Calculator for the Italian flat-rate tax regime (regime forfettario) – including comparison with ordinary taxation

What is the flat-rate regime calculator?

The flat-rate regime calculator from Graber & Partner is a free online tool for calculating and comparing the tax and economic effects of the Italian flat-rate regime (regime forfettario).

The calculator is aimed in particular at self-employed professionals and sole proprietors who want to know their actual tax and social security burden and how much income actually remains available after taxes and social security contributions.

Unlike simple flat-rate tax calculators, the calculator does not only calculate the substitute tax, but also enables a comparison with the ordinary tax regime (regime ordinario).

This makes it possible to assess which regime may be economically more advantageous in the specific case.

In particular, the calculator takes into account:

• revenues or fees;
• type of activity and profitability coefficient;
• income determined on a flat-rate basis;
• social security contributions;
• substitute tax;
• net disposable income.

What is the Italian flat-rate regime (regime forfettario)?

The Italian flat-rate regime is a simplified tax regime for individuals carrying out a self-employed activity.

The main difference compared with the ordinary tax regime is that the actual income is not determined by deducting actual costs from revenues or fees.

Instead, the income relevant for tax purposes is determined on a flat-rate basis using profitability coefficients established by law.

The purpose of the regime is to simplify administrative and tax obligations and facilitate taxation for smaller self-employed activities.

How does the calculation under the flat-rate regime work?

The calculation under the flat-rate regime follows a fixed calculation mechanism.

The individual steps are:

1. The starting point is the revenues or fees earned.
2. The profitability coefficient applicable to the activity is applied to these revenues or fees.
3. The result represents the income determined on a flat-rate basis.
4. Mandatory social security contributions paid are deducted from this income.
5. The substitute tax of 5% or 15% is applied to the remaining taxable income.

In simplified form:

Revenues/fees × profitability coefficient = income determined on a flat-rate basis

Then:

Income determined on a flat-rate basis – mandatory social security contributions = taxable income

Finally:

Taxable income × 5% or 15% = substitute tax

Example: calculating income under the flat-rate regime

A self-employed professional earns annual fees of 60,000 €. A profitability coefficient of 78% applies to the activity.

The calculation is:

• Revenues/fees: 60,000 €
• Profitability coefficient: 78%
• 60,000 € × 78% = 46,800 €

The income determined on a flat-rate basis therefore amounts to 46,800 €.

The mandatory social security contributions paid are then deducted.

Example:

• Income determined on a flat-rate basis: 46,800 €
• INPS contributions: 12,200 €
• Taxable income: 34,600 €

The substitute tax is then calculated on this tax base:

• 15% under the standard application of the flat-rate regime;
• 5% where the requirements for the start-up relief are met.

What is the profitability coefficient?

The profitability coefficient is a percentage established by law that is used to determine the income relevant for tax purposes under the flat-rate regime.

It depends on the activity carried out and the corresponding ATECO activity code.

The reason is that different activities have different typical cost structures.

In simplified terms, the profitability coefficient can be understood as a mechanism for recognising business expenses on a flat-rate basis.

Unlike under the ordinary tax regime, actual costs are not considered individually and deducted from revenues or fees. Instead, through the coefficient, the law already takes an average proportion of costs into account.

Which profitability coefficients apply?

The profitability coefficients differ depending on the business sector (ATECO code) and currently range between 40% and 86%.

A lower coefficient means that the law assumes a higher proportion of costs. As a result, the income relevant for tax purposes is lower.

A higher coefficient, on the other hand, means that a larger proportion of revenues or fees is regarded as income.

Business sector	Related ATECO codes	Profitability coefficient
Food industry and beverage production	(10-11)	40%
Wholesale and retail trade	45 – (46.2 to 46.9) – (47.1 to 47.7) – 47.9	40%
Mobile retail trade in food and beverages	47.81	40%
Mobile retail trade in other products	47.82 – 47.89	54%
Construction and real estate activities	(41-42-43) – (68)	86%
Commercial agents, representatives and trade intermediaries	46.1	62%
Accommodation and food service activities	(55-56)	40%
Professional, scientific, technical, healthcare, education, financial and insurance services	(64-65-66) – (69-70-71-72-73-74-75) – (85) – (86-87-88)	78%
Other economic activities	(01-02-03) – (05-06-07-08-09) – (12-13-14-15-16-17-18-19-20-21-22-23-24-25-26-27-28-29-30-31-32-33) – (35) (36-37-38-39) – (53) – (58-59-60-61-62-63) – (77-78-79-80-81-82) – (84) – (90-91-92-93) – (94-95-96) – (97-98) – (99)	67%

The correct profitability coefficient must always be verified on the basis of the specific activity and the corresponding ATECO code.

Why are profitability coefficients so important for the calculation?

The profitability coefficient directly affects the amount of taxable income and therefore the overall tax and social security burden.

Example:

Two taxpayers each earn revenues or fees of 50,000 €.

Person A:

• Profitability coefficient: 40%
• 50,000 € × 40% = 20,000 € income

Person B:

• Profitability coefficient: 78%
• 50,000 € × 78% = 39,000 € income

Although both individuals earn the same revenues or fees, their different activities result in a significantly different starting position for tax purposes.

Why does the flat-rate regime use profitability coefficients?

The purpose is to take the typical cost structure of different activities into account on a flat-rate basis while at the same time simplifying administration.

The taxpayer therefore does not have to document every individual expense in order to benefit from the flat-rate recognition of costs.

The advantage:

• simple calculation of income;
• less administrative effort;
• greater predictability of the tax burden.

The disadvantage:

If the actual costs are higher than the amount of costs recognised on a flat-rate basis by law, this does not result in any additional tax benefit.

What requirements must be met in order to apply the flat-rate regime?

The Italian flat-rate regime (regime forfettario) can only be applied if the statutory requirements are met.

The main requirements are:

• The taxpayer is an individual.
• The activity is carried out as a sole proprietorship or as a self-employed professional activity.
• The statutory revenue or fee threshold is complied with.
• None of the statutory grounds for exclusion apply.

Companies such as a GmbH or S.r.l. cannot apply the flat-rate regime.

What revenue thresholds apply to the flat-rate regime?

A key requirement for applying the flat-rate regime is compliance with the revenue or fee threshold.

The current threshold is:

85,000 € of revenues or fees per year

If this threshold is exceeded, the flat-rate regime can generally no longer be applied from the following year.

A special rule applies where the following amount is exceeded:

100,000 € of revenues or fees

In this case, the taxpayer loses the flat-rate regime already during the year in which the threshold is exceeded.

The 100,000 € threshold is therefore particularly significant because the change does not only take place at year-end or in the following year.

Which grounds for exclusion prevent the application of the flat-rate regime?

Even if the revenue threshold is complied with, application of the flat-rate regime may be excluded.

The main grounds for exclusion include:

Interests in partnerships or similar structures

The flat-rate regime cannot be applied if the taxpayer holds an interest, for example, in:

• partnerships;
• professional associations;
• family businesses

.

Interest in a GmbH/S.r.l. carrying out a similar activity

An interest in a company may be problematic if:

• there is a direct or indirect interest of at least 50%;
• the company carries out the same or a similar activity;
• there are business relationships between the company and the taxpayer.

The specific assessment depends on the facts and circumstances of the individual case.

Activity carried out predominantly for a former employer

A ground for exclusion may exist where a self-employed activity is carried out predominantly for a former employer.

The rule is intended to prevent an existing employment relationship from merely being converted into a self-employed activity in order to obtain tax advantages.

Other grounds for exclusion

Other grounds for exclusion may arise in particular in the case of:

• application of certain special VAT regimes;
• certain activities in the real estate sector;
• taxable income from employment or pensions exceeding the threshold of 35,000 € in the previous year; 
• exceeding certain limits relating to personnel costs or similar expenses.

What is the start-up relief with a 5% substitute tax?

When starting a new activity, a reduced substitute tax of 5% may be applied under certain conditions instead of the standard substitute tax of 15%.

The relief applies:

• in the year in which the activity begins;
• and in the following four years.

However, the 5% rate does not automatically apply to every newly established self-employed activity.

What requirements must be met for the start-up relief?

The main requirements are:

• During the three years preceding the start of the activity, the taxpayer must not have carried out a corresponding business, professional or artistic activity.
• The new activity must not merely be a continuation of an activity previously carried out.
• There must not be a mere conversion of a previous employment relationship into a self-employed activity.

Example: when may the 5% start-up relief be available?

An individual has previously worked as an employee in an administrative role and then, for the first time, establishes an independent consultancy activity with their own clients.

If all statutory requirements are met, application of the 5% start-up relief may be possible.

Example: when may the 5% start-up relief be excluded?

A software developer works for a company as an employee for several years.

After the employment relationship ends, the developer continues to invoice the same clients and the former employer for the same activity as a self-employed professional.

Since this may economically constitute a continuation of the previous activity, the start-up relief may be excluded.

What role do social security contributions play under the flat-rate regime?

Social security contributions are a significant component of the overall tax and social security burden.

Depending on the activity, different social security schemes may be relevant:

• INPS Artisans Scheme (Gestione Artigiani);
• INPS Traders Scheme (Gestione Commercianti);
• INPS Separate Management Scheme (Gestione Separata);
• professional pension funds (e.g. architects, engineers, doctors, lawyers, chartered accountants, etc.)

Mandatory social security contributions are taken into account when calculating taxable income.

In simplified form:

Income determined on a flat-rate basis – mandatory social security contributions = tax base for the substitute tax

Is there a reduction in INPS contributions under the flat-rate regime?

Under certain conditions, artisans and traders may apply for a 35% reduction in INPS contributions.

This option applies in particular to individuals registered under the INPS Artisans Scheme or the INPS Traders Scheme.

Is electronic invoicing mandatory under the flat-rate regime?

Yes. Taxpayers under the flat-rate regime are also generally subject to the obligation to issue electronic invoices through the Italian Exchange System (Sistema di Interscambio – SdI).

The previous exemption for smaller taxpayers no longer generally applies.

Who is the flat-rate regime calculator particularly suitable for?

The calculator is particularly suitable for:

• individuals wishing to start a self-employed activity;
• self-employed professionals;
• artisans and sole proprietors;
• individuals considering a switch from the ordinary regime;
• entrepreneurs who want to compare their actual net burden.

Why does Graber & Partner provide a flat-rate regime calculator?

The Italian flat-rate regime provides many self-employed individuals with a simple and tax-efficient way to start working for themselves.

However, the economically best solution always depends on the individual's circumstances.

The flat-rate regime calculator from Graber & Partner makes it possible to compare different scenarios and better understand the effects on disposable income.

Information on the use of the flat-rate regime calculator

The results of the calculator are provided for information purposes only. They do not constitute binding tax advice and do not replace an individual assessment of the taxpayer's personal, tax and economic circumstances.

What are actual expenses?

Actual expenses are the costs actually incurred in connection with a business or professional activity.

These include, for example:

• rent for offices or business premises;
• software and licence costs;
• vehicle costs;
• purchases of materials and goods;
• travel and meal expenses;
• consultancy costs;
• personnel and employee costs.

Under the ordinary tax regime, these actual costs are generally taken into account when determining taxable income:

Revenues/fees – actual costs = taxable income

Under the flat-rate regime, however, these actual costs are not taken into account individually.

Why are actual expenses important despite the flat-rate regime?

Even though actual costs cannot be individually deducted for tax purposes under the flat-rate regime, they are very important for the economic assessment.

The reason is that the entrepreneur or self-employed professional still has to actually pay these costs.

The calculator therefore considers not only the tax, but also the income actually available after all costs and charges.

Even if the tax burden under the flat-rate regime may be low, it is necessary to assess the actual economic benefit after taking all costs into account.

What are itemised deductible expenses?

Itemised deductible expenses are individual, specifically documented cost items that can be taken into account for tax purposes under the ordinary regime.

Examples:

• rent;
• material costs;
• machinery and investments;
• vehicles;
• personnel expenses;
• external services.

Under the flat-rate regime, these costs are not additionally deducted from income.

This means:

• no additional reduction in taxable income;
• no individual recognition of actual costs;
• generally no deduction of input VAT on purchases.

The reason is that the law already takes costs into account on a flat-rate basis through the profitability coefficient.

What happens to VAT on purchase invoices?

A significant difference compared with the ordinary tax regime is that, under the flat-rate regime, VAT on purchase invoices generally cannot be deducted as input VAT.

Example:

• An individual purchases a machine for 10,000 € plus VAT.
• Under the ordinary regime, the VAT can generally be deducted as input VAT.
• Under the flat-rate regime, however, the VAT remains an economic cost.

This is an important comparison factor for investments and activities with high costs.

Why does the calculator compare the flat-rate regime with the ordinary regime?

The flat-rate regime is not automatically always the most economically favourable solution.

A common misconception is:

“A 5% or 15% flat tax is always better than ordinary progressive taxation.”

However, for a correct assessment the overall burden must be considered:

• taxes;
• social security contributions;
• actual business costs;
• net disposable income.

Despite higher tax rates, the ordinary tax regime may be more advantageous if high actual costs can be taken into account for tax purposes.

When is the flat-rate regime particularly advantageous?

The flat-rate regime is often particularly attractive for activities with:

• low actual costs;
• high profit margins;
• low levels of investment;
• less complex business structures.

Typical examples:

• consultants;
• many professional activities;
• artisans who primarily invoice other businesses for their own labour, without significant use of materials;
• self-employed activities in the start-up phase.

In these cases, the statutory flat-rate recognition of costs may be more favourable than the costs actually incurred.

When can the advantage of the flat-rate regime disappear?

The advantage of the flat-rate regime may be reduced or disappear entirely if the actual costs are significantly higher than the amount of costs recognised on a flat-rate basis by law.

This may be the case in particular for:

• artisan and production activities with high material costs;
• businesses with several employees;
• high levels of investment;
• high rental costs;
• extensive business structures.

In these situations, the ordinary tax regime may be economically more attractive because the actual costs reduce taxable income.

Why is the flat-rate regime not only a tax issue?

When choosing a tax regime, the amount of tax should not be the only factor considered.

The key question is:

How much income actually remains available after all taxes, social security contributions and actual costs?

The flat-rate regime calculator from Graber & Partner therefore shows the overall economic burden and enables a comparison of different scenarios.

Why can the flat-rate regime be an attractive way to start self-employment?

For many people starting a business, the flat-rate regime provides a simple and transparent way to begin a self-employed activity.

The advantages include in particular:

• simple tax calculation;
• low administrative burden;
• simplified tax obligations;
• low and predictable tax burden.

Especially in the initial phase, this allows many self-employed individuals to focus on developing their activity.

Can the flat-rate regime become a long-term obstacle to growth?

Yes. What is an advantage in the initial phase may become a restriction as the activity grows, especially where self-employed individuals remain in the flat-rate regime out of "fear" of a higher tax and social security burden and therefore fail to exploit their growth potential.  

• revenue or fee threshold of 85,000 €; the business "has to" remain small
• no recognition of additional actual costs;
• no input VAT deduction;
• fewer advantages in the case of larger investments or business structures.

Entrepreneurs should therefore regularly assess whether the flat-rate regime continues to be appropriate for the current size and development of their business.

Graber & Partner provides various free online calculators that allow users to perform frequently needed calculations quickly and easily.

Whether for tax-related calculations, financial planning or everyday purposes, our calculators provide an initial indication and help determine relevant values efficiently.

A complete overview of all available calculators can be found here: Overview of our calculators

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