Running an APS
VAT and the Terzo Settore: when an APS must apply VAT and what the exemptions are
Intro: not every APS pays VAT (and it shouldn't)
An APS that organizes a cultural festival, a training workshop, a community-based lab: must not apply VAT (IVA, Italy's value-added tax) on this revenue. Full stop.
But an APS that sells merchandise, rents out spaces to third parties, offers commercial consulting services: must apply VAT on this revenue.
The confusion starts right here: many APS (and many accountants too!) don't know how to tell tax-exempt institutional activities apart from VAT-liable commercial activities.
The result? APS that lose thousands of euros in VAT they never owed, or APS that fail to charge VAT when they should have (and then get reassessed).
On top of that, since 2026 the regime has changed again. Art. 86 of the Codice del Terzo Settore (CTS, Italy's Third Sector Code) offers a 3% flat-rate scheme for APS with revenue under €85,000: a simplification that many aren't taking advantage of.
This article explains clearly: when VAT applies, when it doesn't, how to calculate it, and how to use the flat-rate scheme to operate with peace of mind.
Basic principle: the VAT exemption for associations (through 2036)
Before getting into the details, here's the general picture:
Through December 31, 2035, non-commercial associations (APS, ODV, recreational and sports associations) are exempt from VAT on activities of general interest (the ones listed in your statute).
This exemption has been extended (it was originally supposed to end in 2024, but has been pushed out to 2036).
What does this mean in practice? If your APS organizes a concert, and you take in €1,000 in ticket sales plus €500 in sponsorship for the event, you don't need to calculate or invoice VAT on that €1,500.
At the same time, you can't reclaim the VAT you pay on your costs (artist fees, venues, materials). It's a tradeoff: no output VAT, no input VAT.
When VAT does NOT apply (tax-exempt institutional activities)
VAT is not due when you carry out activities that fall within your statutory purpose and are of general interest.
Here are the classic examples for a cultural APS:
1. Organizing cultural events
- Festivals, concerts, exhibitions, shows
- Workshops, seminars, educational conferences
- Film screenings, theater, dance
- Creative labs (art, music, theater)
If you receive payments for access/participation at these events, no VAT.
Documentation: an invoice or receipt without VAT, with a description like "Access to cultural event" or similar.
2. Training courses and teaching
- Art, music, dance classes
- Craft workshops (street art, creative writing)
- Literacy and language courses
- Educational programs for children/young people
If participants pay a fee or contribution to take part, no VAT (if it's one of your statutory activities).
Example: APS OnStage organizes "Freestyle 101 Workshop" and charges participants €50. That €50 is VAT-exempt if the workshop is an institutional activity (i.e., it's in your statute and serves your purpose of cultural promotion).
3. Scientific research activities
If you conduct research in the cultural, artistic, or social field, revenue from:
- Directly commissioned research
- Studies, reports, articles
- University collaborations
Is VAT-exempt (if the research is an institutional activity).
4. Services for members
- Access to library, archives, resources
- Newsletters, member magazines
- Access to members-only events
- Forums, communities, discussion groups
Are VAT-exempt (as long as they're restricted to members and aren't truly "commercial services").
5. Recreational and social activities
- Social dinners, picnics
- Trips, excursions
- Informal gatherings
- Coworking spaces for members
Are VAT-exempt if run at cost (no profit) and aimed at members or the community.
When VAT DOES apply (commercial activities)
VAT is due when you carry out activities that aren't in your statute or that are genuine commercial activities, regardless of purpose.
Here are the cases where you must invoice VAT at 22% (or the reduced rate that applies to you):
1. Selling goods/products
- Merchandise: t-shirts, caps, backpacks, posters
- Books and publications you didn't produce yourselves (if you become the publisher of someone else's work)
- Food and drink sold to the public (catering, bar, café)
- Equipment, tools, materials
If you sell t-shirts with your logo, you must invoice VAT at 22%. No discount just because you're a "cultural association."
Exception: if you sell your own publications (books, magazines that you produced yourselves), you can use the reduced 4% rate (instead of 22%).
Documentation: an invoice with VAT, described as "Sale of goods" or "Catering," with VAT applied and shown separately.
2. Commercial consulting services
If you offer consulting to third-party individuals or companies (not to members), you must invoice VAT.
Example: APS OnStage sells "festival organization consulting" to a private event agency. This consulting is not an institutional activity (it's not in your statute as "commercial consulting"). You must invoice VAT at 22%.
3. Renting out spaces to third parties
If your APS has a venue and rents out the hall for private meetings, weddings, or parties to outsiders, you must invoice VAT at 22%.
If you rent it out to members for association meetings, it's exempt.
Important: the dividing line is thin. If you rent the hall for an "association dinner" (exempt), but it then gets used for a private third-party dinner, you must invoice VAT.
4. Tickets or access to commercial services
If you organize a "fundraising gala dinner" where the ticket costs €100 and includes a meal, you must invoice VAT on the catering-service portion (e.g., €70 out of €100).
The nuance: if it's an "institutional" dinner (purpose: raising funds for the festival), the VAT line is less clear (it could be exempt). But if it's a "for-profit social event" (purpose: making a profit), it's subject to VAT.
Consult an accountant for borderline cases.
Box: getting a VAT number for an APS
Many APS ask themselves: do I need to get a VAT number?
Answer: it depends.
If your APS carries out ONLY tax-exempt institutional activities
You don't need a VAT number. When you issue receipts, simply write "Receipt for VAT-exempt association activity" without a VAT number.
Example: APS OnStage issues a receipt for festival tickets, described as "Access to cultural event, VAT-exempt." No VAT number needed.
If your APS ALSO carries out commercial activities
You must apply for a VAT number.
Once you have one, you must:
1. Keep separate accounts: institutional activities (exempt) apart from commercial activities (22% VAT)
2. Issue separate invoices: one without VAT (for institutional activities), one with VAT (for commercial activities)
3. Keep VAT registers: a purchase register, a sales register (like any business)
4. File an annual VAT return: by April 30 (VAT return form)
5. Pay VAT owed: monthly (if you exceed €100,000 a year in commercial turnover) or quarterly
The cost? A VAT number is free to apply for. It takes administrative time (an accountant can get it in a few days). Accountant's fee: €200-500 for setup plus annual VAT management.
Practical advice
If your APS has less than €10,000 a year in commercial revenue (e.g., selling 200 t-shirts = €2,000), you can avoid getting a VAT number and declare the commercial revenue as "other income" in the APS accounts (paying IRES, Italy's corporate income tax, on the difference).
If you exceed €10,000, get a VAT number: the administrative benefit outweighs the cost.
Art. 86 CTS flat-rate scheme (the 2026 "cheat code")
Starting January 1, 2026, there's a new simplified regime for APS and ODV with revenue under €85,000: the flat-rate scheme under Art. 86 of the CTS.
Here's how it works:
The principle
Instead of keeping a complex, itemized set of accounts (institutional vs. commercial activities, VAT, etc.), you apply a flat 3% coefficient to your total revenue.
That is: your taxable income = total revenue × 3%.
Practical example
APS OnStage in 2026 has:
- Total revenue (tickets, sponsors, membership fees, donations): €60,000
- Total expenses (artists, venues, materials): €57,000
- Real margin (60,000 - 57,000): €3,000
Under the Art. 86 scheme:
- Flat-rate taxable income: €60,000 × 3% = €1,800
- IRES owed (12% for APS): €1,800 × 12% = €216
Under traditional accounting:
- Real taxable income: €3,000
- IRES owed: €3,000 × 12% = €360
Savings: €360 - €216 = €144 in direct taxes.
If you scale up to €100,000 in revenue, the savings are €240+ a year. It's not a fortune, but it's money you reinvest in the project.
How to use Art. 86
1. Check the requirements:
- APS or ODV registered with the RUNTS (Registro Unico Nazionale del Terzo Settore, Italy's national register of third-sector entities), or with the old register if not yet on the RUNTS
- Revenue (not profit) under €85,000 in the previous financial year
2. In your 2026 accounts, state:
- "User of the flat-rate scheme under Art. 86, D.Lgs. 117/2017"
- Total revenue: €60,000
- Flat-rate coefficient: 3%
- Flat-rate taxable income: €1,800
- IRES 12%: €216
3. No VAT number needed (even if you carry out mixed activities): the flat-rate scheme "simplifies" everything
4. You don't pay VAT on revenue (you remain exempt)
When you CANNOT use Art. 86
- Revenue above €85,000 in 2025
- You're not on the RUNTS or other registers
- You carry out genuine commercial activity (not "secondary" activity)
If you exceed €85,000, you must go back to itemized accounting (institutional vs. commercial activities) and manage VAT like a real business.
Invoicing: how to do it without making mistakes
Receipt for institutional activity (VAT-exempt)
```
RECEIPT
Date: April 1, 2026
Recipient: Marco Rossi
Amount: €50
Description: Access to Freestyle 101 Workshop — VAT-exempt association activity (Art. 79 CTS)
APS OnStage
Tax code: 99999999999
```
No VAT number, no VAT, no 22% VAT.
Invoice for commercial activity (with VAT)
```
INVOICE NO. 1
Date: April 1, 2026
Client: Agenzia Eventi SpA
Description: Festival organization consulting
Service: Consulting (20 hours) — €2,000
VAT 22% — €440
TOTAL — €2,440
APS OnStage
Tax code: 99999999999
VAT number: 99999999999 (if you have one)
```
Here VAT at 22% is shown separately and it's a "real" invoice, just like a business.
Common mistakes
Mistake 1: Putting VAT on a receipt for an event (event = exemption), then calculating 22%. The payer gets confused, and Agenzia delle Entrate (Italy's Revenue Agency) reassesses you.
Solution: no VAT on institutional events.
Mistake 2: Invoicing without separating exempt from VAT-liable items. An invoice with "Event + Consulting" where you apply 22% to everything is wrong: the event is exempt, the consulting is VAT-liable.
Solution: issue two separate invoices, or one invoice with separate line items (line 1: exempt event, line 2: consulting, VAT 22%).
Mistake 3: Not issuing receipts. If you hold an event and take in €1,000 in cash from tickets, and you don't issue a receipt, that money is "off the books" and Agenzia delle Entrate assumes fraud.
Solution: always issue a receipt (even a simple, handwritten one) with the date, amount, and description.
Case study: APS OnStage's 2026 VAT accounts
Let's imagine APS OnStage's 2026 accounts:
2026 revenue
| Activity | Amount | VAT? |
|----------|---------|------|
| RestArt Festival tickets | €8,000 | No (institutional exemption) |
| Membership fees | €2,000 | No (exempt) |
| Sponsors | €3,000 | No (exempt) |
| T-shirt sales (merchandising) | €1,500 | Yes, 22% = €330 |
| Consulting for a private agency | €2,000 | Yes, 22% = €440 |
| Donations | €1,000 | No (not revenue) |
| TOTAL REVENUE | €17,500 | |
Invoicing
Separate receipts:
1. Receipt for event/fees/sponsors (€8,000 + 2,000 + 3,000 = €13,000): VAT-exempt
2. Merchandise invoice (€1,500 + 22% VAT = €1,830): with VAT, described as "Merchandise sales"
3. Consulting invoice (€2,000 + 22% VAT = €2,440): with VAT, described as "Consulting services"
IRES calculation
- Exempt revenue: €13,000 (zero tax)
- Commercial revenue: €1,500 + €2,000 = €3,500
- VAT owed: €1,500 × 22% + €2,000 × 22% = €770
- Commercial profit (revenue minus commercial costs): €3,500 - €2,000 (costs) = €1,500
- IRES (12% on €1,500): €180
Total 2026 taxes: €770 (VAT) + €180 (IRES) = €950.
If they use the Art. 86 flat-rate scheme
- Total revenue: €17,500
- 3% flat rate: €17,500 × 3% = €525
- IRES (12% on €525): €63
Savings vs. traditional accounting: €950 - €63 = €887.
For a small APS, that's not a trivial difference.
Box: intra-EU VAT and international dealings
If your APS receives payments from foreign entities (European or non-European), the VAT rules get more complicated.
Example: a French foundation funds research for you. Do you need to invoice with a VAT reverse charge? Or does it stay exempt?
Short answer: if the activity is institutional, it stays exempt (even if the payment comes from abroad). If it's commercial, the intra-EU rules apply.
Advice: if you have international transactions over €5,000, consult an accountant specialized in intra-EU VAT. Don't improvise.
CTA: Update your accounting model
If your APS started up in 2024-2025 and has "simple" accounts (a single line of revenue), it's time to update the structure to separate:
1. Institutional activities (VAT-exempt)
2. Commercial activities (with 22% VAT, if any)
Ask an accountant to:
- [ ] Review the 2025 accounts
- [ ] Propose a VAT structure for 2026 (if needed)
- [ ] Advise on whether to use the Art. 86 flat-rate scheme (if revenue is under €85,000)
- [ ] Prepare receipt/invoice templates for 2026
If your accountant doesn't know Art. 86 CTS well (the flat-rate scheme), it's time to look for one specialized in nonprofit work. It costs little, but it'll save you money.
Disclaimer
This article is for informational purposes and is based on Terzo Settore VAT regulations current as of May 2026. VAT rules have countless nuances and exceptions. This is not formal tax advice.
It's not entirely clear: whether a receipt for a "cultural" event where you also sell food is fully exempt or partly VAT-liable (it depends on how you structure it). Consult an accountant.
If you receive a notice of assessment from Agenzia delle Entrate on VAT, turn to a firm specialized in tax disputes. Don't try to fix it yourself.
Agenzia delle Entrate is still in the process of clarifying how to apply VAT to "social utility services." Different readings of the rule are plausible. Absolute certainty doesn't exist.
Regulatory sources:
- D.Lgs. 117/2017, Art. 79-86 — ETS VAT regime
- DPR 633/1972, Art. 4 — VAT exclusion for associations
- Agenzia delle Entrate — ETS tax regime 2026
Recommended further reading:
- Cantiere Terzo Settore — Terzo Settore VAT guide
- Fondazione Terzjus — VAT exclusion 2026-2036
- Agenzia delle Entrate webinar on Art. 86 CTS (search the Agenzia delle Entrate YouTube channel)
Internal links in the APS Taxation series:
1. [5x1000 for APS: registering on the 2026 list](/blog/5x1000-aps-iscrizione-elenco-2026-procedura-agenzia-entrate)
2. [Charitable donations to APS: the 19% deduction](/blog/erogazioni-liberali-aps-detrazione-19-percento-deducibilita)
3. [ETS tax regime: decommercialization](/blog/regime-fiscale-ets-decommercializzazione-art-79-cts-cosa-cambia)
4. [Modello EAS for APS: deadlines and penalties](/blog/modello-eas-aps-quando-presentarlo-cosa-rischi-non-fario)
5. VAT and the Terzo Settore (this article)
Series conclusion: this 5-article series covers the essential tax aspects of running an APS in 2026. If your association implements even 50% of this advice, you'll have:
- €3,000-7,000 in additional annual income from the 5x1000
- 20% more in donations (thanks to well-communicated deductions)
- Savings on direct taxes (via Art. 79 or Art. 86)
- Zero risk of penalties (thanks to a compliant Modello EAS)
- Correct VAT handling (with no future reassessments)
Total annual value: €5,000-12,000 in net cash-flow increase plus administrative peace of mind.