Flat Tax Regime Set to Tighten in 2026,Impacting Employees and Pensioners
Rome,Italy – A temporary increase to the income limit for accessing Italy’s flat tax regime will expire at the end of 2025,reverting to a lower threshold for employees and pensioners seeking to utilize the simplified tax system. As of January 1,2026,the income cap will return to €30,000,down from the current €35,000.
The change, outlined in Article 1, paragraph 12 of Law no. 207/2024, impacts individuals looking to open a VAT number and apply the regime forfettario (flat tax) while simultaneously receiving income from employment or pensions. The €35,000 limit was introduced as a transitional measure for the 2025 tax year only, as stated in the law: “For the year 2025, the limit referred to in article 1, paragraph 57, letter d-ter), of law 23 December 2014, n. 190, is raised to 35,000 euros.“
currently, those earning up to €35,000 from employment or pensions can access the flat tax scheme. However, this benefit will shrink in 2026, requiring individuals to ensure their combined income remains below €30,000 to qualify.
What is the regime Forfettario?
The regime forfettario is a simplified tax system designed for self-employed individuals and small businesses in Italy. It offers a reduced tax rate (typically 5% for the first five years, then 15%) on taxable income, calculated based on a pre-persistent coefficient applied to revenues. it’s popular for its administrative simplicity, but is subject to income and revenue limits.
Impact on Existing Flat Tax Holders
The change isn’t limited to new applicants. Individuals already operating under the flat tax regime must also monitor their income. The regime forfettario isn’t permanent; taxpayers must continuously meet requirements, including staying below a revenue threshold of €85,000 and avoiding disqualifying factors.
Those who benefited from the increased €35,000 income threshold in 2025 will need to reassess their eligibility for 2026.If their income from employment or pensions exceeds €30,000 in the coming year, they will be required to exit the flat tax regime and revert to standard IRPEF and VAT regulations starting January 1, 2026.
While the current rules stand as described, the possibility of an extension to the higher income limit through the 2026 Budget Law remains open. Taxpayers are advised to stay informed of any potential legislative updates.
