The Italian Supreme Court recently issued a judgment (No. 9688 of June 13, 2012) concerning tax allowances afforded Non Lucrative Organizations of Social Usefulness (O.N.L.U.S.) that provide benefits for disadvantaged individuals but who do so upon payment of compensation.
In the case at issue, the Italian Tax Authority issued an order of cancellation of a non profit organization from the Italian register of O.N.L.U.S., asserting that such organization did not comply with article 10, paragraph 2 of the Legislative Decree no. 460/1997. This paragraph requires an O.N.L.U.S. to have the exclusive purpose of ensuring social solidarity in the sectors listed in article 10, paragraph 1, letter A of the above Decree, in order to ensure effective benefits for disadvantaged individuals as regards their physical, psychical, economic, social, economic and family conditions.
In particular, in the opinion of the Italian Tax Authority, the above organization was not entitled to maintain the status of O.N.L.U.S. and to receive tax allowances related to such status, because its activities, although provided in favor of the foregoing categories of disadvantaged, were carried in exchange of payment of compensation.
Thus, the organization started a legal proceeding against the Italian Tax Authority, in order to invalidate the above order of cancellation of the above organization from the Italian register of O.N.L.U.S..
The Supreme Court, affirming the decision of the lower Courts, declared that the cancellation of an organization from the register of O.N.L.U.S. by the Italian Tax Authority pursuant article 10 of the Legislative Decree no. 460/1997 is erroneous even if such organization performs its activities upon the payment of compensation, provided that such activities are carried out in favor of disadvantaged individuals.
In particular, in the opinion of the Supreme Court, “the fact that the activities have been carried out by the organization upon the payment of a compensation does not exclude the pursuit of a solidarity purpose, unless there is the evidence of the pursuit of a profit-making by such organization, through the distribution of profits among its members or through the use of such profits in order to carry out activities other than institutional ones or related to the latter ”.
In conclusion, on the basis of the above, the Supreme Court confirmed the principle that the status of O.N.L.U.S. and the tax allowances related to such status belong to an organization when the activities performed by this latter provide benefits to at least one of the foregoing categories of disadvantaged, irrespective that such activities are undertaken upon the payment of compensation.