A flat-rate tax scheme is a simplified regime that lets small businesses calculate tax using a single fixed percentage instead of tracking every cost and deduction. Governments offer these schemes to cut paperwork for micro-businesses and to make compliance predictable.
The idea appears in several forms. In Italy the regime forfettario applies a flat 15 percent (5 percent for new businesses) to a set percentage of turnover, replacing ordinary income tax for eligible self-employed people. The United Kingdom runs a VAT Flat Rate Scheme where a business pays HMRC a fixed share of its gross sales rather than reconciling input and output VAT line by line. France's micro-entreprise taxes a flat portion of revenue with a standard expense allowance baked in.
Example: an Italian consultant with 50,000 euros of turnover under the forfettario is taxed on a fixed profit coefficient rather than actual costs, often producing a lower and far simpler bill than the ordinary progressive system.
- Less bookkeeping and simpler filing
- Eligibility usually capped by turnover
- You may lose the benefit of deducting real expenses
Flat-rate schemes suit a sole trader with low costs. See how regimes vary in our country tax comparison.