Is the flat-rate scheme worth it?
Comparing the two regimes, with a method.
OpenVAT numbers · Change of regime
Leaving the flat-rate scheme
Leaving the regime forfettario (Italy's flat-rate scheme for sole traders and freelancers) is not a choice: it is a consequence. There are two rules, with very different effects, and anyone who goes over the higher threshold has to redo invoices they have already issued.
01 · The key rule
Going over the threshold, and going over the higher limit
The rules distinguish between two situations, and the difference between them is the most important thing on this page.
| Situation | Effect | In practice |
|---|---|---|
| Revenue above the ordinary threshold but within the higher limit | You leave from 1 January of the following year | The current year stays under the flat-rate scheme: no invoices to redo |
| Revenue above the higher limit | You leave immediately, with effect on the current year | The whole year becomes ordinary after the fact, VAT included |
| Losing another requirement | You leave from 1 January of the following year | For example a shareholding in a company, or employment income above the limit |
Going over the higher limit is the situation to avoid at all costs. It does not just change the regime: it works backwards over the whole year, and every invoice issued without VAT from January onwards has to be supplemented.
02 · The heavy case
What happens when you leave the flat-rate scheme immediately
The current year is treated as ordinary from the start. That means rebuilding, backwards, everything the flat-rate scheme did not require.
VAT on transactions
VAT is due on all the transactions of the year, including those already invoiced without it. The invoices issued have to be supplemented.
Recovering it from clients
You can charge the supplementary VAT on to your clients, but that is a commercial conversation that does not always go well, especially with private individuals.
Accounts to rebuild
VAT registers, recording of costs, documentation of purchases for the whole year.
Income on actual figures
Income is worked out as the difference between revenue and actual costs, no longer with the flat coefficient. Documented costs suddenly become valuable.
There is an upside that is often overlooked: once you move to actual figures, the VAT on the year's purchases becomes deductible and your actual costs reduce your income. If the costs are significant, the final bill is not always worse.
03 · The manageable case
Leaving from the following 1 January
This is the ordinary situation, and you manage it a few months in advance. The current year stays under the flat-rate scheme in every respect: no invoices to redo, no back VAT.
- Update your price lists: from 1 January your invoices will carry VAT. With private clients that means a higher final price, and it should be communicated beforehand.
- Set up the accounts: VAT registers, handling of costs, and possibly the choice between ordinary and simplified accounting.
- Schedule the VAT settlements, monthly or quarterly, with the related periodic returns.
- Check your social security position: the base for INPS contributions (the Italian social security institute) changes, because the way income is calculated changes.
- Postpone or bring forward purchases depending on which is more convenient: from the new year VAT on purchases becomes deductible again.
The December window
The last months of the year are when decisions matter most.
- A payment deferred to January can keep you under the threshold, if the deferral is genuine
- A purchase put off to the new year recovers VAT that would be lost today
- Price lists for the new year should be sent to clients beforehand, not in January
- Decisions should be documented: the substance must match the form
04 · What changes
The obligations that appear
The flat-rate scheme is simplified above all in terms of obligations. When you leave it, all the ones that had been set aside come back.
| Obligation | Under the flat-rate scheme | Under the ordinary regime |
|---|---|---|
| VAT on invoices | Not charged | Charged at the rate that applies to the transaction |
| Deducting VAT on purchases | Not allowed | Allowed, under the general rules |
| Periodic settlements | Not due | Monthly or quarterly, with a return |
| Annual VAT return | Not due | Due |
| Accounting registers | Not mandatory | Mandatory, according to the accounting regime chosen |
| How income is calculated | A coefficient applied to turnover | Revenue minus actual documented costs |
| Personal tax deductions | Not usable | Usable, as for any taxpayer |
| Sector studies and indicators | Not applicable | Applicable under the rules in force |
05 · The return
You can go back into the flat-rate scheme
Leaving is not final. If you meet the requirements again, you can return to the regime: there is no permanent bar for anyone who left because they went over the thresholds.
- If you left because your revenue went over the limit, you can return once you are back under the threshold, with effect from the following year.
- If you left by voluntarily opting for the ordinary regime, the option binds you for a minimum period before you can return.
- If you left because of a cause of exclusion (a shareholding in a company, employment income above the limit), you can return once that cause no longer applies.
- Returning means an adjustment of the VAT deduction on goods still in use, which has to be calculated: it is the item that surprises people who go back.
Moving in and out repeatedly is not forbidden but it is costly: each move requires VAT adjustments and a reorganisation of the accounts. If your turnover hovers around the threshold, it is often better to settle on the ordinary regime.
06 · In practice
How to prepare in the months before
The move goes well if it starts a few months ahead. This is the sequence that works.
Monitor your revenue
Keep an eye on the running total month by month, by date of payment: the flat-rate scheme works on a cash basis.
Estimate where you will land
By September you can already tell whether the year will close above or below. It is the moment when decisions are still possible.
Revise your prices
If leaving is certain, tell clients about the new price lists in good time, explaining why.
Set up the tools
Accounts, invoicing with VAT, a calendar of VAT settlements: ready before 1 January, not after.
Frequently asked
The questions that keep coming up
I went over the threshold in November. Do I have to redo January's invoices?
Only if you went over the higher limit. In that case leaving takes effect on the current year and VAT is due on all the year's transactions, including those already invoiced.
If instead you went over the ordinary threshold but stayed under the higher limit, the current year remains under the flat-rate scheme and there is nothing to redo.
Can I ask my clients for the VAT I have to add?
You can charge it on to them by issuing credit or debit notes (note di variazione). If the client is a business that deducts VAT, it does not usually object.
With private clients the conversation is harder, because for them it is a real cost. In practice, in those cases the tax often ends up being paid by whoever issued the invoice.
Do I really need an accountant after leaving?
The kind of work changes. Under the flat-rate scheme many people handle their own invoicing; under the ordinary regime you have periodic settlements, registers, a VAT return and income calculated on actual costs.
The part where you recover money (VAT deduction, deductible costs, depreciation) is also the part where mistakes cost the most.
Is it worth leaving voluntarily before I am forced to?
In some cases, yes: anyone with significant costs or planned investments may find the ordinary regime more convenient even before reaching the threshold.
The check is the same as on the page about whether the flat-rate scheme is worth it, but looking ahead over the next two or three years.
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