For those considering operating an individual business in Italy, this article outlines the core tax features and requirements of the country’s sole proprietorship structure, the Partita IVA individuale under the Regime Forfettario, as of 2025. This overview covers eligibility, tax rates, income thresholds, and practical considerations for small business owners and freelancers in Italy.
Availability of Sole Proprietorship Status in Italy
Italy provides individuals with the option to conduct business activities as sole proprietors through the Partita IVA individuale. This individual VAT registration makes it possible to invoice clients independently, without creating a separate legal entity. The most accessible and widely used structure for small-scale professionals and freelancers is the Regime Forfettario.
Overview of the Regime Forfettario Structure
The Forfettario regime simplifies both taxation and regulatory compliance for sole proprietors with moderate revenues. Eligibility for this status is strictly defined by annual turnover limits and other formal conditions, making it a highly pragmatic choice for those whose activity does not exceed these parameters. As expected in a high-tax jurisdiction like Italy, the regime is specifically structured to reduce the administrative burden for smaller businesses.
| Status Name | Annual Revenue Threshold (EUR) | Annual Revenue Threshold (USD)* | Flat Tax Rate (%) | Reduced Tax Rate for Initial Period (%) | Social Security (INPS) Obligations |
|---|---|---|---|---|---|
| Partita IVA individuale / Regime Forfettario | €85,000 | $91,800 | 15% | 5% (first 5 years, if eligible) | Required (Reductions for new businesses) |
*USD conversion at €1 = $1.08 (2025 estimate)
Key Features and Eligibility Criteria in 2025
- Who can apply: Natural persons residing in Italy, conducting business or freelance activities, including professionals such as consultants, translators, designers, and craftspeople.
- Revenue cap: Total gross annual income from all eligible business is capped at €85,000 ($91,800 USD) to remain in the Forfettario regime.
- Tax regime: A simplified flat tax of 15% is applied to taxable income. Qualifying new businesses may benefit from a reduced 5% rate for their first five years, provided they meet certain startup conditions.
- Social contributions: Sole proprietors must pay mandatory INPS (National Social Security Institute) contributions. New businesses may qualify for reduced social contribution rates during their early stages.
- Legal separation: The status does not create a separate legal entity, meaning personal and business assets are not formally distinguished for liability purposes.
How the Flat Tax System Works
The Forfettario regime uses a flat rate system meant to reduce the compliance burden for small-scale enterprises. Instead of progressive taxation, sole proprietors under this regime pay either:
- 15% on taxable income (the rate for standard cases)
- 5% on taxable income for the first five years when opening a new business and meeting specific requirements
The taxable income is determined after applying a set coefficient (for expenses) based on the sole proprietor’s industry or activity. However, the exact coefficient values are defined by the tax authority each year and are not included in this summary.
Simple Compliance, Reduced Red Tape
Compared to Italy’s traditional tax regime for businesses, the Forfettario offers simplicity: no VAT obligations, substantially reduced bookkeeping, and a predictable tax burden if one remains within the income limits. INPS contributions are calculated separately and are distinct from income tax liabilities.
Official Sources
Pro Tips: Maximizing the Forfettario Regime
- Monitor Your Revenue Carefully: Exceeding the €85,000 ($91,800 USD) limit in any calendar year will make you ineligible for the Forfettario and may subject you to higher, ordinary tax rates the following year.
- Take Advantage of the Startup Rate: If you meet the requirements, the 5% flat rate for new businesses can significantly reduce your overall tax liability in your early years. Always check eligibility before registration.
- Calculate All Social Contributions: INPS payments can be substantial. Review both the standard and reduced rates for your sector and confirm your obligations when opening your status.
- Keep Up With Official Updates: Regulatory details, coefficients, and limits may change from year to year. Consult the Agenzia delle Entrate main site regularly for clarifications.
In summary, Italy’s Forfettario regime and the Partita IVA individuale make it possible for individuals—especially freelancers and micro-entrepreneurs—to operate flexibly with simplified taxation and reporting requirements. Provided you remain within the defined thresholds and comply with social contributions, this structure offers efficiency and cost predictability. Remember that while the compliance process is streamlined, staying vigilant about annual caps and updating yourself on regulatory adjustments remains essential for avoiding costly surprises in 2025 and beyond.