The Problem of the Italian Freelancer: High Taxes, Zero Protection
If you are an Italian freelancer with a VAT number — a consultant, designer, developer, marketer, lawyer, accountant — you know the feeling well: you work hard, you invoice well, but at the end of the year a huge chunk of your income disappears between IRPEF, INPS contributions, and VAT. And in return? Virtually no asset protection and no separation between your personal assets and business risks.
There is a legal alternative, within the EU, that allows you to pay less tax, protect your assets, and continue working exactly as you do now. It's called the Hungarian KFT.
Flat-Rate Scheme vs. Hungarian KFT: The Comparison No One Shows You
Many Italian freelancers choose the flat-rate scheme for its simplicity: a 15% rate (or 5% for the first 5 years) on the flat-rate taxable income. It seems convenient. But it hides some traps:
- Turnover limit: €85,000/year. If the limit is exceeded, you switch to ordinary IRPEF (23-43%)
- INPS contributions: approximately 25-26% of income, not deductible under the flat-rate scheme
- No asset protection: professional debts fall on personal assets
- No possibility to deduct real costs: a flat-rate coefficient is applied regardless of actual expenses
| Scenario | Turnover €80,000 | Total Taxes | Net Income |
|---|---|---|---|
| Italian Flat-Rate (15%) | €80,000 | ~€28,000 (IRPEF + INPS) | ~€52,000 |
| Ordinary IRPEF (above threshold) | €80,000 | ~€38,000 (IRPEF + INPS) | ~€42,000 |
| Hungarian KFT | €80,000 | ~€18,000 (9% flat tax + 15% dividends) | ~€62,000 |
How It Works in Practice: Freelancer with KFT
The typical structure for an Italian freelancer operating through a Hungarian KFT is simple:
- Establish the KFT in Budapest (3-5 days, 100% remote)
- Invoice your clients through the KFT (Italian, European, or international)
- The KFT pays 9% flat tax on corporate profits
- You distribute dividends with a 15% withholding tax (if resident in Hungary) or according to the Italy-Hungary DTA treaty
- You continue to work from wherever you want — from home, smart working, traveling
No Turnover Limit
Unlike the Italian flat-rate scheme, the Hungarian KFT has no turnover limits. Whether you invoice €50,000 or €500,000, the rate always remains 9%. This makes it particularly advantageous for growing freelancers who risk exceeding the flat-rate threshold.
Asset Protection: The Often-Ignored Advantage
Operating through a KFT means that the company's debts and liabilities are separate from your personal assets. If a client doesn't pay, if a contractual dispute arises, or if the company accumulates debts, your personal assets — home, savings, investments — are protected. With an individual Italian VAT number, this protection does not exist.
Can I Continue Working with My Italian Clients?
Absolutely yes. The Hungarian KFT can invoice Italian clients without any restrictions. From the Italian client's perspective, they receive an invoice from an EU company (Hungarian) with an European VAT number — just as they would receive an invoice from a German or French company. The intra-community VAT regime automatically handles the issue of VAT in B2B transactions.
What Do I Need to Do to Get Started?
- No Hungarian residency required
- No physical presence in Hungary for partners
- Minimum capital: €7,500
- Timeline: 3-5 working days
- First year cost (all-inclusive): €5,000-€8,000
- Estimated annual tax savings (on €80,000 turnover): €10,000-€20,000
Conclusion: The Flat-Rate Scheme Is Not the End of the Story
The flat-rate scheme is a convenient but not optimal solution for those invoicing over €40,000-€50,000 annually and wanting asset protection and growth flexibility. The Hungarian KFT offers a legal, structured, and more tax-efficient alternative for ambitious Italian freelancers.
Find out if the KFT is the right choice for you. The Start Ungheria team offers a free personalized simulation for Italian freelancers and professionals. Contact us today.
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