The Italian flat tax regime (regime forfettario) is a simplified tax regime for natural persons who carry out a commercial, freelance or artistic activity. It is primarily aimed at sole traders and freelancers with manageable turnover and allows for a lump-sum profit determination with a fixed substitute tax.
Requirements and Turnover Threshold
The key requirement is that the annual revenues achieved in the previous year do not exceed €85,000. If this threshold is exceeded, the regime can no longer be applied in the following year. In the case of revenues exceeding €100,000, exclusion takes place immediately with transition to ordinary taxation including VAT.
The regime is available exclusively to natural persons who are tax resident in Italy or resident in an EU or EEA state and who earn more than 75% of their total income in Italy. Corporations are excluded.
Grounds for Exclusion
In addition to the turnover threshold, the following important grounds for exclusion apply:
- Participation in partnerships, family businesses or transparently taxed corporations
- Non-residence in Italy
- Receipt of income from employment or pension exceeding €35,000 in the previous year
- Activity carried out predominantly for a current or former employer
An exception applies if the employment relationship was terminated in the previous year and no ongoing employment income exists.
Tax Treatment
The flat tax regime replaces the progressive personal income tax (IRPEF), the regional and municipal surcharges as well as IRAP. Instead, a flat substitute tax of 15% applies. For start-ups, a reduced substitute tax of 5% may apply during the first five years – provided certain requirements are met.
The taxable profit is not determined on the basis of actual operating expenses but is calculated on a lump-sum basis. A sector-specific profitability coefficient (depending on the ATECO code) is decisive. The revenues are multiplied by this percentage and the result represents the taxable profit. Actual costs are not tax-deductible.
Example
An IT consultant generates revenues of €40,000 in 2026. A profitability coefficient of 78% applies to his activity.
€40,000 × 78% = €31,200 taxable profit
€31,200 × 15% = €4,680 substitute tax
Whether the actual costs amounted to €3,000 or €15,000 is irrelevant for tax purposes.
VAT and Social Security
Entrepreneurs under the flat tax regime issue invoices without VAT and are not entitled to deduct input VAT. The periodic VAT settlements do not apply and the invoice must include a corresponding reference to the application of the “regime forfettario”.
Social security contributions to INPS are generally due in the ordinary manner. For commercial activities (craftsmen, traders), there is the possibility of a 35% reduction of INPS contributions upon request.
Who Benefits from the Flat Tax Regime?
The regime is particularly attractive for:
- Freelancers and entrepreneurs with low operating costs
- Activities with low use of goods
- Part-time self-employed persons with limited employment income
- Start-ups with manageable investment needs
Disadvantages and Limits
- No deduction of actual costs
- No input VAT deduction
- No use of certain tax deductions
- Limited growth potential due to the turnover threshold
The flat tax regime is therefore less suitable in cases of:
- High fixed costs
- Significant use of goods
- Strongly growing activities
- Planned larger investments
Minimum Regime (Regime dei minimi)
An obsolete model, however, is the minimum regime (Regime dei minimi). This is also a preferential tax system for small entrepreneurs with prior-year revenues up to €30,000, under which the substitute tax amounts to only 5%. This tax system was abolished in 2015, but may continue to be applied by those taxpayers who had already entered this tax system before and who meet the relevant requirements.
Conclusion
The Italian flat tax regime offers a simple and often tax-efficient solution for smaller entrepreneurial and freelance activities. However, the combination of turnover threshold, lump-sum profit determination and exclusion criteria makes a careful assessment of the individual situation necessary.