18 abril, 2020
Italy implemented a comprehensive reform of the Third Sector and other not-for-profit organizations.
Introduction.
Pursuant to Italian law, a Third Sector Organization or Ente del Terzo Settore (“ETS”) is a not-for-profit private organization or entity that pursues civic, solidarity and social benefits purposes carrying out, exclusively or principally, activities of general interest in an accountable and transparent way. The Code of the Third Sector (Legislative Decree No. 117 of 3 July 2017) introduced a common definition for not-for-profit organizations such as associations, foundations, social enterprises, philanthropic entities, and voluntary organisations, which are now all considered as “Entities of the Third Sector”.
The Third Sector includes organizations and entities operating in different fields that promote Italian community solidarity and pluralism, in a context of autonomy and cooperation with governmental authorities.
Main types of not-for-profit organizations (ETS).
Under Italian law, the main types of ETS are the following:
Volunteer Organizations (ODVs).
ODVs (in Italian) are a particular type of ETS regulated by the Code for the Third Sector. ODVs may use occasional volunteers for the furtherance of their activities, and the volunteers must register in a special registry.
To be constituted, ODVs require a minimum of seven individuals or three other volunteering organizations.
Volunteers may not serve simultaneously as employees of the respective ODV. Volunteers may only be reimbursed for their expenses, excluding non-refundable expenses in the case of, for example, blood and organ donors.
Associations for Social Promotion (Aps).
An Association for Social Promotion is a particular category of ODV that carries out activities of general interest for the benefit of its members or third parties using mainly the voluntary work of its members.
An Association for Social Promotion must to adopt the legal form of an Association and be composed of at least seven individuals or three Associations for Social Promotion. Other third sector or not-for-profit entities may also be admitted as members, but these must not exceed 50% of the members. Exceptions are provided for sport organizations.
The number of employees cannot exceed 50% of the volunteers or 5% of the members.
Philanthropic Entities are those third sector entities whose purpose is to provide support to disadvantaged persons or to carry our “activities of general interest”.
Social Enterprises are private entities and companies that carry out mainly business activities of general interest, non-for-profit and for civic, solidarity or social utility purposes. Social Enterprises can, under certain circumstances, distribute limited profits and operating surplus. Social cooperatives and consortium of social cooperatives automatically acquire the status of Social Enterprise.
Associative Networks and Mutual Associations.
Under certain circumstances, religious entities are also subject to third sector regulations. Religious Entities recognized under civil law may adopt the status of Social Enterprise only if they carry out the activities of general interest as defined by Code for the Third Sector and identify such activities by means of a public deed or a notarized private contract.
Governmental agencies, political parties, unions, professional, entrepreneurial, commercial, or industrial associations cannot qualify as ETS.
Main features of ETS’s.
Each ETS must mention their non-profit nature in their founding documents.
ETS may organize fundraising activities including solicitations to the public and acceptance of legacies. The distribution of funds, income or other assets to members of third sector organizations is prohibited with the exception of social enterprises. If the organization is dissolved or otherwise ceases to exist, the assets are transferred to Fondazione Italia Sociale, a private entity created by Law No. 106 of 2016 to support the activities of ETS.
The law sets a minimum amount of initial capital for associations and foundations that intend to obtain legal personality (respectively €15,000 and €30,000). The assets of an ETS may also consist of contributions in kind, but in this case, the value of such contributions shall be audited.
All Third Sector Entities must to register with the National Single Registry of the Third Sector (RUNT) held by the Ministry of Labour and Social Policies. The registration with the registry must be requested by the legal representative of the ETS.
The employees of a ET are entitled to the same benefits as other, equivalent private sector employees who are subject to collective bargaining agreements.
Moreover, Government agencies at the national, regional, and provincial levels are mandated to provide ETS with access to their facilities, as feasible and appropriate.
Funding, tax Regime and exemptions.
ETS may have access to a dedicated government ETS fund. Financial institutions authorized to operate in Italy may issue “solidarity bonds” (titoli di solidarietà) to finance the activities of ETS. The issuing organization is exempted from the payment of placement fees.
General activities carried out by ETS pursuant to their mission through cooperative actions with government agencies are considered non-commercial activities. Hence, such activities are exempted from income tax liability. There is also a special tax credit equivalent to 65% of the cash donations made to ETS by individuals and 50% by legal entities. Additionally, 30% of the expenses incurred by taxpayers for in-kind contributions made to ETS for non-commercial activities are regarded as deductible for purposes of gross income tax. Managers of online portals that carry out social lending activities are subject to a different, more favourable tax regime for contributions received via their portals.
Measures to support Third Sector Entities during COVID-19 emergency.
The so-called “Decreto Cura Italia” (Decree-Law No. 18/2020) introduced a series of measures to protect workers, also applicable to the employees of Third Sector Entities.
In particular:
- the deadline to carry out the mandatory statutory changes required by the reform of the third sector is extended to 31 October 2020. Therefore, ODV, APS and Onlus registered in their respective registers will have until 31 October 2020 to modify their statute and update it to the Third Sector new legislation. Other associations that do not have one of the three qualifications mentioned and therefore are not registered in their respective registers have no time limit to adapt their statute to the third Sector reform and will be able to decide if and when to enter the «perimeter» of the Third Sector.
- The deadline for the approval of the financial statements of non-profit organizations and ETS is extended to 31 October 2020.
