If you are a migrant or refugee willing to start your own business or work as a freelancer in Italy, you may need to open a ‘partita IVA’ (VAT number in English). You can use this article to learn more about:
- What Partita IVA is
- How to open one
- What the types of Partita IVA are
- How much it costs
What is Partita IVA?
The Partita IVA is a code consisting of 11 digits which identifies a self-employed worker or owner of a company.
It is a government-issued number, and allows self-employed people or business owners to practice their profession in Italy and to legally declare their revenue for tax and social security purposes. With a VAT number, you can issue invoices, declare your income, and pay taxes and contributions due to the Italian State.
Who needs it
You need to open a Partita IVA if you are self-employed or a company owner who either makes 5,000 euros in revenue or works for a single client for 30 or more days in a year.
How to open a Partita IVA
Opening and managing a Partita IVA may be a complicated process. This is why some people prefer to rely on an accountant (‘commercialista’ in Italian). For small businesses, you can also contact a CAF to help you out.
If you want to open a Partita IVA by yourself, you have to fill out the AA9/12 form within 30 days of starting your business. You can find the form here.
You must submit the AA9/12 form to the Revenue Agency (‘Agenzia delle Entrate’ in Italian):
- At any office of the Agenzia delle Entrate – you can find the nearest office here
- Online, through the Agenzia delle Entrate portal
- By mail (‘posta raccomandata’ in Italian), by sending the form and a copy of your identity document to any Agenzia delle Entrate office
When opening a Partita IVA, you must choose a tax accounting system (flat rate or ordinary), as well as an ATECO code that identifies the specific activity and sector of your business. Since there are a lot of ATECO codes, you may need help from an expert to identify the correct one.
You also have to open a social security account with the INPS (‘gestione separata’ in Italian) for the payment of contributions and with the INAIL for compulsory insurance.
Types of tax systems for Partita IVA
There are two types of tax systems for Partita IVA, flat-rate and ordinary. You can choose the one that best suits you and your business.
Flat-rate tax system
The flat-rate system (‘regime forfettario’ in Italian) is simpler and more convenient to manage, and it is meant for small businesses.
Flat tax rate requirements include:
- Revenue limit of 65,000 euros
- Expenses for employees and ancillary work not exceeding 20,000 euros gross
- Income from other employment not exceeding 30,000 euros gross
If you choose the flat-rate system, you will have to pay a tax of 5% (for the first 5 years of your working or business activity) or 15% — this is a relatively low tax rate considering that ordinary taxes start at 23%. Moreover, the tax is calculated only on a part of your income, depending on your ATECO code (basically, you deduct flat-rate expenses for your activity to the taxable income), and you do not need to pay the VAT (value-added tax) on each invoice.
Ordinary tax system
The ordinary tax system (‘regime ordinario’ in Italian) is for those that do not meet the above requirements, therefore for individuals and companies with higher income and higher sales volume businesses.
If you choose the ordinary tax system, among other expenses, you will have to pay a progressive income tax called IRPEF (starting at 23% that gets higher the more you earn) and the VAT on each invoice. However, you can deduct the costs of certain expenses, for example rent and equipment.
How much does it cost?
Opening a Partita IVA on your own is free. However, take into account that you will have to pay contributions (for example, social security ranges from 24% to 35%) and taxes, which will differ depending on your tax system. Bear in mind that you may have to pay taxes in advance.
Accountants and CAF will ask you to pay a fee for their services, which may include opening the Partita IVA, account management, and tax return. The accountant could cost from 350 euros yearly upwards, also depending on your revenue. CAF services may be cheaper, and labor union’s CAF costs are calculated based on your income situation.
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