Tax and accounting treatment of the contratto di rete (Italian business network contract)

Tax and accounting treatment of the contratto di rete (Italian business network contract)

The contratto di rete allows several businesses to cooperate on a common programme while remaining independent: the tax treatment changes radically depending on whether the network stays a rete-contratto (a purely contractual network) or becomes a rete-soggetto (a network with separate legal personality).

Rete-contratto: no new entity arises; the costs and revenue of the common programme are allocated pro rata to the member businesses, each of which invoices and accounts for its own share. The common fund is managed by the common body acting under a mandate.

Rete-soggetto: separate registration with the Registro imprese (Italian companies register) creates a distinct person liable to IRES, IRAP and VAT, with its own books, financial statements and tax returns; contributions by the members follow the rules on equity interests.

Points to watch: invoicing of internal dealings, the recharging of costs, the VAT treatment of transactions with third parties and liability for the network’s debts.

The firm supports businesses in choosing the form, in drafting the tax provisions of the contract and in running the accounts on an ongoing basis.

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