What is Regime Forfettario? The flat rate scheme for Partita Iva.
If you have considered setting up Partita Iva in Italy, you may have heard of the term Regime Forfettario and wondered what it is and what it has to do with opening a VAT account. Although Regime Forfettario may sound intimidating, it’s actually a simplified and favourable tax regime. But let’s take a step back. If you want to start working autonomously in Italy, you can open a VAT account under two types of regimes: regime ordinario and regime forfettario.
Regime forfettario is a favourable flat-rate tax regime for those who invoice less than €65,000 per year and for those who are still at the beginning of their careers. It provides tax and contribution benefits as long as the requirements for accessing and remaining in the scheme are met.
Regime forfettario is a favourable flat-rate tax regime for those who invoice less than €65,000 per year and for those who are still at the beginning of their careers. It provides tax and contribution benefits as long as the requirements for accessing and remaining in the scheme are met.
Requirements
Professionals who meet the following criteria can join the flat rate scheme.
• Be an Italian tax resident;
• Not earning more than €65,000 per year with Partita Iva;
• Not earning more than €30,000 per year in case of an additional employment job.
How much does it cost?
1. Income tax
First of all, the adoption of the flat-rate scheme results in a reduction of taxes, thanks to a single 15% tax applied on taxable income.
To help those who decide to start working autonomously, the tax rate is reduced from 15% to 5% for the first 5 years of opening a Partita Iva. The condition, however, is not to have carried out the same job activity (e.g. translator) in the previous three years under any other form of contract (e.g. as an employee).
2. Social contributions
Besides income taxes, it will also be necessary to pay social contributions, and these amount to 25% of the taxable income.
What is this taxable income?
Taxable income is the percentage of your earnings that can be taxed. In the flat-rate scheme, this percentage depends on your activity area and varies from 40% to 86%. It will have to be verified by your tax advisor.
Okay, we know it may seem overly complicated, but it will be clearer with a practical example!
Sara is a recent graduate who has never worked before and wants to open a Partita Iva and work as a translator. How much will she pay?
Annual gross income: €22,000
Tax base for translator: 78% → Taxable income: €17,160
Income tax for “starters”: 5% of the taxable income → €858
Contributions: 25% of the taxable income → €4,290
Total taxes: €858 + €4,290 = €5,148
This was a brief overview of how the flat-rate scheme works. Still, in reality, there are countless cases that deserve special attention and should be discussed with your accountant.
For further information, please contact us:
For further information, please contact us:
Expat Regime Forfettario IVA / Expat Regime Forfettario IVA
