Guide · Self-employed
Guide comparing the simplified regime and organised accounting
Straight answer: under the simplified regime, taxable income is determined through the rules and coefficients set out in law; under organised accounting, the starting point is the accounting result, subject to the applicable tax adjustments. The better option depends on the activity, the costs, the investment, the expected income and the need for management information.
This guide is for: sole traders and freelancers who are starting an activity, have grown, or want to review how their income is determined.
Who falls under the simplified regime?
The Personal Income Tax Code provides for the simplified regime for category B taxpayers who did not exceed, in the previous period, the annual gross threshold set out in law, and who have not opted for accounting. The threshold and the conditions should be confirmed at the time of the decision.
How is income calculated under the simplified regime?
You do not simply subtract all expenses from income. The law applies different coefficients depending on the nature of the activity, and may require part of the expenses to be evidenced. Saying that a percentage is automatically treated as expenses is a simplification that can be misleading.
Even under this regime, you still have to issue documents, organise expenses, comply with VAT where applicable, keep up with Social Security and file the annual income tax return.
What changes under organised accounting?
The activity comes to have accounts kept under the legal terms, ensured by a Certified Accountant. The accounting result is determined from actual income and expenses, with the applicable tax adjustments.
This option creates additional obligations and costs, but it also provides more detailed information about assets, debts, results and how the activity is evolving.
When do high costs justify a simulation?
Activities with rent, employees, equipment, subcontracting, travel or significant investment should compare the two models using real figures. High costs do not automatically make organised accounting more advantageous, because you need to consider the tax treatment of each expense and the obligations as a whole.
Does the choice depend only on tax?
No. You should also weigh:
- Liability and the separation of personal and business assets.
- The need for periodic information about the activity.
- Financing and the relationship with banks.
- Hiring employees.
- Investments and assets.
- Expected growth.
- The complexity of domestic and international transactions.
Is it the same as choosing between sole trader and company?
No. A sole trader may be under the simplified regime or under organised accounting. A company has organised accounting and is taxed under the rules applicable to it. Deciding between continuing as a sole trader and incorporating a company also involves liability, administration, fixed costs and how income is withdrawn.
When is the option formalised?
The option to determine income on the basis of accounting can be made in the start-of-activity declaration or, within the period set out in the Personal Income Tax Code, through a declaration of changes. Because the effects and the deadlines may depend on the timing and the history of the activity, the decision should be prepared in advance.
Which information should be gathered to compare?
- Income for the last year and the forecast for the next.
- Expenses genuinely related to the activity.
- Planned investments.
- Number of employees and their pay.
- Transactions with other countries.
- Financing needs.
- Growth objectives or plans to incorporate a company.
Official sources and related content
See article 28 of the Personal Income Tax Code and the Tax Authority information on self-employment.
See also what to organise when opening a company.
The analysis can form part of the sole traders, freelancers and income tax service and, where necessary, of tax advisory.
Related concepts
Simplified regime · Organised accounting · Coefficient · Taxable income · Category B · Article 53 of the VAT Code