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Flat-rate regime at €100,000 but VAT from 85,000: why, and what changes on invoices

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In short: Italy can decide on its own how much income tax flat-rate taxpayers pay, but not how far it can exempt them from VAT. The EU VAT directive sets the small-business exemption at €85,000 at most. That is why, as of 23 October 2026, the press hypothesis is a flat-rate regime at 15% up to €100,000, but with VAT on invoices above €85,000.

Takings between €85,000 and €100,000? The flat tax 2027 simulator, already set to €95,000, compares tax and contributions under the rules in force and under the 2027 hypothesis. You can calculate the effect of VAT on your prices with the example in this guide.

Why does the flat-rate VAT exemption stop at €85,000?

Because the European Union sets it. Art. 284 of Directive 2006/112/EC, as rewritten by Directive (EU) 2020/285 and applicable from 1 January 2025, allows Member States to exempt small businesses from VAT, but with a national turnover threshold that "does not exceed EUR 85 000". Italy has chosen precisely the maximum.

The text of art. 284, para. 1, is clear: Member States may also set different thresholds by sector, but "none of those thresholds shall however exceed EUR 85 000". Directive 2020/285 is dated 18 February 2020 (Official Journal of the European Union L 62 of 2 March 2020) and, in art. 3, requires Member States to apply the new rules "from 1 January 2025".

The VAT exemption is the core of the flat-rate regime: today the flat-rate taxpayer does not charge VAT on invoices, does not deduct the VAT on purchases, and is exempt from settlements and payments, invoice registration and the annual VAT return (Revenue Agency circular 32/E of 5 December 2023, §1.2). Raising the substitute tax threshold does not, by itself, raise the VAT one.

So where do the €100,000 come from?

Also from the directive, but with a different function. €100,000 is the ceiling on annual turnover across the whole Union for the cross-border exemption, that is, for those who use it in a Member State other than their own. It is also the limit beyond which the exemption cannot continue in the year in which the national threshold is exceeded.

This is the scheme of the Italian rules in force: between €85,000 and €100,000 you remain in the flat-rate regime until the end of the year and leave it the year after; above €100,000 you leave immediately, with VAT on the transaction whose takings push you over the limit (art. 1, para. 71, Law 190/2014). Circular 32/E expressly links these rules to Directive 2020/285 and to art. 288-bis. The practical consequences are in the guide exceeding €85,000 in the flat-rate regime: what happens.

What does Implementing Decision (EU) 2023/664 have to do with it?

It is the act by which the Council of the European Union authorised Italy to exempt from VAT the taxable persons with turnover up to €85,000, before the new directive became applicable. It made possible the increase of the flat-rate threshold from €65,000 to €85,000 decided with the 2023 budget law.

What would "15% up to €100,000 but VAT from €85,000" mean?

Two different rules for the same activity. For direct taxes you would remain in the flat-rate regime: income by coefficient and substitute tax at 15%. For VAT, above €85,000 you would be like an ordinary business: VAT on invoices, periodic settlements, payments, annual return. This is the formula reported by Alanews on 20 October 2026.

In practice, everything from which the flat-rate regime is exempt today (circular 32/E, §1.2) would again apply in the band between €85,000 and €100,000:

What nobody has written yet: from which takings VAT would start to apply in the year, whether there would be a margin of tolerance like the one allowed by art. 288-bis, and how the exit at €100,000 would be coordinated. Sky TG24 (13 October 2026) reports that the extension would require discussion with the European Commission. Until there is a text, every detail must be verified.

Who is most affected by VAT on invoices: those working with businesses or with private individuals?

With private individuals. A business or professional who deducts VAT pays your invoice with VAT, but recovers the tax in the settlement: for them the cost remains the net amount. A private individual deducts nothing, so VAT is a real cost: either you pay, reducing your margin, or they pay, with a price 22% higher.

Example with a €1,000 service, explicit arithmetic:

€1,000 service: today and with 22% VAT
CaseThe client paysVAT to payYou keep (net amount)
Today, flat-rate regime without VAT€1,000.00€0.00€1,000.00
With VAT, business client: add the VAT€1,220.00, but they deduct €220.00€220.00€1,000.00
With VAT, private client: add the VAT€1,220.00€220.00€1,000.00
With VAT, private client: final price unchanged€1,000.00€180.33€819.67

And the VAT you pay on purchases?

Today it is a cost: the flat-rate regime does not exercise the deduction of VAT on purchases (circular 32/E, §1.2). In an ordinary VAT regime that tax is subtracted from the VAT on your invoices. If you buy a good for €1,000 plus VAT, today it costs you €1,220.00; with deduction, €1,000.00, because you recover the €220.00.

How much the deduction offsets the VAT on sales depends on your purchases: a professional with few costs recovers little, a business with many purchases of goods recovers more. The press reports do not say which deduction rules would apply to the band between €85,000 and €100,000. The simulator does not calculate VAT, because it depends on your price list and your clients.

How much would the €100,000 threshold be worth to someone taking €95,000?

On direct taxes, for a professional in the separate management scheme who takes €95,000, with the 2026 parameters: today the year after exceeding the threshold would move to the ordinary regime with €35,074.19 of tax and contributions; under the hypothesis they would remain in the flat-rate regime with €27,535.19. Difference: €7,539.00 a year, VAT excluded.

From that difference the effect of VAT must be deducted, which is not the same for everyone: for those working with businesses that deduct VAT it is close to zero (the formalities remain), for those working with private individuals at unchanged prices it is up to 18.03% of each takings subject to VAT, minus the VAT deductible on purchases. The steps of the calculation are in the simulator, in the section on the VAT point; the comparison between the two regimes is in the guide flat-rate or ordinary regime: which is better.

What is certain and what is still a hypothesis?

The European limit is certain: the national VAT exemption cannot exceed €85,000 (art. 284 of Directive 2006/112/EC, from 1 January 2025). The flat-rate threshold at €100,000 with VAT from €85,000 is a hypothesis: as of 23 October 2026 the 2027 draft budget law has not yet been approved by the Council of Ministers.

The stages of the budget law are in the guide 2027 budget law and flat tax: stages and dates; all the measures are in the flat tax 2027 hub for sole traders. How to set prices and contracts if the hypothesis became law is a decision to take with your accountant.

Income tax first, then VAT: in the flat tax 2027 simulator, calculate how tax and contributions would change in your case, then apply to your prices the VAT example on this page.

Sources

Frequently asked questions

Why can the flat-rate regime not have the VAT exemption above €85,000?

Because art. 284 of Directive 2006/112/EC, rewritten by Directive (EU) 2020/285 and applicable from 1 January 2025, sets at €85,000 the maximum national turnover that small businesses may be exempted from VAT. Italy can raise the threshold of the substitute income tax, but not the VAT one.

With the flat-rate regime at €100,000, would I have to put VAT on my invoices?

According to press leaks, yes, above €85,000: you would stay in the 15% substitute tax, but with VAT on invoices, periodic settlements and the annual return (Alanews, 20 October 2026). As of 23 October 2026 this is a hypothesis: the 2027 draft budget law has not yet been approved by the Council of Ministers.

Where does the €100,000 threshold come from if the VAT exemption is 85,000?

From the same directive: €100,000 is the ceiling on annual turnover in the Union for the cross-border exemption (art. 284, para. 2) and the limit beyond which the exemption cannot continue in the year the threshold is exceeded (art. 288-bis). Hence the Italian rule of immediate exit above €100,000.

How much does VAT cost a flat-rate taxpayer who works with private individuals?

On a €1,000 service, either the private client pays €1,220.00 with 22% VAT, or, with the final price unchanged, you keep €819.67 and pay €180.33 of VAT, that is 18.03% of the takings. The VAT deduction on your purchases recovers part of it. With business clients the VAT is largely neutral.

What is Implementing Decision (EU) 2023/664?

It is the Council of the European Union decision of 21 March 2023 which authorised Italy, derogating from art. 285 of the VAT Directive, to exempt from VAT the taxable persons with turnover up to €85,000, from 1 January 2023 to 31 December 2024. From 2025 that ceiling is written directly into the reformed art. 284.

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