European Commission approves tax benefits for Italian nonprofit entities

The European Commission has given the green light to the tax incentives introduced by Italy's reform of nonprofit entities, representing a major step for the implementation of the Italian third sector. Starting from 2026, nonprofit organisations in Italy will operate under a stable regulatory framework that’s fully aligned with European directives.

The reform, established by Legislative Decree 117/2017, known as the “Third Sector Code,” required the European Commission's approval to implement specific tax benefits designed for nonprofit entities.

According to the Italian Ministry of Labor, the European Commission concluded that these tax benefits don’t qualify as state aid pursuant to art. 107 of the TFUE, as they exclusively support activities of general interest with a clear public utility purpose.

Key tax measures effective from 2026

• Solidarity bonds: The introduction of “solidarity bonds” has been approved. These financial instruments will allow credit institutions to raise funds to finance projects of third sector entities, offering investors the same favourable tax treatment as Italian government bonds, with a reduced tax rate of 12.5%.
• Criteria for non-commercial activities: The European Commission approved the criteria to determine when an activity carried out by a nonprofit organisation can be considered non-commercial and therefore not subject to taxation.
• Flat-rate scheme: A flat-rate accounting scheme has been introduced, providing profitability coefficients related to business income produced by nonprofit entities.
• End of ONLUS Registry: The registry of Non-Profit Organizations of Social Utility (ONLUS) will cease to exist. From 1 January 2026, nonprofit entities with ONLUS status will have three months to comply with the Third Sector Code regulations and register with the National Single Register of the Third Sector (RUNTS). The deadline for registration is 31 March 2026.
• Specific tax regime for social enterprises: Nonprofit entities qualifying as social enterprises will benefit from a specific tax regime, including the ability to exempt profits used for statutory activities or to increase equity.

Transitional regime until 2026

Until 2026, while awaiting full implementation of the European authorization, nonprofit entities registered in the RUNTS will continue to apply the ordinary Italian tax code regulations throughout 2025.

Additionally, for the fiscal year 2025, nonprofit entities registered in the RUNTS can still benefit from some tax advantages provided by the Third Sector Code, even without EU authorization. These include:

• Tax deductions for donations: Nonprofit entities will continue to offer tax deductions for donations received.
• Exemption from inheritance and gift tax: Donations to nonprofit entities will remain exempt from inheritance and gift taxes.
• Tax-free income: Income generated from fundraising events and donations received by nonprofit organisations won’t be taxed.

The European Commission’s approval is a significant opportunity for the third sector in Italy. It provides greater regulatory stability and targeted tax incentives to support philanthropic activities and initiatives for both companies and individuals.