Italy: Loan from Members:Tax Concessions provided for by the state(1994)

    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
                         May 1996


Loan from Members : Tax Concessions Provided for by the Italian State (1994)

Source : International Handbook of Cooperative Organisations,
Edited by E. Duelfer in cooperation with J. Laurinkari,
Vandehoeck & Ruprecht in Goettingen, 1994, ISBN 3-525-13225-5 

On interest and income from capital paid by co-operative
societies to their own members. legally registered persons
resident in the territory of Italy, a tax concession of 12.5%
is applied on condition that:

a)   the payments and withdrawals are effected exclusively for
     the pursuit of the society's aims and do not exceed, in
     the case of any individual member, the sum of forty
     million lire. This limit is raised to eighty million for
     co-operative for the preservation, processing,
     transformation and alienation of agricultural produce,
     and for co-operatives for the production of work;

b)  interest paid on the above sum must not exceed the
     maximum measure of interest pertaining to holders of
     interest-bearing post-office certificates. 

In addition, the following clauses must be included:

a)   forbidding the distribution of dividends superior to the
     legal interest rate applicable to the capital effectively
     paid over.

b)   forbidding the distribution of the reserves among the
     members during the life of the Society; 

c)   devolution, in the case of dissolution of the Society, of
     the entire assets of the Society. (deducting only the
     capital paid and the dividends due there from), to
     purposes of public utility in conformity with the spirit of mutual

In case of controversy, the Minister of Labour and Social
Security will decide, in agreement with the Ministries of
Finance and the Treasury, after the Central Committee for
Co-operatives has given its judgment.

Brief Comments on Deliberation No.94 A 1625 of the Inter-
Ministerial Committee for Credit and Savings, (ICCS) dated
3.3.1994 and published in the Official Gazette No. 58 of 11
March, 1994.

The deliberation, which puts into effect Article 11, para, 3
letter (a) of the new Banking Law, established that the
acquisition of loans undertaken among their own members by co-
operative which are not financial trust does not constitute
the acquisition of public savings, on condition that the
following limits and criteria are met:

1.  The acquisition must be made from subjects entered in the
     Register of Members for at least three months, and must
     be permitted by the Charter of Incorporation (Statute).

2.   The overall amount of the loans from the members must not
     exceed "the limit of three times the assets (paid over
     capital and reserves) appearing on the last approved
     Balance-sheet". This limit may be raised to "five times
     the assets as long as the overall sum of loans from members is
     backed up to at least 30%," either by guarantees issued
     to the co-operatives by banks, by financial companies (as
     defined in Article 107 of the Banking Law), by authorized
     insurance companies and bodies, or through adhesion of
     the co-operatives itself to a scheme of guarantees of members 
     loans which provides for adequate safeguards for
     investors", (in other words, for example, a mutual guarantee
     fund for this sector, which undertakes to reimburse to the
    members the sum loaned, in the case of bankruptcy or
    obligatory administrative liquidation of the co-operative
    concerned, with substitution of the fund in favour of the
    rights of the members in case of bankruptcy or liquidation). 

The suitability of any of these guarantors must be certified
by the Bank of Italy.

3.   The manner of obtaining loans from members must be
      clearly shown in the appropriate regulations, for the purposes of
      avoiding, among other things, the appearance of
      solicitation of public sector savings referred to in Article 18 of Law
      No. 216/74.

4.   Paragraph 1. section 4 of the deliberation in question
      states (verbatim)  Obtaining of loans from members must
      not in any case take place by on-demand means, or methods
      linked to the emission or management of means of payment".

With reference to the phrase "obtaining of loans from members
must not in any case take place by on-demand means , it should
be understood on the basis of the pervious deliberation of the
I.C.C.S. dated 27th October 1983 and the related instructions
for its application issued by the Bank of Italy on 25th May 1984,
in the sense that co-operatives may not, according to the
I.C.C.S., adopt "means of circulation of deposits, such as bearer bonds
and chequebooks, which are destined by their nature for a wide use
among the public." In particular, according to the Bank of
Italy, "the documents relating to the deposits must contain the name
of the holder as well as provision for non-transferability. Thus,
for instance, the issue of bearers  savings book or other
bearers documents containing the obligation to pay a certain sum of
money on demand (certificates, vouchers, receipts, etc.) is not
permitted". In conclusion, the Bank of Italy also states that
"for the use of the available funds created within the firm,
it may not make use for its own purposes of the instrument of
bank cheques or any other instrument intended for circulation" .
This interpretation, moreover, is in harmony with the 5th section
of Article 11 of the Banking Law, which forbids the obtaining of
on-demand funds and all forms of acquisition linked to the
issue or other management of instruments of payment, though only in
cases provided for by the previous section 4, points c). d) e)
and f) which do not concern the co-operative societies in
question. Obviously, the investments in financial means
readily convertible to liquidity provided for in the Co-operatives'
own regulations are allowed for and acknowledged, for the purpose
of guaranteeing repayment of sums which may requested, including
rapid repayments.

Finally, as regards the other expression "linked to the issue
or other management of means of payment", no problems of
interpretation should arise from this for the Coop-card, since
it is an instrument only usable at the sales outlets of the co-
operative which is obtaining the loan.

5.   The limitations of assets provided for by this
      deliberation do not apply to co-operative societies with less than
      fifty members.

6.   Acquisition from members is not permitted to co-operative
     societies which carry on activities of the assumption of
     shares in relation to the public, or of the granting of
     loans of any kind, or provision of payment services or
     exchange intermediation (as in Article 106, sec. 1. point
     1.b), nor to those co-operatives which carry on these
     activities prevalently not in relation to the public
     sphere (Art. 113, sec. 1, point 1. b).

7.   The provisions listed above enter into effect after 15
     days have passed since the publications in the Official
     Gazette of the instructions for application by the Bank of Italy.
     The co-operatives which by that date have debit positions
     exceeding the limits mentioned in point 2 above must
     bring themselves into line with the limits within the stated
     terms, which will be fixed by the Bank of Italy in an
     appropriate measure.

8.   It follows that, from the date that the instructions for
     application from the Bank of Italy enter into effect (as
     mentioned in point 7 above), the present dispositions on
      the subject, as contained in the I.C.C.S., deliberation of
      the 27th October 1983, will be revoked, as is shown,
      moreover, by the subsequent deliberation no. 94A 1626 by the
      I.C.C.S., published in the Gazette on 11th following, which limits
      itself to abrogating any provisions made in other

9.   The penal sanctions are determined by Articles 130, 131
      and 132 of the Banking Law.

Rome, 22nd March 1994.