Flat rate scheme 2027: how it works and when it is really convenient

No VAT, no withholding tax on invoices, single tax

The flat rate regime is a preferential tax regime intended only for natural persons, professionals and self-employed persons. Those who apply the flat rate regime do not charge VAT to the customer and are therefore exempt from all related bureaucratic and fiscal obligations, such as: record keeping, periodic payments, annual VAT declaration. Furthermore, there is no withholding tax on the invoices issued. The following remain mandatory: numbering and conservation of invoices issued and received and certification of payments in the case of employees.

The flat rate tax replaces IRPEF and related additional taxes. The taxable income is determined by applying the profitability coefficient to the revenues or compensation received, which varies by ATECO code.

For professional activities the coefficient is 78%, for construction and building renovation activities 67%, the same for craft activities. In the flat rate regime, therefore, the costs are not calculated analytically (i.e. by subtracting every single documented expense), but are determined “on a flat rate” basis using the pre-established percentage, equal in the cases indicated to 22% and 33% respectively. An exception is made for compulsory social security contributions which are fully deductible from income.

Starting the business and reducing tax

The flat-rate regime follows the cash criterion: only the amounts actually collected during the year are relevant, regardless of the date of issue of the invoice. The substitute tax has two rates:

• 5% for start-ups in the first five years of activity;
• 15% standard rate.

The reduced rate of 5% is due to those who start a new business and have not carried out an artistic, professional or business activity in the previous three years, even in an associated or family form. In essence, it must not be a continuation of work carried out with other formulas, except in the case of compulsory professional training.

However, subjects who:

• participate in partnerships, professional associations or limited liability companies that carry out activities directly or indirectly attributable to those carried out individually;
• in the previous year they worked mainly (over 50% of revenues) with their former employer;
• carry out exclusively or mainly the sale of buildings and building land.

Once entered into the regime, the other constraints must be respected in order to maintain it year after year. In fact, there are different control thresholds.

The annual requirements: revenues, dual income and employee expenses

For 2026, the first requirement to be respected is the amount of revenues: those who exceed 85,000 euros in the year lose the flat rate from the following year, but if they exceed 100,000 euros, immediate exit from the regime is triggered already in the current year, with the transition to ordinary taxation. In essence: those who close the year between 85,000 and 100,000 euros maintain the flat rate for the current year but lose it from the following January 1st, those who exceed 100,000 are subject to the application of the ordinary VAT rules starting from the invoices that caused the excess, and therefore also to the ordinary IRPEF regime.

The second requirement concerns income from employment or similar received in the previous year: it must not exceed 35,000 euros gross, but without considering separately taxed sums (TFR, arrears). The verification is not necessary if the employment relationship ended in the previous year without any further similar income having been received. Anyone who terminates their employment relationship can therefore access the flat rate even if the income received before termination exceeds the threshold.

The third limit concerns expenses for accessory or dependent work, which must not exceed 20,000 euros in total per year. Exceeding this results in exclusion from the flat-rate regime from the following year.

How much you pay in flat tax: practical examples

Here are now two simulations of the taxes due for those who start a new business.

Example 1: Young Surveyor (Freelancer)

• ATECO code: 71.12.30
• Profitability coefficient: 78%
• Collect 45,000 euros
• Gross Income 35,100 (45,000 x 78%)
• Contributions (with discounts for new members) approximately 1,050 euros (a quarter of the ordinary minimum), plus 30 euros maternity contribution (fixed fee).
• Tax Calculation:
• Taxable amount: 35,100 – 1,080 = 34,020 euros
• Substitute Tax (5%): 1,701 euros

Example 2: Craftsman (Company)

• ATECO code: Example 43.xx (Building/Plant)
• Profitability coefficient: 67% (artisan standards)
• Gross Income: 30,150 (45,000 x 67%)
• INPS contributions (with 50% Start-up discount): 3,618 euros.
• Tax Calculation:
• Taxable amount: 30,150 – 3,618 = 26,532 euros
• Substitute Tax (5%): 1,326.60 euros

When the flat rate is really worth it

In principle, all things considered, the flat rate is always convenient for those who are starting up their business thanks to the 5% preferential rate, but even in this case, close attention must be paid to the expenses that are actually incurred for the business and beyond.

With the flat rate regime, in fact, you do not have the possibility of deducting any other type of expense, unless you also have income from employment, given that you do not pay IRPEF. Therefore, those who have many expenses for the business, but also personal expenses, from mortgages to health expenses to those for renovations, must carefully evaluate the choice of regime, also in light of the fact that IRPEF rates have been reduced.

With the ordinary regime, in fact, in addition to the analytical deduction of expenses for the business, the deduction of expenses for goods for mixed use is allowed, including those on the house if the property in which you live coincides with the operational headquarters. Therefore deductible from the mortgage to the bills, from the condominium to the Tari, even if pro quota. The same goes for cell phones and means of transport.

In short, the choice must be made very carefully, especially if you cannot take advantage of the reduced rate for start-ups. In general, however, for those who start a business it may be convenient to start with the flat rate regime and evaluate after a year whether or not the real convenience remains.

Flat rate scheme 2027: the changes

Read and download here the text of article 9 of the new Budget Law, which increases the turnover limit to 100,000 euros, but inserts the obligation to apply VAT on invoices over 85,000 euros: