Tax regulations for Third Sector Entities: the new organizational framework following Circular 1/E/2026

Edited by Tiziano Mazzucato and Marta Nestaroli

The entry into force of the new provisions of the Third Sector Code (CTS) marks a turning point for the associative and philanthropic world. With Circular No. 1/E of February 19, 2026, the Revenue Agency outlined a regulatory framework in which transparency and adequate organizational structures become the cornerstones for maintaining incentives.

In this scenario, the tax regime for Third Sector Entities (TSEs) is no longer a static status, but a continuous compliance process. Registration with the RUNTS, while effective as a constituent entity, represents only the starting point: to benefit from the favorable regime, substantial and consistent compliance with the statutory and operational requirements must be ensured.

The new commerciality test in the Third Sector Code

The core of the reform lies in Article 79 of the CTS, which introduces independent criteria based on the entity's effective management. The new tax regulations for Third Sector Entities require stringent monitoring of three parameters:

• Cost/revenue ratio: general interest activities are considered non-commercial if carried out free of charge or for fees that do not exceed actual costs (direct and indirect).

• Tolerance margin: Revenues may exceed costs by up to 6% for a maximum of three consecutive tax periods.

• Other activities: secondary and instrumental activities are permitted, provided they represent no more than 30% of total revenue or 66% of total costs.

Exceeding these thresholds not only affects the organization, but also determines the commercial nature of the entity for IRES purposes, with a consequent change in the applicable regime.

Governance and internal controls: protection tools for ETSs

In this new ecosystem, the sustainability of the accounting system depends crucially on the entity's ability to constantly monitor its activities. Correct application of the tax regulations for Third Sector Entities requires advanced tools:

1. Cost accounting: essential for demonstrating correct cost allocation and compliance with non-commerciality thresholds.

2. Budget and Mission Report: key documents for certifying the consistency between resources employed and institutional objectives.

3. Preventive monitoring: the supervisory body and the statutory auditor are responsible for monitoring the risks of a "slippage" towards commercialization.

An integrated management challenge between IRES and VAT

The reform also confirms the persistent divergence between direct tax regulations and VAT. An activity can be considered non-commercial for IRES purposes but still be relevant for VAT purposes, requiring a very thorough technical assessment of applicable exemptions.

For ETSs, the challenge is no longer merely bureaucratic but strategic. Protecting the preferential tax regime requires a systemic vision that integrates the statute with rigorous operational management. Only through structured governance and proper qualification of activities can the institution's sustainable development and the preservation of its charitable mission be ensured.

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