The Third Sector Code (Italian Legislative Decree 117/2017): structure and purpose

In recent years, the non-profit world in Italy has undergone significant transformation thanks to the Third Sector Code (Legislative Decree 117/2017). This law finally brought order to a sector that, until then, had been regulated by scattered and poorly coordinated rules.

But what does it mean in practice for associations, foundations, and social enterprises? What opportunities and obligations does it introduce for those working in this field?

In this article, we aim to clearly and accessibly explain the structure and objectives of the Code, examining practical aspects that may interest those managing or looking to start an activity in the Third Sector.

Why was the Third Sector Code needed?

Before 2017, the non-profit sector in Italy was fragmented, with different rules depending on the type of entity: ONLUS, ODV, APS, social cooperatives… Each category had its own legislation, including differences in tax and administrative aspects.

The reform responded to a concrete need: to create a unified and clear legal framework that would allow non-profit organizations to operate more securely and transparently.

With the Third Sector Code (CTS), the legislator aimed to standardize rules, increase transparency, and facilitate access to incentives and funding. The ultimate goal? To promote the growth of the Third Sector and its social impact.

One of the most innovative elements of the reform is the creation of the National Single Register of the Third Sector (RUNTS), which we will explore in the next section.

RUNTS: the register that gives credibility to Third Sector entities

RUNTS is a digital platform managed by the Ministry of Labour and Social Policies. It is the official registry for all Third Sector Entities (ETS) that meet the reform’s criteria.

Why is it so important? Because without registration in RUNTS, an entity cannot be considered an ETS and therefore cannot access the benefits provided by the Code, such as tax incentives and public funding.

The Third Sector Code does not automatically include all non-profit organizations. To officially qualify as an ETS and benefit from the Code, an organization must fall under one of the legally recognized categories and register in RUNTS.

Who must register with RUNTS?

The Code identifies specific categories of entities eligible for registration, including:

• volunteer organizations, that is, non-profit entities composed mainly of volunteers who offer their time and skills without compensation (e.g., associations operating in the socio-health sector);
• social promotion associations, which involve both volunteers and paid workers. Their activities are aimed not only at members but also at the broader community (e.g., cultural associations);
• social enterprises, which carry out economic and productive activities with the goal of generating social impact. They represent an innovative model that combines economic sustainability with social value, creating jobs and providing essential services to the community;
• foundations and philanthropic entities, that is, non-profit entities that manage assets intended for socially beneficial projects; they are based on an initial endowment that ensures their stability (e.g., banking foundations);
• recognized and unrecognized associations that pursue purposes of general interest, including civic, solidarity-based, and socially useful objectives.

A key aspect of the reform is the elimination of ONLUS, which had long been a main form of non-profit organization in Italy.

ONLUS entities must now adapt by either registering as an ETS under the new code, converting into another entity type, closing, or remaining outside the Third Sector and losing tax benefits.

What are the benefits of the Third Sector Code?

Joining the Third Sector Code is not just about following new rules—it also opens the door to numerous opportunities, such as:

• exemption from income tax for certain types of revenue, reduced VAT rates, exemption from registration tax, and simplified flat-rate tax regimes;
• the possibility to participate in national, regional, and municipal calls for funding, European financing, as well as agreements and partnerships with public administrations;
• registration with RUNTS, which serves as a tool to increase trust and visibility for organizations;
• the ability to carry out commercial activities without losing ETS status, provided that such activities are instrumental and secondary to the organization’s social objectives; profits may not be distributed but must be reinvested, and the organization must comply with the limits established to maintain ETS qualification.

The Code also requires that employee salaries be consistent with the sector and no more than 40% higher than average public sector wages. If an ETS earns over €100,000 annually, it must publicly declare executive salaries.

These measures ensure ETS operate with genuine solidarity and maintain a general interest mission.

What are the obligations for ETS?

A core obligation for ETS is to draft and publish an annual report, which tracks income, expenses, and resource use.

Depending on the entity’s size, there are two types of reports:

• the annual financial statement, mandatory for all ETS, it includes income, expenses, activities, assets, and reserves;
• the social report, mandatory for ETS with revenues over €1 million, it outlines social impact, stakeholder relations, volunteer and beneficiary engagement, and performance indicators.

All reports must be submitted to RUNTS and, in some cases, published on the organization’s website for transparency. Failure to comply may result in administrative penalties or even deregistration from RUNTS, with the loss of tax benefits.

To ensure maximum transparency towards donors, institutions, and citizens, the Code requires ETS entities to publish key information. In particular, ETS must communicate the following in a clear and accessible manner:

• compensation and reimbursements for board members;
• funding sources, including public and private donations;
• activities carried out and results achieved.

If an ETS receives over €10,000 in public funding annually, it must publish a detailed report on fund usage.

Failure to publish these disclosures may lead to:

• administrative fines;
• loss of ETS status and benefits;
• reputation damage, reducing donor and funder trust.

Conclusion: follow the rules to grow

The Third Sector Code introduced new rules but also significant opportunities for non-profits. Tax benefits, access to funding, and increased public recognition make ETS status highly advantageous.

However, becoming an ETS is not only about obtaining benefits—it also means complying with strict rules to ensure fairness and transparency.

Though the obligations may seem complex, they are essential to access the benefits of the Third Sector and to operate professionally.

For this reason, it is essential to rely on industry experts who can guide ETS entities in legal and fiscal management, helping them avoid risks and penalties. A well-organized, transparent, and compliant organization not only grows and secures more funding, but also earns the trust of donors, partners, and institutions, ensuring a lasting positive impact on society.