Flat-tax or standard regime: which is better when you open a VAT number in Italy

The flat-tax scheme taxes an income it estimates; the standard regime taxes the one you actually have. That's the difference that matters, not just the headline rate. Under the first, revenue gets multiplied by a fixed percentage set by law; under the second, you subtract the costs you actually incurred. From here on, under the rules in force in 2026, everything else follows from that choice.

How the flat-tax scheme works

Italy's flat-tax scheme (regime forfettario) can be used up to 85,000 euros in annual revenue or fees, a threshold that stays unchanged for 2026. Taxable income isn't revenue minus costs incurred: it's revenue multiplied by a fixed profitability rate that runs from 40% to 86% depending on the ATECO code filed, so two businesses with the same revenue can end up with a different taxable base purely because of the code chosen. I've written about this in more detail in ATECO code: what it is, and why the choice changes the tax you pay.

A 15% substitute tax applies to that base, dropping to 5% for the first five years if the business is genuinely new, meaning it wasn't carried on in the previous three years and isn't simply a continuation of an activity already run by you or someone else. The flat-tax scheme also brings practical simplifications: no VAT charged to clients, but consequently no VAT deducted on purchases either, no periodic VAT settlements or annual return, and no withholding tax on fees for those working as self-employed professionals.

Staying on the flat-tax scheme also means not exceeding 20,000 euros gross in spending on employees and collaborators, and not having earned more than 35,000 euros in employment income or similar the year before: that second threshold, though, is an exception valid only for 2025 and 2026, renewed year by year. The rule written into the statute is still 30,000 euros, and absent a further extension that's what it would revert to from 2027.

How the standard regime works

Under the standard regime, taxable income is the real one: revenue minus costs actually incurred and documented, from office rent to software, from suppliers to business travel. Personal income tax (IRPEF) applies to that base in brackets rather than a single rate: from 2026 they're 23% up to 28,000 euros, 33% from 28,001 to 50,000 euros (cut from 35% by the 2026 budget law), and 43% above 50,000 euros, plus regional and municipal surcharges that vary by location.

VAT, here, applies to invoices issued and gets deducted on purchases, with the obligation of periodic settlements: one more administrative task, but also a mechanism that's nearly neutral for a business client, since they deduct it in turn. A self-employed professional whose client is a withholding agent, such as a company, also typically has a 20% withholding tax applied to the invoiced fee, recovered later at tax filing: that's a rule specific to self-employed work, and doesn't apply to a business selling goods.

One point that's still often described online as a deciding factor, but hasn't been since 2022, is IRAP, the regional business tax. Since 2022 it hasn't been owed by natural persons carrying on a business or a profession, under either regime. Choosing the standard regime isn't why someone avoids it: no natural person pays it anymore, period.

Social security contributions: same rate, different base

For a craftsperson or trader enrolled in the relevant INPS scheme, the social security rate doesn't change with the tax regime: for 2026 it's still a fixed 4,521.36 euros for craftspeople and 4,611.64 euros for traders up to the 18,808-euro income floor, plus 24% (24.48% for traders) on the portion above it. What changes is the base that rate applies to, because contributions are calculated on the business income declared for tax purposes: under the flat-tax scheme that's the income estimated from the profitability rate, under the standard regime it's revenue minus real costs. Someone whose real costs run higher than what the flat-tax rate implicitly assumes can end up paying more in contributions under the flat-tax scheme than they would under the standard regime, and the other way round for someone with low real costs.

When each one wins

There's no answer that fits everyone, but the question worth asking is always the same: how much do your real costs actually weigh against your activity's profitability rate? Someone with few documentable costs, perhaps because they mostly sell their own expertise, often finds the flat-tax scheme lands on a lower taxable base than the real one, on top of fewer things to manage. Someone with significant costs, for equipment, materials, or staff, may find that the standard regime, by deducting those costs in full, leaves a lower taxable base than the flat rate would have assumed.

Who your clients are matters too: with mostly private clients, not charging VAT is a visible saving on the final price; with business clients, who deduct that VAT themselves, the saving shrinks considerably. And if revenue is approaching 85,000 euros, it's worth weighing the standard regime before being forced into it mid-year, with everything the switch involves: moving from one regime to the other can have practical consequences, for instance on VAT already deducted on equipment bought earlier, worth confirming with an accountant for your specific situation before deciding.

Whichever regime you choose, from day one you're still required to issue electronic invoices: there's no longer a revenue threshold that exempts flat-tax filers. I've written about that in e-invoicing for a new business: what you need from day one. And it's the same first day that, if you're opening a business registered with the Business Register, brings the obligation to register a certified email address (PEC), with specific penalties if it's missing: the details are in mandatory certified email for businesses.

If the business you're about to open will need to get found online, it's worth planning for that from the start, not after the tax side is settled: I cover that in website services. If you've already picked a regime and want to work out how to build a digital presence around it, get in touch: a couple of lines about your situation are enough to start.