Flat-rate regime at 5% for new businesses: requirements, duration and when it is lost

Updated to 23/10/2026

In short: under the flat-rate regime the tax falls from 15% to 5% for the year in which you start the activity and the four following years, if you meet three conditions: no business, artistic or professional activity in the three years before, no mere continuation of a previous job and, if you take over another person's activity, that activity's revenues within €85,000. After five years you move to 15%.

Want to see what 5% is worth on your turnover? Open the simulator already set to €40,000 with the 5% rate and untick "New business" to compare it with 15%.

What is the 5% flat-rate regime and who can use it?

It is the reduced rate of the substitute tax provided by art. 1, para. 65 of Law 190/2014 "in order to encourage the start of new activities". Instead of the 15% of para. 64, whoever opens a new activity in the flat-rate regime pays 5% on the flat-rate income, provided they meet all three conditions of the paragraph.

The 5% is not a regime in its own right: it applies within the flat-rate regime. So the general requirements of the regime come first (revenues of the previous year within €85,000, no cause of exclusion under para. 57) and then the specific ones of para. 65. The general rules and the status of the 2027 budget law are set out in the guide flat tax 2027 for sole traders.

What are the three requirements for the 5% rate?

Para. 65 lists them as follows, in the text in force as read on Normattiva on 23/10/2026. All three are required together: if even one is missing, the 15% applies. The Revenue Agency reports them identically on its page on the flat-rate regime.

No activity in the three previous years: you must not have carried on, in the three years before the start, an artistic, professional or business activity, "including in associated or family form" (letter a).
No mere continuation: the new activity must not constitute "in any way" a mere continuation of an activity previously carried on as an employee or self-employed worker, unless the previous activity was the compulsory traineeship to practise arts or professions (letter b).
Activity taken over within the threshold: if you continue an activity carried on by another person, the revenues and fees of that activity in the previous tax period must not exceed the limit in para. 54, today €85,000 (letter c).

How are the three years without activity counted?

By calendar, not by tax years. The Revenue Agency circular 10/E of 4/4/2016 (§5) gives the example of someone starting a new activity in April 2016: they can have the benefit if they closed the previous one by March 2013. The three-year period is therefore measured backwards from the start date, day by day.

The same circular specifies that the bar does not apply if, in the three-year period, you received income from an association in participation contract with contribution of labour only, nor if you took part in a dormant company.

When is there a "mere continuation" of a previous job?

When you do the same thing as before, for the same clients, changing only the form. Circular 10/E/2016 (§5) says that continuation is assessed in substance, not in form: what matters is whether the new activity is addressed to the same clientele and requires the same skills. There is continuity if you carry on the activity you did as an employee, in the same market.

Anti-avoidance purpose: the rule prevents the benefit for those who only change the legal form of the activity, or just the ATECO code.
Dismissal: continuation applies even if the employment ended for reasons beyond the employee's control.
When there is no continuity: if the new activity or the reference market is different, or if the previous work was marginal, that is, carried out under fixed-term or collaboration contracts for no more than half of the three-year period.
Compulsory traineeship: the traineeship required to practise a profession does not count as an activity from which you "continue".

Anyone who opens a VAT number while still working as an employee also faces the limits of para. 57 on salary and clients: see flat-rate regime and employment.

And if you take over someone else's activity?

The 5% remains possible if the revenues of the person who transfers the activity to you, in the previous year, do not exceed the access threshold for the flat-rate regime (today €85,000). Circular 10/E/2016 (§5) adds that, if the transfer takes place during the year, the revenues of the transferor and yours for that year are added together: if together they exceed the limit, you leave the favourable regime from the following year.

How long does the 5% last and when is it lost?

It lasts five tax periods: the one in which the activity started and the four following ones. The count starts from the year in which the activity began, even if you opened in December, and it does not extend. It is lost before the end if you leave the flat-rate regime, and it was never really available if one of the three requirements was missing from the start.

Natural end: from the sixth tax period, if you remain in the flat-rate regime, you pay 15%.
Leaving the flat-rate regime: the 5% is a rate of the flat-rate regime, so if you leave the regime it no longer applies. Under the 2026 rules you leave the year after revenues exceed €85,000, and immediately if they exceed €100,000 (art. 1, para. 71); the details are in the guide exceeding the €85,000 threshold.
Leaving and returning: since the window is tied to the year the activity started, years spent outside the flat-rate regime do not extend it. Circular 10/E/2016 applied this principle to those who moved to the flat-rate regime from earlier favourable regimes: the 5% "for the period remaining until the completion of the five years from the start of the activity". If you return once the window has closed, you pay 15%. How it applies to your case, with the exact dates, should be checked with your accountant.
Inaccurate declaration of requirements: para. 74 increases the minimum and maximum penalties by 10% if you inaccurately declare the conditions of para. 65 and the higher income assessed exceeds the declared income by 10%.

How much is 5% worth compared with 15%? A worked example

On €40,000 of fees as a professional in the separate management scheme, the tax is €1,153.31 at 5% and €3,459.92 at 15%: €2,306.61 less each year. INPS contributions are identical in the two cases, because the reduced rate concerns only the substitute tax, not social security.

€40,000 of fees, professional activity, separate management scheme 26.07% (2026 rules)
Item	New business (5%)	Ordinary rate (15%)
Flat-rate income (€40,000 × 78%)	€31,200.00	€31,200.00
Separate management scheme contributions	€8,133.84	€8,133.84
Taxable base (income − contributions)	€23,066.16	€23,066.16
Substitute tax	€1,153.31	€3,459.92
Net (revenues − contributions − tax)	€30,712.85	€28,406.24

Over five years, with a stated assumption: fees constant at €40,000 each year and 2026 parameters unchanged. The difference is then €2,306.61 × 5 = €11,533.05. It is a multiplication, not a forecast: in reality fees change, and in the early years the deductible contributions are those paid on a cash basis, not those of the same year as the engine assumes. The coefficient varies by sector (see profitability coefficients by ATECO code), and for craftsmen and traders the contributions follow other rules (INPS contributions in the flat-rate regime 2026).

Does 5% change with the 2027 budget law?

As of 23 October 2026 no change has been reported. Para. 65 is law in force, and the press reports on the 2027 budget law concern the revenue threshold, not the 5% rate: according to Sky TG24 (13/10/2026) and Alanews (20/10/2026) the flat-rate regime would rise to €100,000 with the tax unchanged. The draft budget law has not yet been approved by the Council of Ministers.

Topic	Status as of 23/10/2026	Source
5% rate for the year of start and the four following ones, with three requirements	Law in force	Art. 1, para. 65, Law 190/2014
Three-year period by calendar, mere continuation assessed in substance	Revenue Agency practice	Revenue Agency circ. 10/E/2016, §5
Flat-rate regime threshold at €100,000, tax unchanged	Press reports, not approved	Sky TG24, 13/10/2026; Alanews, 20/10/2026

Whether 5% applies in your case depends on your employment history: the simulator shows the difference in euros, while checking the requirements is done with your accountant. If you are also weighing up the ordinary regime: flat-rate or ordinary regime: which is better.

Try it with your own numbers: open the simulator with the 5% rate, choose sector and social security, then compare with 15%. The regime rules are summarised in the section rules in force.

Sources

Law of 23 December 2014, no. 190, art. 1 paras. 54-89, text in force (Normattiva): paras. 64, 65, 71 and 74. Consulted on 23/10/2026.
Agenzia delle Entrate (Italian Revenue Agency), "Regime forfetario" page: "Greater advantages for those starting a new activity". Consulted on 23/10/2026.
Agenzia delle Entrate, circular 10/E of 4 April 2016, §5 (new activities) and the residual five-year period for those coming from earlier regimes. Consulted on 23/10/2026.
Agenzia delle Entrate, circular 9/E of 10 April 2019, §4.4: 5% for the first five tax periods under the conditions of para. 65. Consulted on 23/10/2026.
INPS, circular no. 8 of 3 February 2026: separate management scheme rates 2026. Consulted on 23/10/2026.
Italian Government, Council of Ministers press release no. 192 of 13/10/2026 (Documento programmatico di bilancio, draft budget policy document). Consulted on 23/10/2026.
Sky TG24, 13/10/2026 and Alanews, 20/10/2026 (press reports on the 2027 budget law). Consulted on 23/10/2026.

Frequently asked questions

What are the requirements for the 5% flat-rate regime?

Three, all together (art. 1, para. 65, Law 190/2014): no artistic, professional or business activity in the three previous years; the new activity must not be a mere continuation of a previous employment or self-employment, except for the compulsory traineeship required to practise a profession; and if you take over another person's activity, that person's revenues for the previous year must not exceed €85,000.

For how many years do you pay 5% under the flat-rate regime?

For the tax period in which the activity started and the four following ones, so five tax years in all, even if you opened at the end of the year. From the sixth year, if you remain in the flat-rate regime, the substitute tax rises to 15%. Any years spent outside the regime do not extend the window.

When is the 5% rate lost?

At the end of the five years, or earlier if you leave the flat-rate regime: under the 2026 rules, the year after revenues exceed €85,000, immediately if they exceed €100,000. Years outside the regime do not extend the window, which starts from the year the activity began. It does not apply at all if one of the three requirements was missing from the start.

If I work as a freelancer doing the same job I did as an employee, do I get the 5%?

As a rule, no, if you serve the same clients with the same skills: according to Revenue Agency circular 10/E of 2016, it is a mere continuation, even if the employment ended against your will. There is no continuity if the activity or the market changes, if the previous work was fixed-term or a collaboration for no more than half of the three-year period, or if it was the compulsory traineeship.

How much do you save with 5% instead of 15%?

It depends on revenues, sector and contributions. With €40,000 of fees as a professional in the separate management scheme, the tax is €1,153.31 instead of €3,459.92: €2,306.61 a year. Assuming constant fees over five years, €11,533.05. INPS contributions do not change, because the reduction concerns only the substitute tax.

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