An article of our associate Dott. Gianni Mario Colomboadministrative and tax expert. From (non) commercial institution to third sector entity: capital good transfer.

Gianni Mario Colombo, Ratio Quotidiano; November 25, 2019.

Art.9, c.2 D.Lgs. 460/1997 (Temporary assistance for capital asset transfer) includes a transitional arrangement that allows non-commercial institutions that use capital goods (described in art.40 TUIR) to exclude those goods from the institution’s assets, provided they pay a replacement tax.

This rule became necessary when the non-profit organizations’ legislation was introduced in our legal system.

As for direct taxation, a similar rule should be introduced once the RUNTS (National Register for the Third-Sector) is activated, considering the major fiscal changes brought about by the reform when the goods, as well as the activities, are effectively transferred to the new system, introduced by the Third Sector Reform.

Art.101, c.8 excludes the loss of the non-profit organization status once the Third-Sector institution status is gained, including the social enterprise one; however, it does not mention the fiscal consequences of the transition from non-commercial institution to Third Sector Entity or social enterprise.

Case no.1: the Transition from Commercial Institution to Non-Commercial Third Sector Entity

Even though it is the same subject, what is the fiscal destiny of the activities and goods in the new system? For the transferred capital goods, the self-supply issue might arise.

In that regard, we should consider art.86, c.1, lett. c) of TUIR, since at this point the goods would be put to use for purposes that are unrelated to the enterprise.

This is the case of a capital real estate put to use for institutional activities of the non-commercial institution. The choice of enrolling in the social enterprise section at first and, if necessary, “move” to the Third Sector Institution section does not seem an adequate solution, because, again, the self-supply issue might arise.

In this case, the capital gain is the difference between the “regular” value and the non-amortized cost of the asset (art.86, c.3).

To sum up, the following instance may occur. If the assets are purchased against payment, the depreciation set aside during the asset’s service life must be taken into account and compared to the “regular” value of the asset to establish a capital gain or a capital loss. If the assets are obtained free of charge, capital gain still depends on the acquisition value minus the “regular” value of the asset.

A similar line of reasoning should be applied if the asset was used for the commercial activities of the non-commercial entity and it is transferred to the non-commercial Third Sector Entity.

In this case, resolution 96/E/2006 could apply; it provides for the transfer of property from the commercial activities of the non-commercial entity to its institutional activities.

Case no.2 Religious Third Sector Entity/Social Enterprise

Is it possible to transfer to the Third Sector “branch” only the current activities of the Religious Entity involved, without the capital goods necessary to the activities it performs?

Moreover, if that was possible in the non-commercial Third Sector branch, could the use of a capital good previously considered in relation to the entity’s commercial activities raise the issue of self-supply, as we mentioned in the previous example?

These important questions should be answered by the legislation.