Tax incentives for regenerative enterprises

👉🏽 This story is developed as part of the Doughnut Economics for Policymakers guide.

Many governments have provided tax incentives for regenerative enterprises based on their purpose, ownership or profit use. Such tax reliefs or exemptions have been applied to sales, profits, investment, donations, and ownership conversion. They can decrease financial pressure on regenerative enterprises as well as stimulate conversion or investment into these businesses.

Overview

Governments in many countries have provided tax reliefs or exemptions to reward enterprises that are more regenerative by design.  To ensure such tax policies are effective, governments need to first develop clear definitions of the enterprises that can benefit from them. These enterprises are often identified by their purpose (e.g. public benefit organisations); ownership structure (e.g. cooperatives); or a combination of factors (e.g. social enterprises who reinvest profits for social and ecological purposes). 

Examples include: 

• Tax reduction or exemption for sales or profits:  Belgium, Cabo Verde, Latvia, Portugal, South Korea and Thailand all provide tax reduction or exemptions for social enterprises. Luxembourg exempt corporate income and business tax for social impact companies who only offer impact shares with no dividend rights. India offers various tax reductions for cooperatives or full exemption for certain sectors, such as cooperative banks and agricultural cooperatives. Agricultural cooperatives in Peru receive full tax exemption on their first $41,600 of income, followed by reduced tax rates on subsequent earnings.
• Tax reduction or exemption for conversion: Slovenia, the UK and USA offer tax reduction for conversion to employee-owned companies in the form of capital gains tax reductions on sold shares.
• Tax reduction or exemption for investment or donation: Bulgaria, Croatia, France, Hungary, Italy, Portugal, Quebec in Canada, and Sweden offer tax reductions for investment or donation into social enterprises or cooperatives. In many countries, tax exemptions also apply to donations to public benefit organisations with social and/or ecological purposes.

• Incentivising donation through the taxation system: Many EU countries allow taxpayers to donate a fixed percentage or amount of their income tax to eligible organisations through their tax return.

Implementation

Whilst many governments around the world offer favourable taxes for businesses that are collectively owned or purpose-led, the extent of such benefits varies, ranging from reduced rates to full exemption.

In many countries, favourable taxes are part of a wider national strategy to make social enterprises or collectively owned enterprises more widespread.

Clear eligibility criteria and transparent, accessible registration systems often underpin the effectiveness of these taxation measures.

Impacts

Tax reliefs can serve as a reward for enterprises' contributions to societal and ecological goals. Such incentives can help improve the financial performance of these enterprises by increasing investments and making their services or products more competitive (e.g. the ability to set lower prices when sales taxes are exempt). 

Challenges

• Limited awareness and complex application processes : Regenerative enterprises  are often unaware of available tax measures or face significant challenges in accessing them. Complex tax codes and administrative procedures—such as burdensome reporting and registration requirements—can discourage uptake. 
• Challenges in designing eligibility criteria:  Many incentives are based primarily on ownership models (e.g. cooperatives) or stated purpose (e.g. delivering social or ecological impact), rather than a broader set of enterprise deep design considerations.  This can exclude other regenerative businesses (e.g. stewardship-owned businesses) or create barriers to deeper transformation in enterprise design. Conversely, overly broad or vague definitions can make eligibility difficult to assess and may increase the risk of misuse. 

Reference and further reading

• News of tax exemption for Peruvian agricultural cooperatives (2023).
• Introduction to tax exemptions for cooperatives in India.
• Section 21 of the 2024 Promoting the social and solidarity economy for sustainable development UN report.
• Overview of European taxation regulations for social enterprises and public benefit organisations by the International Centre for Non-Profit Law.
• OECD's Social Economy in Europe report (2025) include a chapter on taxation policies. 

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