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.

The deadline not to miss. If the network has acquired legal personality, within two months of the close of the annual financial year the common body draws up a statement of assets and liabilities, applying, to the extent compatible, the rules on the financial statements of joint-stock companies, and files it with the Registro imprese office for the place where the network has its registered office; Article 2615-bis, third paragraph, of the codice civile (the Italian Civil Code) applies to the extent compatible. The time limit runs from the close of the financial year, not from its approval: for a calendar-year financial year the deadline is 28 February, 29 February in leap years. Amendments to the contract are filed for registration, by the business named in the amending instrument, with the section of the Registro imprese in which that business is registered, and that office notifies the other offices for the corresponding official annotations.

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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