Italy's Flat-Rate Tax Scheme 2025: complete guide for freelancers and small businesses
Italy’s flat-rate scheme (regime forfettario) is today the most widespread favourable tax regime among freelancers, sole traders and small business owners. The core rules remain those introduced by Law 190/2014 and subsequently amended, with the revenue ceiling fixed at €85,000 per year. This guide explains in detail how it works, who can access it, how the tax is calculated and — above all — when it genuinely makes financial sense compared with the standard regime.
What the flat-rate scheme is and who can use it
The flat-rate scheme is a simplified tax regime available to individuals carrying out business, artistic or professional activities as sole traders. It is not available to partnerships, limited companies or other entities.
Those operating under the flat-rate scheme pay a single substitute tax replacing IRPEF (personal income tax) and regional and municipal surcharges. There is also no obligation to apply VAT: flat-rate taxpayers do not charge VAT to clients and cannot recover it on purchases. This enormously simplifies administrative management.
To access the scheme, the main requirement must be met: in the previous year, revenues or fees collected must not have exceeded €85,000. For those starting a new activity, the scheme applies automatically unless an exclusion condition exists, upon declaring that this threshold is not expected to be exceeded in the first year.
The scheme applies by default: no specific notification is required to enter it. If you wish to opt out voluntarily, you must notify this in your tax return by exercising the option for the ordinary regime, which is then binding for at least three years.
The €85,000 threshold: how it is calculated
One of the most frequent mistakes concerns the correct calculation of the threshold. The €85,000 limit refers to gross revenues or fees — meaning amounts invoiced and collected in the year (the cash basis applies both to professionals and to businesses).
Key points to keep in mind:
- If activity starts mid-year, the €85,000 limit must be pro-rated to the period.
- For those with multiple activities, revenues from all activities are aggregated for the threshold calculation.
- Exceeding €100,000 during the year triggers immediate exit from the scheme for that same year, with an obligation to apply VAT from the transaction that caused the exceedance onwards.
- If revenues exceed €85,000 but remain below €100,000, you exit the scheme from the following year.
Exclusion conditions
Even those who respect the revenue limit may be excluded from the flat-rate scheme for other reasons. The main exclusion conditions are as follows.
Shareholdings in companies
Individuals who at the same time as carrying out the activity are partners in partnerships, professional associations or family businesses, or who control, directly or indirectly, a limited liability company (or a profit-sharing arrangement) that carries out economic activities directly or indirectly attributable to those conducted by the individual under the flat-rate scheme cannot use the regime. In plain terms: if you are a shareholder of an SRL carrying out the same type of work as your sole-trader activity, you cannot be on the flat-rate scheme.
Note: a shareholding in an SRL carrying out a different type of activity is not an exclusion condition. The connection must be with the activity actually carried out.
Employment income exceeding €30,000
Those who received employment or equivalent income (coordinated and continuous collaborations, pensions) exceeding €30,000 gross (for 2025 and 2026, the limit is raised to €35,000) in the previous year cannot access the flat-rate scheme. This exclusion condition does not apply if the employment relationship ended in the previous year and no new relationship was established in the current year.
Special VAT regimes or special income determination regimes
Those applying special VAT regimes (such as the agricultural one, or the publishing regime) or special flat-rate income determination regimes are excluded.
Fiscal residence abroad
Non-Italian tax residents cannot access the flat-rate scheme, with the sole exception of those residing in an EU or EEA country providing adequate information exchange, provided at least 75% of their total income is produced in Italy.
The substitute tax: 15% standard and 5% for start-ups
On the flat-rate taxable income (calculated as described in the next section), a substitute tax of 15% applies.
However, there is an additional incentive for those starting a new activity: the rate drops to 5% for the first five years of activity, provided all three of the following conditions are met:
- The taxpayer has not, in the three years preceding the start of the activity, carried out any artistic, professional or business activity, even in association or as a family business.
- The activity to be carried out does not constitute the mere continuation of another activity previously carried out as employment or self-employment (with exceptions where the new activity is a legal obligation).
- If an activity previously carried out by another party is being continued, the revenues of that activity in the previous year must not have exceeded €85,000.
The fifth year of the reduced rate coincides with the fifth year of activity, not the fifth year of applying the flat-rate scheme: if you entered the scheme from the start of your activity, the maths is straightforward. If you started under the ordinary regime and then switched to the flat-rate scheme, the five-year period runs from the start of the activity, not from the entry into the favourable regime.
The profitability coefficient: what it is and how it works
Taxable income under the flat-rate scheme is not calculated by subtracting actual expenses from revenues. Instead, a profitability coefficient predetermined by law is used, varying according to the ATECO code identifying the activity carried out.
Taxable income is calculated as follows:
Taxable income = Revenues/fees collected × Profitability coefficient
Example: a lawyer with fees collected of €60,000 applies a coefficient of 78%, obtaining a taxable income of €46,800. The 15% substitute tax amounts to €7,020.
The coefficients vary significantly by activity type. Some representative examples:
- Retail and wholesale trade: 40%
- Catering, bars, food service: 40%
- Construction and real estate activities: 86%
- Commercial intermediaries (agents, brokers): 62%
- Professional, scientific and technical activities (lawyers, accountants, engineers, architects, etc.): 78%
- Other economic activities: 67%
From the taxable income thus calculated, only compulsory social security contributions paid during the tax period are deducted. No other expenses are deductible.
This mechanism favours those with low actual expenses relative to their turnover (such as many intellectual professionals), but may be disadvantageous for those with high costs (for example, those purchasing significant stock or employing collaborators).
INPS social security contributions under the flat-rate scheme
Those operating under the flat-rate scheme are subject to ordinary social security contributions, with the difference that the income on which contributions are calculated is the same flat-rate taxable income (not actual income).
Professionals enrolled in category pension funds (lawyers, engineers, doctors, etc.) continue to pay contributions to their own fund according to the fund-specific rules.
Artisans and traders enrolled in the INPS IVS Management pay the minimum fixed contributions and the percentage contribution on income exceeding the minimum.
Professionals enrolled in the INPS Separate Management apply the contribution rate provided for those not enrolled in another pension fund.
For all subjects enrolled in INPS Management (artisans, traders), there is the option to apply for a 35% contribution reduction. This must be communicated online to INPS by 28 February of the reference year (or within 30 days of starting the activity for new enrollees). The reduction significantly lowers the social security burden but proportionally reduces contributions counting towards the pension. The choice should be evaluated on a case-by-case basis, taking into account age and overall pension situation.
Electronic invoicing: mandatory for all since 2024
From 1 January 2024, electronic invoicing through the SDI (Sistema di Interscambio — Revenue Agency exchange system) is mandatory for all flat-rate taxpayers, regardless of revenue volume. There are no longer any exemptions based on turnover thresholds (an exemption that previously applied up to 2023 for those below €25,000).
Every invoice issued to private clients, businesses or public administration must be in XML format and pass through the Revenue Agency’s SDI. In the electronic invoice, the flat-rate taxpayer must indicate the nature of the operation (code N2.2 — operation not subject to VAT pursuant to Art. 1, paragraphs 54-89, Law 190/2014) and include the annotation: “Operazione in regime forfettario — IVA non applicabile ai sensi dell’art. 1, commi 54-89, della L. 190/2014” (Operation under the flat-rate scheme — VAT not applicable).
Penalties for omitted electronic invoicing are the same as for ordinary taxpayers. Management can be handled through dedicated software, the free Revenue Agency portal, or integrated commercial platforms.
When the flat-rate scheme makes sense — and when it doesn’t
The comparison between the flat-rate scheme and the ordinary IRPEF regime depends on many variables: revenue level, actual expenses, family situation and applicable IRPEF tax brackets.
Favourable example
An IT consultant with revenues of €60,000 and actual expenses of €5,000:
Under the flat-rate scheme (coefficient 78%):
- Taxable income: €60,000 × 78% = €46,800
- Deduction of INPS Separate Management contributions (assumed €15,000): €46,800 − €15,000 = €31,800
- Substitute tax at 15%: €4,770
Under the ordinary regime:
- Income: €60,000 − €5,000 (expenses) − €15,000 (contributions) = €40,000
- IRPEF on €40,000 (2025 tax brackets): approximately €11,000–€12,000
- Regional and municipal surcharges: approximately €800–€1,000
The saving under the flat-rate scheme is in the order of €7,000–€8,000. The flat-rate scheme is clearly advantageous.
Unfavourable example
A commercial agent with revenues of €70,000 and actual expenses of €40,000 (car, travel, samples, etc.):
Under the flat-rate scheme (coefficient 62%):
- Taxable income: €70,000 × 62% = €43,400
- Deduction of contributions: −€5,000 → €38,400
- Substitute tax at 15%: €5,760
Under the ordinary regime:
- Income: €70,000 − €40,000 (expenses) − €5,000 (contributions) = €25,000
- IRPEF: approximately €4,300
- Surcharges: approximately €550
The correct evaluation requires a detailed analysis of the specific situation. As a general rule: the flat-rate scheme becomes more advantageous the lower actual expenses are relative to revenues.
Frequently asked questions about the flat-rate scheme
Can I invoice foreign clients under the flat-rate scheme?
Yes. Flat-rate taxpayers can invoice foreign clients, both EU and non-EU. For sales of goods to EU entities, the intra-community purchase rules do not apply (the flat-rate taxpayer is not a VAT taxable person). For services to EU taxable persons, reverse charge applies: the foreign client self-accounts for VAT in their own country. There are no particular limitations for working with clients abroad.
If I exceed €85,000 in November, what happens?
If you exceed €85,000 but remain below €100,000, you continue to apply the flat-rate scheme for the remainder of the current year and switch to the ordinary regime from 1 January of the following year. If you exceed €100,000 during the year, you exit the flat-rate scheme immediately: from the transaction that caused the exceedance, you must apply VAT and switch to the ordinary regime, with an obligation to adjust the VAT recovery on purchases made during the year.
Can I employ staff under the flat-rate scheme?
Yes. Flat-rate taxpayers can have employees or collaborators. There is no explicit prohibition. Obviously, employment costs are not deductible for substitute tax purposes, as flat-rate taxpayers do not deduct actual expenses analytically. This is a factor that can make the regime less advantageous as employment costs increase.
Is IRAP payable under the flat-rate scheme?
No. Those under the flat-rate scheme are exempt from IRAP (Regional Tax on Productive Activities). This is an additional advantage compared with the ordinary regime, where IRAP applies (unless to self-employed workers without employees or autonomous organisation).
Have questions about your specific situation? Contact the firm — Studio CITI snc in Milan will help you evaluate the flat-rate scheme with a concrete analysis of your figures.
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