A special tax scheme (Regime Forfettario) offers a flat rate on gross income for taxpayers looking to get themselves registered for VAT and start a self-employed business or profession.
The various schemes for small taxpayers (the Regime dei Minimi/Regime Forfettario) have seen a number of changes over the years and some of the old rules continue to apply to people who started out in earlier years.
But from FY 2016 onward there is only one regime open to new taxpayers – the Flat–Rate Scheme. This Scheme was updated in December 2018, with the main result that the threshold was increased to Euro 65,000. It was further updated at the end of 2022 with the result that the annual threshold is now Euro 85,000. The 5% reduced rate for the first five years remains for start-ups. Please get in touch with us if you want to check if you qualify.
The Flat Rate Tax Scheme is optional, so taxpayers (who are not already registered under an older scheme) should indicate in advance when registering for VAT, and must confirm the option in their first annual tax return after registering, whether they wish to take the benefit of the scheme. If they do not then they will be subject to tax on their net profit at the usual scale rates.
Our Italian Tax Return and Payment Support Service
Modello Redditi PF The tax return is called “PF” standing for Persone Fisiche (individuals). Modello in Italian means “Form”. The PF form is for use by individuals who are not able to present the simplified tax return (the modello 730) or who having filed a 730, need to report foreign income
List of deductible expenses and tax credits in the Italian tax return
General Rules An Italian resident taxpayer has the right to certain deductions and claim a tax deduction or tax credit for certain expenses and charges incurred in the relevant tax return. Some, but not all, of these deductions/credits may be claimed by non-residents with taxable
Tax credit for employment income
Italy has no personal relief nor (any longer) a no-tax zone. This means that you start paying income (at 23% – see the marginal rates here) of the first euro of income. However Italy has an intricate system of tax credits (described as “deduzioni” –
Personal income tax (IRPEF) rates from 1 January 2022
These are the personal income tax rates that apply after 1 January 2022. For applicable rates before that date please click this link FY 2022 Rates of Italian Income Tax (based on annual income) Bracket of Income (annual amounts) Rate Cumulative Tax to Top of Band
Second payment on account
By 30 November of each year, Italian taxpayers must make payment of the second payment on account. The first payment was due earlier in the year at the same time as the tax due on income reported in your latest annual tax return. The amount
UK Italy Double Tax Treaty
The UK/Italy Convention for the Avoidance of Double Taxation of Income (or Double Tax Treaty) was signed at Pallanza on 21 October 1988. It entered into force on 31 December 1990. It came into effect in the United Kingdom from 1 January 1991 for petroleum
My disabled sister is resident in Italy & employs a full time carer.What are the current tax liabilities?
Her current tax liabilities will depend on her income and the extent of her disability. You can find a guide (in Italian but which can be translated with google into English of a sort) on benefits and tax breaks for the disabled here: https://www1.agenziaentrate.gov.it/web_app_entrate/agevolazioni_disabilita.html.
If you need any further advice use our client sign up form, ask the question and we will provide a quote for answering it.
Having worked as a teacher in Italy for numerous years with various occasional and indeterminato contracts, am I eligible to change to the flat rate scheme, despite continuing the same type of work? Thanks very much
Yes – there are a number of conditions – in particular you can’t be a shareholder in a company, and there are rules to counter people giving up employment and converting to self-employed. So if you meet the requirements then you can get set up under this regime.
You will need to consider carefully if you are entitled to the 5% reduced rate for the first five years or whether you will be subject to the standard 15% rate. This depends on what you have been doing in the past
Can I qualify for this tax regime if I provide freelance writing services to other companies in other EU states? I’m resident for tax purposes in Italy so will obviously be paying tax to Italy, but I will not have any Italian clients.
Hi Barry,
There is no bar, under the flat tax regime to your providing services to clients outside Italy. What is important is that you are resident in Italy and/or providing the services from a base in Italy. So as long the general rules apply then you can happily operate this regime. Not only will you be liable to the flat rate tax (5%/15% on the relevant percentage of gross income)you will also be liable to Italian social security (unless you are covered by a treaty (e.g with the U.S. and carry on paying social security abroad).
If you are billing in a currency other than Euro I generally recommend issuing a simple advice note – advising the client on what is due (or this can be done through any online platform that you are using) and then issue the Italian tax invoice in Euro (converted ideally at the Bank of Italy exchange rate on the day of receipt). Print a hard copy of that invoice and apply the 2 euro bollo stamp duty to your copy, inserting the bollo number on your pdf copy sent to the client.
Hello. Can you please clarify the points below regarding the forfettario regime?
1- Can I apply for the forfettario regime if I’m a shareholder / manager in a foreign company? If so, is there any limitation on the income that I make from this foreign company?
2- Can I register a business name with the forfettario regime i.e the invoices that I will submit to my clients will be in my business name instead of my name?
3- Can I apply for the forfettario regime if I move my tax residency to Italy but stay less than 183 days there?
You cannot apply for the regime forfettario if you are shareholder in an Srl (an Italian limited liability company). There is some doubt as to whether this applies to foreign companies, but given the spirit of the legislation – to stop people splitting income between a company and themselves so as to fall below the Euro 65k threshold, I think the Tax Agency would challenge your eligibility for the regime. You also need to be aware of the rules that will subject the foreign company’s profits to tax where the company has its principal place of management in Italy (which it very may well if you are tax resident here and are sole owner/director) or if it is carrying on business through a permanent establishment. In short owning shares in a foreign if you want to access the regime forfettario, is not compatible. Bear in mind that you must, as an Italian resident, disclose your shareholding in the foreign company in section RW of the annual tax return.
You can use any name or logo you like on the face of the invoice, subject to usual rules e.g good taste, not passing off as another business and not pretending to be limited liability company. For tax purposes though, you are self-employed and your trading name is irrelevant. You can register your trading name if you are required to be registered with the Chamber of Commerce or can elect so to do.
3) You can apply the regime forfettario as long as the work is carried on mainly from Italy, which I think means working from Italian territory for the greater part of the tax year.
Hi there. I suggest you explore an online all inclusive regime forfetario solution such as flextax.it. They are well used to setting up freelance workers such as yourself and will provide guidance on your Ateco (business sector) code and deal with the application on your behalf for a VAT number and registration with INPS, the social security authority.
Hi, if someone used to work as doctor abroad in one specialty and moves to Italy to work as doctor in another field, such as emergency room, is this person qualified for the forfetario regime of 5%? Medicine is such a broad profession, can it simply qualify as a continuation? Thank you