered in the calculation of the average number of employees by relating the working hours worked to the full contractual hours provided for the hiring sector and/or to any existing agreements at company level that provide for working hours different from the contractually provided for.

The Labour Office is required to calculate the average number of employees employed by the company or by the freelancers and to update it in the event of changes, constantly providing this data to the Contributions Office of the Social Security Institute and the Tax Office.

Employers who in the tax year in question, compared to the previous financial year, increase the average number of employees equal to at least one unit, provided that at least 50% of them come from the start-to-work lists, have the right to take advantage of an IGR tax credit on the general income tax due equal to: a) 5% of the tax for each unit of increase, with possible rounding by default, for companies with an average number of employees in the previous year greater than or equal to 5; b) 10% of the tax for each unit of increase, with possible rounding by default, for Companies with an average number of employees in the previous financial year less than 5; it being understood that this tax credit cannot exceed 25% of the total tax due. 

In the event that the employer hires, from the start-up lists, a worker falling into the special categories, the percentages of letters a) and b) are high by an additional 5% for each hired worker and the IGR tax credit cannot exceed 40% of the total tax due. 

The tax credit can be enjoyed, even partially at the option of the company, when submitting the tax return for the year in which the increase takes place or within the following two tax years. 

If during the year in which it has chosen to enjoy the tax credit, the company makes a further increase, according to the procedures provided, it can choose to accumulate the benefits in that year or to enjoy the additional tax credit within the two subsequent tax years. 

The tax credit is revoked for companies that, within one year of the tax year in which the benefit was enjoyed, carry out collective redundancies and/or staff reductions pursuant to labour regulations, if such reductions involve a number of employees equal to or greater than those for whom the benefit was obtained. 

Companies that forget benefits are excluded from access to benefits for the following two years by collective dismissal or staff reduction. 

Reinvested earnings tax deduction

The annual balance sheet profits, obtained by subjects who carry out business activities regardless of the legal form and provided that in the ordinary accounting regime, used for investment interventions in capital goods in the same company, do not constitute taxable income for the purposes of direct taxes, according to the provisions of the following articles. 

These provisions apply to companies that, on the date of submission of the project, have at least five employees hired with a permanent employment contract or three employees provided that they are from San Marino or residents hired with a permanent employment contract; if during the duration of the project the number of the above-mentioned employees becomes less than five or three units, the benefits expire entirely. 

The tax reduction referred to in this article is also allowed for companies in different accounting regimes, provided that from the year following that of the approval of the project the companies adopt the ordinary accounting. 

Business projects that provide for:

are considered investment interventions

1. the introduction of technological advances to improve existing products or production processes or the acquisition of plants or technologies aimed at the realisation of new products or new production processes;
2. constructions, acquisitions, renovations or expansions of buildings aimed at improving existing production processes or introducing new ones in the presence of business projects that provide for the employment of at least one permanent employee;
3. the acquisition of plants, machinery or technological processes aimed at obtaining substantial energy and water savings or significant reductions in pollutants according to the parameters, coefficients and methods suitable to represent the considerable and substantial energy savings and the lower polluting load as established by specific sector legislation and with appropriate certification. The benefit referred to in this letter can be obtained provided that the potential beneficiary has not received sanctions or reports from the competent offices regarding non-compliance with the regulations relating to the requested benefits.

For the purposes of tax treatment, they do not constitute taxable income: 

1. 60% of the annual profits for the year for interventions referred to in letter a); 
2. 40% of the annual profits for the year for interventions referred to in letter b); 
3. 90% of the annual profits for the year for interventions referred to in letter c). 

Notwithout prejudice to the maximum coefficients, in the event of cumulation of the interventions referred to in letters a) and b) the maximum percentage of non-taxable income is equal to 70%. 
Tax benefits are recognised up to the value of the investment intervention, authorised, within the fifth year following that of the authorisation itself. 
Non-taxable income must be allocated to a special budget fund and are bound for five years from the period of formation of the same. 
If the value of the total investment intervention is greater than €7,000,000.00, the tax benefits are recognised within the seventh year following That of the authorisation. 
If the company has kept the average level of employment stable in the year of profit formation compared to that existing at the end of the year preceding that of access to benefits, the provision for the special fund can be made limited to the amount of general income tax corresponding to the tax benefit used. 

Report of tax losses for newly established companies

Tax losses realised in the first three tax periods from the date of incorporation of the new company can be calculated as a decrease in the total income of the subsequent tax periods without any time limit, provided that they refer to a new economic activity. 

Tax deduction for equity

Taxable persons can deduct from taxable income, a share corresponding to the increase in equity, net of the result of the current financial year, in each tax period. 

The share of deductible equity is set at 10% of the capital increase. 

Undeducted shares in a tax period cannot be calculated in decreasing the taxable incomes of the subsequent tax periods. 

The profit reserves constituted in relation to the tax deduction of reinvested profits and the mandatory reserves by law are excluded from the calculation of the capital increase. 

In the case of equity reductions deliberated by the shareholders’ meeting not deriving from operating losses, the company is required to pay the proportional return of the facility enjoyed. 

Deduction of income from intangible assets

Companies and entities of all types, including trusts, with or without legal personality, non-residents in the territory may exercise the option provided that they are resident in countries with which the exchange of information is effective. 

The option for the subsidised taxation regime is allowed on condition that the subjects who exercise the option carry out research and development activities, also through cooperation contracts in research and development stipulated by the company, the State of San Marino or by Entities controlled by the latter, with Universities, Entities, independent private companies from other countries, aimed at the production of intangible assets subject to the tax relief governed by this decree-law. 

The option can be exercised by those who have the right to the economic exploitation of intangible assets.

The facilitation referred to in this decree-law concerns income deriving from the use of the following intangible assets: 

1. industrial patents, whether granted or in the process of being granted, including patents for inventions, including biotechnological inventions and related complementary certificates of protection, patents for utility models, as well as patents and certificates for plant varieties; 
2. designs and models, legally protectable; 
3. Copyrighted software. 

The following methods of use are within the scope of the option: 

1. the granting in use (indirect use) of the right to use intangible goods; 
2. the direct use of intangible goods, by which the use in the context of any activity that the rights to intangible goods reserve to the holder of the right itself. 

In the case referred to in letter a) of this article, the subsidised income is determined according to the nexus ratio and consists of the fees deriving from the concession in use of intangible assets, net of the tax-relevant direct and indirect costs related to them, in compliance with the accounting rules in force in San Marino. 

In the case referred to in letter b) of this article, it is necessary to identify for each intangible asset subject to the option the economic contribution deriving from it that has contributed algebraically to the formation of the company’s income or loss.

The option also concerns the sums obtained as compensation or as a return of the profit by way of contractual or non-contractual liability, for non-fulfilment of contracts relating to intangible assets or for violation of rights to the same assets.

The qualified income of companies deriving from the use of intangible assets does not contribute to forming the total income as it is entirely excluded for their total amount. 

Capital gains deriving from the sale of intangible assets do not contribute to forming the total income of the company, as they are entirely excluded from the formation of income, provided that at least 90 percent of the consideration deriving from the sale of the said assets is reinvested, before the closure of the second tax period following that in which the transfer occurred, in the maintenance or development of other intangible assets. The provisions relating to the agreement with the Tax Office apply.

Audiovisual industry tax incentives

The companies of the audiovisual industry, national or foreign with permanent establishment in the territory, which carry out cinematographic, audiovisual or theatrical projects in whole or in part in San Marino enjoy the following tax breaks: 

1. deduction of taxable income equal to 50% of the costs incurred in the territory attributable to each individual production; 
2. reduction of the ordinary single-phase rate equal to 50%, without prejudice to the application of the rates in force on capital goods. 

In addition to the benefits, the companies indicated therein are entitled to a contribution relief of up to a maximum of 20% for each worker hired in execution of employment plans approved by the State Secretariat for Labour. With the approval, the State Secretariat for Labour determines the extent and duration of the contribution relief taking into account the number of workers hired and the form and duration of the hiring. 

Internationalisation tax relief

In order to facilitate the internationalisation processes of San Marino companies, an IGR tax credit is granted equal to 20% of the eligible expenses incurred by San Marino economic operators for participation in business initiatives, missions, participation in fairs and other research initiatives for new markets.

Applications are submitted to the Chamber of Commerce of San Marino. The Technical Evaluator Committee referred to in article 17 of Law n.71/2013, on the basis of the provisions of the regulation, establishes any access to the benefits referred to in this article and the amount of IGR tax credit to be disbursed.

In order to facilitate the internationalisation processes of San Marino companies, all San Marino economic operators organised in the form of a company that participate in the initiatives listed below related to the search for new markets can benefit from the incentives: 

• participation in official exhibition events; 
• temporary show rooms; 
• incoming of operators; 
• missions abroad; 
• promotional and communication activities in new markets; 
• Workshops and/or seminars or in San Marino with operators from new markets, or in new markets; 
• specialised training activities for internationalisation; 
• international events.

The expenses considered eligible are those indicated in the lists and must be indicated in divided applications for each individual initiative. An expense gives rise to the facilitation if it is directly linked to the participation of the initiative and if it is borne by the company in the period starting from the date of accession and ending 12 months after the start date of the same. An expense is considered incurred on the date on which the actual payment is made. 

In the case of initiatives oriented to the search for new markets, applications can be submitted for initiatives with annual cadences and for which a first facilitation has already been obtained, for a maximum of two consecutive years. 

By “new market” means a Nation, or a market sector in which the company requesting the benefits has not invoiced an annual figure exceeding 10,000.00 euros (ten thousand/00) or in any case more than 1.5% of the total turnover of the company recorded in the year prior to that of the event. 

These amounts are all-inclusive of any proceeds from the sale of products, after-sales services, consulting or as a consequence of any other possible internationalisation activity. 

In the event that the territorial extension of the Nation exceeds one million square kilometres, the Technical Evaluating Committee can accept lower national subdivisions. 

In the case of an event referred to in point (h), the provisions of the previous paragraph shall not apply.

Tax incentives for training activities

Economic Operators who invest in training activities, excluding training courses required by law, are granted an IGR tax credit to the extent of 25% of the expenses incurred in each tax period.

The IGR tax credit is granted to each economic operator up to a maximum annual amount of 5,000.00 euros and for a maximum of two years over a four-year period.

In order to benefit from the IGR tax credit, each economic operator must present a Training Plan in advance to the Vocational Training Centre. The training plan must contain the following minimum elements:

1. identification of the company’s training needs;
2. Defining a business training plan that meets training needs.

At the end of the training period, a report must be submitted to the Vocational Training Centre containing an evaluation of the training activity carried out.

The Professional Training Centre, in relation to the documents presented, issues, at the end of the period indicated above, a specific certificate of validity of the course with respect to the identified needs that must be attached, together with the documents demonstrating the expenses incurred, to the tax return in order to enjoy the IGR tax credit.

The Vocational Training Centre raises the percentage of the IGR tax credit to a maximum of 40% when the Training Plan is aimed at training workers in sectors that have emerged as missing or strategic at the system level.

In the event that, following checks, the improper use, even partial, of the IGR tax credit is ascertained due to the inadmissibility of the costs or for non-compliance with the required conditions, the public administration provides for the recovery of the relative amount, plus interest and penalties.