Taxes for freelancers and the self-employed in Italy

Italy has favorable tax options for freelancers and those who own small businesses. Many of these workers can pay a lower income tax rates than those in standard employment. There are, however, various rules and restrictions you’ll need to adhere to. Find advice on the following topics below:

Self-employed tax system in Italy

Freelancers and self-employed people in Italy must file an annual tax return and pay income tax (IPREF or imposta sul reddito delle persone fisiche) on their earnings. The Italian Revenue Agency (Agenzia della Entrate) oversees the Italian tax system, and the tax year runs from 1 January to 31 December.

Working for yourself is a popular option in Italy. Data from World Bank shows that around 23% of workers in Italy are self-employed. The tax system for self-employed people working as sole traders and freelancers is relatively straightforward. However, if you’re setting up a larger company and employing staff, you’ll likely be liable for corporate rather than income tax.

Income tax in Italy for freelancers and the self-employed

There are a couple of different structures for self-employed workers in Italy.

• Sole proprietorship (ditta individuale): designed for self-employed traders, such as plumbers, electricians, and shopkeepers, allowing you to hire employees.
• Freelancer (libero professionista): status is exclusively available to self-employed residents who carry out intellectual activities such as consultancy, legal work, or journalism

Whichever option you choose, you’ll need to file an Italian tax return and pay income tax.

If starting a company in Italy for the first time, you must decide on a tax regime. You either pay the standard taxed rates (for employees) or use the regime forfettario, a flat-rate tax scheme introduced in 2015.

Standard rates of income tax

If you pay standard tax rates, your income will be taxed progressively across four bands. In 2023 (for income earned in 2022), the bands are as follows:

If you choose the standard tax system, you’ll be able to deduct certain expenses when filing your tax return. You’ll also be able to use Italy’s tax credit for self-employed workers.

Self-employed workers using the standard tax system can benefit from the workers relocating to Italy scheme (lavoratori impatriati). This allows workers to only pay tax on 30% of their income for the first five years of living in Italy. A lower rate of 10% is available in some regions.

Regime forfettario – flat rate tax system

Under regime forfettario, people starting new self-employed or freelance businesses in Italy can benefit from a tax rate of just 5% for the first five years. After five years, this increases to 15%.

You can reduce your rate even further. Each profession in Italy has an income code (ATECO – link in Italian), which specifies what percentage of their earnings will be taxed. For example, you pay income tax on 78% of your earnings if you work in financial services. Your social security contributions are already deducted, you won’t need to complete a VAT return.

Finance

The tax system in Italy

Read more

While this scheme might sound ideal on paper, there are some downsides. First, you won’t be able to offset any expenses incurred in running your company. If you’re a sole trader working from home on a computer, you’re likely to be much better off than a freelancer in an industry with bigger overheads.

There are also some stringent rules over who is eligible for the scheme:

• Your earnings must not exceed €65,000 (2022) or €85,000 (2023).
• If you also make money from employment, you must not earn more than €30,000 per year.
• You wouldn’t be eligible if you earned more than €30,000 from your employer the previous year.
• You can’t give up employed work and freelance solely for your old employer.

To access the flat rate scheme, you’ll need to select regime forfettario when signing up for a VAT number. For more information on the specifics of the flat rate system, see the guide from the Italian Revenue Agency.

Registering for self-employed tax in Italy

You’ll first need a tax identification number to register to pay tax as a self-employed worker (codice fiscale). You can obtain this by taking your passport and residence card to your local municipality’s immigration desk or visiting a police headquarters. Non-EU citizens must define their business structure before they can register.

Living

The codice fiscale: ID numbers in Italy

Read more

Sole traders who regularly engage in a ‘business or agricultural activity’ or ‘an artistic or professional activity’ need to acquire a VAT number in Italy (partita IVA). If you earn more than €65,000 through self-employment, registration is required by law. You’ll need to submit the relevant forms to the Italian Revenue Agency to register for VAT.

Tax deductions and credits for Italian freelancers and self-employed

If you choose the standard taxation system, you’ll be able to offset some of the costs of running your company when you file your tax return. These include office space, utilities, and materials.

There are also some standard deductions available. First, self-employed workers who earn less than €50,000 can deduct a flat rate credit of up to €1,265. PwC provides a handy guide to simplify the complicated calculations.

A series of other deductions are available. These include the following:

• Family tax credit: maximum of €1,220 for each child below three years, €950 for each child above three years, €800 for a dependent spouse, and €750 for other dependents
• Medical expenses credit: 19% of the expenses incurred above €129
• Education expenses credit: 19% of nursery, elementary, secondary, or high school education expenses up to €800 per annum per child. University fees are fully deductible.
• Mortgage interest credit: 19% of mortgage interest paid, up to €4,000

Corporate tax in Italy

Self-employed workers and freelancers in Italy don’t need to pay corporate tax. However, if you set up a limited company, your profits will be subject to two types of taxes:

• Corporate tax (imposta sul reddito sulle società – IRES)
• Regional production tax (imposta regionale sulle attività produttive – IRAP)

Corporate tax is charged at 24%, and IRAP at 3.9%. Local authorities can increase their IRAP rates by one percentage point.

How to file self-employed and freelance tax in Italy

You must file your tax return annually. Whether you use the standard or flat rate system, you’ll need to file your Redditi PF tax form online by 30 November in the year following the tax year. Therefore, make sure you’ve completed your tax return for 2022 by 30 November 2023.

Self-employed workers in Italy need to make two advance payments (payments on account) for the current tax year. These are calculated based on the liability from the previous tax year. On the other hand, if the company is new, you can provide an estimate of its profits. There are two advanced payments:

• 40% payment due in June
• 60% payment due in November

VAT in Italy for self-employed workers

The Italian government charges VAT on items consumed and services provided in Italy. The standard rate is 22%, though lower rates are available on some items and services, as follows:

VAT returns must be submitted once a year, between 1 February and 30 April 2023. You can learn more about the specific rules for different types of companies in the guides published by the Italian Revenue Agency.

Italian social security for self-employed workers

Employees and self-employed workers must make social security contributions to the Italian Social Security Administration (INPS or Instituto Nazionale Previdenza Sociale). For employees, these are split between the employer (around 30%) and the employee (10%).

Self-employed people must make contributions at a higher rate. If registered for VAT, but not covered by a mandatory pension fund, you’ll need to pay social security contributions through the separate social security regime (gestione separata), at a rate of around 26%. Those enrolled in a mandatory fund make social security contributions at a rate of about 24%.

Self-employed and freelance tax fines in Italy

If you fail to file your tax return on time, you’ll need to pay a fine to the tax authority. Penalties vary from €250 to €1,000. If you have underpaid tax, you’ll be liable for the amount owed plus a surcharge. The surcharge ranges from 120% to 240%, depending on the size of the liability and how late the payment is. You may face further fines if you fail to declare foreign assets in a blacklisted country or jurisdiction.

How to find an Italian accountant or financial adviser

Getting your head around the Italian tax system can take time and effort. Therefore, accessing professional financial advice from an English-speaking tax expert can be invaluable, when you file a self-employed tax return in Italy.

Expatica Italy directory

Tax adviser in Italy

Read more

You can find an accountant by searching this directory or contacting the CNDCEC (Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili), the trade body for accountants operating in Italy.

Useful resources

• Italian Revenue Agency – official Italian tax authority
• PwC – information on allowable deductions for self-employed workers
• Ministry of Economy and Finance – information about how to register for VAT