Can I sign up for the regime forfettario if I know I am going to be billing more than Euro 65k in the next year?
Yes. The rules say that if you go over the threshold in any year, you will go onto the normal regime starting with the next following year.
How do I know what my ATECO Code is?
We can help you to identify your Ateco code. This is an important issue as your Ateco code will determine the lump sum deduction to which you are entitled, as well as the social security regime applicable to your activity.
Billing in foreign currency (non Euro)
FlexTax does not at present handle billing in a currency other than Euro. The best approach is to:
a) Issue a “proforma invoice” – this can be in excel format, word or just an email showing the total amount to pay.
b) As soon as you receive payment you should issue an invoice via Flextax for the Euro amount you actually received – the foreign currency amount should be converted using the Bank of Italy exchange rate prevailing on the day of receipt (or the immediately preceding working day. Alternatively if you convert into Euros using your bank account, you can use that rate as long as you choose this method consistently. The Flextax invoice should so the gross amount received without any deduction for bank/paypal fees or currency exchange fees.
c) Print out the Flextax invoice, add the stamp (bollo) to the hard copy you print out, cancel the stamp and keep the hard copy.
Do I need to keep a listing of my costs?
No, you costs are not tax deductible. In place of the usual procedure – ensuring your are issued with a tax invoice/till receipt etc – under the regime forfettario you get a lump sum deduction for costs – typically 22% or 33% depending on your Ateco code and actual activity. If your costs are likely to exceed that amount, then the regime forfettario may not be appropriate for you.
How much tax will I pay
See this table for an example. With Flextax tools you can do a more tailored simulation of your tax and social security liabilties.
| Example of Tax and Social Security Due under Regime Forfettario | ||||
|---|---|---|---|---|
| Ateco Code | 70.22.09 | |||
| Ateco Description | Altre attivita' di consulenza imprenditoriale e altra consulenza amministrativo-gestionale e pianificazione azienda | |||
| Rate | Annual | ERT | ||
| Forecast Income | € 30,000 | |||
| Coefficent | 78% | |||
| Social Security Basis | € 23,400 | |||
| Social Security | 25.72% | € 6,018 | ||
| Taxable income | € 17,382 | |||
| Tax | 5% | € 869 | ||
| Total Tax and Social Security | € 6,888 | 23% | ||
| Net Income | € 23,112 | |||
Dear sir or madam,
If I am a retired foreigner living in Italy by the “Elective visa”, can I apply to use this tax rate to pay taxes when we live in Italy? If so, if my business rental income in my home country is 30,000 euros, then I only need to pay 5% tax in the first 5 years of my residence in Italy? Thank you for your reply!
If you are eligible for the flat rate 7% applicable to pensioners then the 7% rate (not 5%) will apply to foreign (non Italian) source rental income. Note that there are a number of conditions for eligibility for the 7% regime see this article
If you are not eligible for the 7% regime then foreign rental income is liable to Italian income tax, additional regional and municipal taxes at scale rates. The applicable rate will depend on total income. The amount liable to Italian tax is, where the income in your home country is liable to tax there, the same taxable base as reported there. If the rental stream is not subject to tax in the home country then as a general rule, you are liable to your are liable to Italian tax on gross rents received less a 15% lump sum deduction. You should (but it needs to be checked) be able to offset any foreign tax paid on rental income liable to tax at scale rates. You cannot, as a general rule offset foreign tax against an Italian flat rate tax.
The 5% rate you refer to is I suspect the rate, for the first five years (thereafter 15%) for Italian tax resident taxpayers who register a business activity in Italy under the regime forfettario. We are not convinced that the Italian Tax Agency would admit the a business of managing an activity of renting out a foreign property. Since in order to access the 5% regime you need to register what is considered an Italian business activity (even if the property is outwith Italian territory, the main hurdle is with your Elective Residence Visa/Stay Permit, which does not permit the carrying on of a business activity from Italian soil. You would need to seek the advice of a specialist in immigration law, for this, bearing in mind that the penalties for working from Italian soil without the necessary immigration authorizations are steep. A further issue would be that you may well be liable to Italian social security contributions on the earned income. In some circumstances, exemption or relief can apply e.g to pensioners, or U.S. citizens who remain with in the social security system, but absent such exemption or relief the Italian social security burden could be significant.