The long-awaited tax reform for Third Sector Entities (Enti del Terzo Settore – ETS) will finally come into force in 2026, completing a legislative process that began several years ago with the enactment of the Third Sector Code (Legislative Decree No. 117/2017).

Starting from the tax period following the one in progress as of 31 December 2025, therefore, from 1 January 2026 for entities whose financial year coincides with the calendar year, the provisions contained in Title X of the Third Sector Code will become fully effective. Their implementation is accompanied by the first official guidance issued by the Italian Revenue Agency through Circular No. 1 of 19 February 2026.

The reform marks a fundamental shift in approach. The previous special tax regimes, most notably that applicable to ONLUS (non-profit organisations of social utility), are definitively abolished and replaced by a single, unified framework based on economic and substantive criteria. This new system requires organisations to adopt a more informed approach to managing their activities and interpreting their financial data.

Registration with the National Third Sector Register (RUNTS)

A cornerstone of the new framework is registration with the National Third Sector Register (RUNTS). Only organisations registered in the RUNTS may qualify as Third Sector Entities and benefit from the tax regime established by the Third Sector Code. Registration is therefore not merely a formal requirement but the essential prerequisite for accessing the entire package of tax incentives.

The position of former ONLUS organisations deserves particular attention. As of 31 December 2025, the ONLUS regime officially comes to an end, and organisations still registered in the ONLUS Register are required to make a definitive choice: either apply for registration with the RUNTS by 31 March 2026, thereby obtaining retroactive tax effects from 1 January 2026, or, failing that, commence the procedures for transferring their assets in accordance with Legislative Decree No. 460/1997. 460/1997.

Accordingly, the entry into force of the new regime marks the definitive end of the ONLUS framework. The tax benefits provided under Legislative Decree No. 460/1997 and Article 150 of the Italian Income Tax Code (TUIR) will cease to apply, giving way to a system that places greater emphasis on the economic substance of an organisation’s activities rather than on its legal form.

A New Definition of Non-Commercial Activities of General Interest

The most significant innovation introduced by the Third Sector Code concerns the assessment of whether activities of general interest qualify as non-commercial for direct tax purposes.
Article 79 of the Code abandons the formal criteria previously applied and introduces an economic test based on the relationship between costs and revenues.

Specifically, an activity of general interest is considered non-commercial where it is carried out free of charge or where the fees charged do not exceed the actual costs incurred by the organisation. For this purpose, costs include not only direct expenses but also indirect costs attributable to the activity, including depreciation, overheads and finance costs. Conversely, notional costs—such as the value of volunteer work—are excluded.

The legislation also introduces an important tolerance rule. An activity will continue to qualify as non-commercial even if it generates a positive margin, provided that such margin does not exceed 6% of total costs and does not occur for more than three consecutive tax periods. Exceeding either of these thresholds results in the activity being classified as commercial.

Commercial and Non-Commercial Third Sector Entities: The Predominance Test

Once the nature of each individual activity has been determined, the next step is to classify the organisation as either a non-commercial ETS or a commercial ETS. To this end, the Third Sector Code introduces a predominance test comparing non-commercial income with commercial income.

Non-commercial income includes, among other items, public and private grants, donations, membership fees not linked to specific services, income derived from non-commercial activities of general interest and proceeds from occasional fundraising events.

Commercial income, on the other hand, includes revenues generated through activities carried out on a commercial basis, including ancillary business activities.
Where commercial income becomes predominant, the organisation is classified as a commercial ETS, with the consequence that all income becomes subject to the ordinary business income tax rules. To mitigate the impact of the new regime, a transitional provision applies for the 2026 and 2027 tax years, under which any change in the entity’s status becomes effective only from the following financial year.

Fundraising Activities and Public Grants

Another important aspect of the reform concerns the tax treatment of fundraising activities.
The Third Sector Code clearly distinguishes between occasional public fundraising events, organised in connection with celebrations or awareness campaigns, which remain tax-neutral for non-commercial ETSs, and ongoing fundraising activities involving consideration, which are instead treated as commercial activities.

A similar approach applies to public grants. Such grants do not contribute to taxable income only where they are intended to finance activities of general interest carried out in accordance with the non-commercial criteria, and provided that the organisation, taken as a whole, maintains its status as a non-commercial ETS.

Lump-Sum Tax Regimes: Simplification and Tax Benefits

The reform introduces two simplified tax regimes of particular interest.
The first, governed by Article 80 of the Third Sector Code, is available to non-commercial ETSs and allows taxable income to be determined by applying profitability coefficients ranging from 5% to 17%, depending on the level of revenues and the type of activity performed.

The second regime, introduced by Article 86, is specifically designed for Volunteer Organisations (ODV) and Social Promotion Associations (APS). It may also be adopted by organisations classified as commercial, provided that annual revenues do not exceed €85,000.
Under this regime, taxable income is calculated using highly favourable coefficients of 1% for ODV organisations and 3% for APS organisations, while also providing significant simplifications for VAT purposes.

Final Considerations

The year 2026 represents a genuine turning point for Third Sector Entities.
The new tax framework requires a more structured approach to accounting and financial management, together with continuous monitoring of the economic balance of activities carried out in the public interest.
In this new environment, the ability to monitor costs and revenues, properly plan tax strategies and adapt internal governance and organisational processes will become essential to preserving non-commercial ETS status and fully benefiting from the tax incentives provided under the Third Sector Code.