The Regime forfettario in Italy: The Flat-Rate Tax

For many self-employed people in Italy, the “regime forfettario” is the most attractive tax option: a low flat rate and minimal paperwork. This guide explains how it works, who it’s beneficial for, and who is not eligible to use it. (Note: General guidance; not tax advice.)

What is the Regime forfettario?

The flat-rate scheme is a Flat-rate tax system for small business owners and freelancers. Instead of regular income tax (IRPEF) and value-added tax (IVA), you pay a single Substitute Tax (substitute tax) – with simplified accounting, without an IVA return, and without IRAP.

The gear ratio: 15 % or 5 %

The flat rate is 15 %. For real Startups under certain conditions, it drops to the only 5 % in the first 5 years – a strong incentive to start a business.

Revenue Threshold and Profitability Ratios

Two things are key:

• Revenue Threshold: maximum 85.000 € per year. Anyone above that threshold falls under the regular system.
• profitability ratio: Not all of your revenue is taxed; only a fixed percentage, depending on ATECO code (e.g., 78 % for many services, 40 % in retail). The flat rate is then applied to this profit.

INPS Contributions

In addition to the tax, there are the Social Security Contributions To the INPS (or your unemployment insurance fund). Craftsmen and Merchants can make a 35 % Discount Apply for the contributions (notify INPS by February 28). The contributions paid also reduce the taxable base.

Who Is Not Allowed to Use the System

Among others, the following are excluded:

• more than 85.000 € has revenue,
• in the previous year, over 30.000 € received wages,
• Personnel costs exceeding €20,000 has,
• on certain Companies is a participant (partnership, controlled SRL),
• Non-resident (except for the EU/EEA, where at least 75 % of income must come from Italy).

Is it worth it?

For many self-employed individuals, the forfettario system is very tax-efficient. The catch: You can Do not deduct input tax and don't take full advantage of all the deductions available under the standard tax regime. Whether it's worth it for you depends on your revenue, expenses, and business activities—a Accountant Do the math. Learn more about the tax system in the Tax Basics.

What You Need to Do Next

Check your ATECO code and the corresponding coefficient, estimate your revenue, and compare the flat-rate and standard tax regimes. Choose the regime when you open your VAT Number – and if in doubt, have the decision reviewed by an expert.