Under Article 1754 of the Civil Code, a business and commercial broker is a person who brings two or more parties together with a view to concluding a transaction without being bound to any of them by a relationship of collaboration, employment or representation.
The fundamental characteristic of mediation is therefore the business and commercial broker’s independence and impartiality with regard to the parties involved.
From the perspective of the Civil Code, there is a single general category of business and commercial broker, whilst special laws regulate the various categories according to economic sector. The relevant sections use the term ‘business brokers’ and there are four such categories:
- Estate agents (brokerage activities for the conclusion of transactions relating to property and businesses)
- Commodity agents (mediation activities for the conclusion of transactions relating to goods, foodstuffs and livestock)
- Agents acting under a fee-based mandate (property sector, businesses and business units)
- Agents providing miscellaneous services (this applies to any transaction relating to the sale or purchase of services not covered by the previous sectors: tourism, entertainment, transport and logistics, personal services, etc.)
Each sector may have specific requirements and regulations.
Business agents engaged in mediation should not be confused with credit brokers and financial agents (registered with the OAM), financial advisers (registered with the OCF), insurance intermediaries (registered with the RUI) or maritime brokers. These are specific professional roles covered by their own respective registers.
Differences compared to commercial agents and business finders
The business broker differs from both commercial agents and business finders.
A commercial agent operates on the basis of a stable and ongoing mandate and facilitates contracts on behalf of a specific company.
A business finder normally acts to identify commercial opportunities without a permanent contractual relationship.
The broker, on the other hand, does not act in the exclusive interest of one party, but facilitates the matching of supply and demand whilst maintaining an independent position.
Requirements and registration with the Chamber of Commerce
To practise as a broker, one must meet certain personal, professional and moral requirements:
- be aged 18 or over;
- a five-year upper secondary school diploma or a vocational education and training diploma corresponding to EQF Level 4, or five-year qualifications under the old system of vocational schools;
- have successfully completed a preparatory course for the qualifying examination;
- have passed a specific examination;
- hold Italian recognition of professional qualifications obtained abroad;
- meet the required moral standards (e.g. certain criminal convictions may prevent registration; the applicant must not be disqualified, incapacitated or have been declared bankrupt);
- provide insurance cover for professional risks and to protect clients.
The Chamber of Commerce issues a personal identification card upon application by the estate agent. The card certifies registration and must be produced at the request of clients.
The right to commission
Under Article 1755 of the Civil Code, the broker is entitled to commission from each of the parties if the transaction is concluded as a result of their intervention.
The commission is therefore normally owed by both parties, unless otherwise agreed or unless different applicable regulations apply.
The right to commission arises when there is a causal link between the broker’s activities and the conclusion of the transaction.
Law 39/1989 stipulates that only brokers who are duly authorised and registered in the Register of Companies are entitled to commission. An unregistered broker is not entitled to any remuneration or commission.
Exclusivity and incompatibility
Unlike a commercial agent, a broker does not normally operate on an exclusive basis for a specific company.
Their essential characteristic is, in fact, their independence from the parties.
The legislation does, however, provide for specific incompatibilities for certain categories of brokers, in particular to avoid conflicts of interest and ensure the impartiality of their activities.
The activity of a broker is incompatible:
- with the pursuit of business activities involving the production, sale, representation or promotion of goods relating to the same product sector for which the brokerage activity is carried out;
- with work carried out as an employee of a public body (except for employment in the public sector under part-time contracts of up to 50 per cent) or as an employee or contractor of firms providing financial services, excluding brokerage firms;
- with the practice of professional services relating to the same product sector in which the brokerage activity is carried out;
- in any case, in situations involving a conflict of interest.
Tax and social security aspects
For tax and civil law purposes, the broker is considered to be a self-employed person.
VAT registration
A broker who carries out the activity on a regular basis must be registered for VAT and issue electronic invoices for the commissions earned. The scenario of carrying out an activity on a purely occasional and non-regular basis without VAT registration is extremely rare and must be assessed with the utmost care.
Withholding tax
At the time of payment, the parties, if acting as withholding agents, must withhold tax as an advance payment on the business and commercial broker’s services at a rate of
23 per cent calculated on 50 per cent of the gross amount of the commissions (effectively 11.50 per cent).
The withholding tax may be calculated on only 20 per cent of the commissions, based on a specific declaration by the estate agent, in which they certify that they make continuous use of the services of employees or third parties.
Car expenses
For business and commercial brokers, the standard rules applicable to business owners apply. However, the tax reliefs provided for commercial agents and sales representatives cannot be utilised.
Business and commercial brokers may deduct 40% of the VAT relating to the company car.
They may also deduct the following as a business expense:
- 20 per cent of the purchase cost (including leasing) of the company car, up to a maximum limit of 18,075.99 euros; up to 4,131.66 euros for motorbikes; up to 2,065.83 euros for mopeds. In the case of leasing, the amounts must be prorated according to the number of days of use.
- 20 per cent of the hire cost up to a maximum annual amount of €3,615.20 for cars; €774.69 for motorbikes; €413.17 for mopeds. The amounts must be prorated according to the number of days of use.
- 20 per cent of expenses for fuel, insurance, maintenance, storage, registration and road tax.
INPS – Traders
Business and commercial brokers with a VAT number are registered with the INPS special scheme for traders.
Registration with ENASARCO
This is not required of intermediaries.
Accounting regime
At present, three accounting regimes are available. The choice depends on turnover, the structure of costs, business needs and corporate considerations.
- Flat-rate scheme (up to a maximum of 85,000 euros in annual turnover – business income is determined as 86 per cent of turnover. Income tax is calculated on the basis of business profit net of INPS contributions, applying a substitute rate of 5 per cent for new businesses and 15 per cent for existing businesses)
- Simplified accounting regime
- Ordinary accounting regime (double-entry bookkeeping)
Conclusions
The broker acts as a liaison between parties interested in concluding a deal, whilst maintaining an autonomous and independent position.
The correct classification of the relationship is essential to distinguish brokerage from agency and business solicitation, as this determines the treatment under civil, tax and social security law.
Set out below are the main differences between a Commercial Agent, a Business Finder and a Business Broker.