What is Italy's flat tax regime (forfettario)
The forfettario is a simplified tax regime for Italian sole traders (Partita IVA), introduced by Law 190/2014. It applies a flat 15% tax rate — reduced to 5% for the first 5 years of a new business — not on the full revenue but on a reduced taxable base calculated using a profitability coefficient specific to the business sector.
Who qualifies in 2025
Sole traders may access the forfettario if in the previous year they earned revenues below €85,000. From 2023 an additional threshold at €100,000 was introduced, with immediate exit from the regime during the year if exceeded.
- Revenue limit: €85,000 (exit on Dec 31 if exceeded); €100,000 (immediate exit)
- No employee/collaborator expenses exceeding €20,000
- No shareholding in partnerships, associations, or family businesses
- Employment income must not exceed €30,000 (unless employment has ended)
The profitability coefficient
The taxable base is not the full revenue but the forfettario income, calculated by multiplying revenues by the profitability coefficient of the ATECO business code. Examples:
- Technical professions (developers, architects): 78%
- Retail trade: 40%
- Hotels and restaurants: 40%
- Craftsmen and other services: 67%
- Sales agents: 62%
Advantages and disadvantages
- ✅ Flat 15% rate (5% for start-ups in the first 5 years)
- ✅ Exempt from VAT, withholding tax, IRAP, and sector studies
- ✅ Simplified accounting: no obligation to receive electronic invoices (only issue)
- ❌ Cannot deduct VAT on purchases
- ❌ Cannot deduct analytical costs (travel, depreciation, etc.)
- ❌ No deductions for dependants or medical expenses on the flat taxable base
INPS social security contributions
Social security contributions depend on the pension scheme. Professionals enrolled in the INPS Separate Management (Gestione Separata) pay 26.07% on taxable income. Craftsmen and traders enrolled in specific INPS schemes pay a fixed minimum plus contributions on income above the threshold.
Sole traders in the forfettario can request a 35% reduction on craftsman/trader INPS contributions, but this proportionally reduces the future pension.