Nonprofit Organizations Law and Policy Third Edition - Libraries ...

SEC. IV FOREIGN NONPROFIT ORGANIZATIONS 57
Most foundations are subject to corporate income tax pursuant to the
same conditions as commercial enterprises. However, those foundations
which carry out their activity free of charge (i. e., they have no income) or
those whose expenses exceed income are exempt from corporate tax.
With regard to the value added tax ("VAT"), as is the case for
associations, this tax may apply to certain activities of certain types of
foundations.
Foundations which are exempt from VAT are those the purpose of
which is charitable or philanthropic, and only provided that the prices
which they charge have been approved by the public authorities, or if the
prices are below market prices for comparable services, or if the services
performed by the foundation are not available by commercial enterprises.
Finally, like associations, payments which are made by individuals to
a public interest foundation are deductible from taxable income within
certain limits which are set by the Tax Law enacted each year by the
legislature.
B. SYNOPSIS OF ITALIAN LAW ON
NONPROFIT ORGANIZATIONS
Professor Giovanni Riccio 26 summarized laws in Italy on nonprofit
organizations as follows. Italy reorganized the fiscal legal principles of
nonprofit organizations in 1997. 27 The 1997 law created ONLUS (Organizzazione
non lucrativa di utilita or Non-profit organization of social utility),
which is a nonprofit organization with social benefit purposes. These
separate and autonomous category of entities have fiscal benefits in that
they may receive donations from the state. Further, individuals and
companies receive tax deductions for their donations. Donations to the
ONLUS foundations are deductible up to a certain percentage of gross tax,
and the transfer of goods as gifts to ONLUS is VAT exempt. Activities of
ONLUS center around benefitting persons disadvantaged by economic,
physical, mental, social or family conditions and include providing humanitarian
aid to members of foreign groups. These corporate bodies may not
distribute their profits to members or other entities nor may they distribute
assets to their members upon dissolution (the non-distribution constraint
principle).
The Italian Civil code recognizes two forms of nonprofit organizations:
associations and foundations. Associations and foundations are set
up by a public document, by a notarial act, or by another public official,
but foundations, unlike associations, may be created by will. The law
relating to associations and foundations is similar to that in the United
States in many respects. These organizations have private autonomy and,
in effect, become corporations by filing a memorandum of association that
26. Professor Giovanni Maria Riccio, Professor of Law, University of Salerno Otaly); translated
by Ileana Ippolito and Frank Z. Elmer.
27. Legislative Decree 460.