Regime Forfetario in Italy - 2021 update
Since 2015, Italy introduced a new tax regime for freelancers and small business activities called the Regime Forfetario. Just like every year, the Italian legislator introduces new minor changes to the law, and the purpose of this brief article is to highlight the most recent updates in regards to the matter.
Note that only private individuals and natural persons can access this regime, thus companies and societies are excluded.
To have a broader overview of freelancing, please consult our Freelance guide for Italy.
Who can access the Regime Forfetario?
In order to access the Regime Forfetario you must first acquire a Partita IVA and in its application you must check the Regime Forfetario option.
You are disqualified from accessing this regime if any of the following conditions apply:
How much tax do I pay under the Regime Forfetario?
The flat-rate scheme charges a flat income tax rate of 15% tax on gross turnover multiplied by the coefficient in the table below; it is not therefore subject to the progressive IRPEF brackets.
There is no recourse on costs suffered, and this is why it
If a self employed teacher will pay tax on 78% of gross earnings at a rate of 15% - an effective rate of 11.7% of gross income invoiced to clients.
The rate is reduced to 5% for a new business activity – defined as one being carried out for the first time and not an extension of a previous business carried out under the ordinary regime or a prior special scheme. This means that you will suffer an effective rate of tax of 3.9% of turnover.
The maximum annual revenue threshold is € 65,000 per tax year.
What about INPS payments?
The new regime does not provide any reduction in the rate of contributions. Social security will be applied at normal rates of 25.72% to the gross income reduced by the coefficient.
Social security contributions are deductible from the taxable income on a paid basis – i.e. contributions on last year’s income are deductible from this year’s taxable base, after reduction of the coefficient.
Since 2017, commerce and artisanal activities, can claim a 35% reduction on their social security payments as long as the Regime Forfetario applies.
Are there any other advantages in the Regime Forfetario?
On top of the reduced 5% tax rate, the Regime Forfetario is a valid scheme to reduce the bureaucracy connected to the annual tax compliance:
What happens if I make more than € 65,000?
Upon passing the threshold of € 65,000 you are not eligible for the Regime Forfetario and you will shift to the regular IRPEF brackets from the FOLLOWING TAX YEAR.
It is therefore possible to make more than € 65,000 for just one year.
Is this the best regime available?
Despite the very attractive 5% flat tax rate, this regime might not be the best one for the following reasons:
We therefore strongly advise to talk to a tax professional to assess your personal tax situation and evaluate carefully the best tax regime applicable to your personal case.
How can AccountingBolla help you?
Accounting Bolla is able to provide a full fledged accounting service to your needs, we will:
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After moving back to Italy from the United States in 2013, I realized how much an accounting and tax firm was needed to help expats living in Italy to comply with the local tax regulations.