Unresolved issues in the taxation of social cooperatives

The social function of cooperatives is protected by Article 45 of the Italian Constitution and is also recognised on the European level. In fact, in its Communication on the promotion of cooperative societies in Europe, the EU Commission stresses that “[the] role of cooperatives as vehicles for the implementation of many Community objectives in fields like employment policy, social integration, regional and rural development, agriculture, etc” (COM/2004/0018 final). Under Italian law (Law no. 381 of 8 November 1991), social cooperatives aim to pursue the general interest of the community and benefit from particularly advantageous rules including preferential tax treatment. As a result of the so-called “Third Sector reform, social cooperatives have been classified as social enterprises. However, it is not entirely clear which tax regime is applicable to them. This is uncertain due to the way in which Article 1(4) of Legislative Decree no. 112/2017 is worded. The aim of this paper is to ascertain whether any aspects of the legislation on social cooperatives, including tax provisions, have been affected by this reform. Secondly, it will also seek to establish whether the tax regime applicable to social cooperatives is consistent with the role performed by them within the Third Sector.