On March 8, the European Commission approved the fiscal regime outlined in the Third Sector Code. The approval specifically concerns income tax regulations for Third Sector Entities (ETS) and social enterprises, which have been deemed compatible with European Union law. This decision paves the way for the implementation of Title X of the Third Sector Code (CTS) and the definitive elimination of the ONLUS (Non-Profit Organizations of Social Utility) qualification.
According to the Commission, the compatibility of the Italian regulations with EU competition and state aid laws stems from the fact that ETS and social enterprises operate within a distinct legal and fiscal framework compared to for-profit businesses. Their activities are aimed at the general interest, and any profits generated cannot be distributed but must be reinvested for civic, solidarity, and social utility purposes. This principle justifies the tax exemption granted to these entities, which is not considered selective state aid but rather a measure consistent with their legal nature.
Notably, the Commission’s assessment was not affected by the partial ability of corporate social enterprises to distribute profits, as Article 18 of Legislative Decree 112/2017 establishes taxation on distributed profits while maintaining tax exemptions for reinvested ones.
The approval of the fiscal regime marks the beginning of the final phase of the Third Sector Reform, leading to:
- The definitive repeal of Legislative Decree 460/1997 on ONLUS;
- The extension of VAT regulations previously reserved for ONLUS to non-commercial ETS;
- The inapplicability of Law 398/1991 (which provided tax benefits for sports and cultural associations) to ETS.
The Commission’s decision could influence the European debate on the taxation of the social economy, fostering greater harmonization among EU member states. The focus now shifts to pending regulations, such as Article 77 of Legislative Decree 117/2017 and Article 18, paragraphs 3-5, of Legislative Decree 112/2017, which could further strengthen the fiscal benefits framework for the non-profit sector.
