Opening a VAT number is a crucial step for anyone wishing to start an economic activity in Italy, whether as a freelancer or an entrepreneur.
Here are 10 fundamental aspects to consider before taking this initiative.
What is a VAT number and who needs to open one?
A VAT number is an 11-digit identification code issued by the Italian Revenue Agency, required for carrying out economic activities on a regular and continuous basis.
A VAT number is mandatory for:
Freelancers: Attorneys, mediators, notaries, legal consultants, general practitioners, specialist doctors, psychologists, physiotherapists, nurses, dentists, nutritionists, midwives, civil engineers, mechanical engineers, electrical engineers, IT engineers, architects, surveyors, industrial experts, accountants, statutory auditors, labor consultants, financial advisors, business management experts, web developers, graphic designers, social media managers, SEO specialists, IT consultants, copywriters, digital marketing experts, translators, interpreters, journalists, writers, photographers, videomakers, illustrators, musicians, private tutors, professional coaches, corporate trainers, e-learning specialists, biologists, chemists, physicists, agronomists, veterinarians, massage therapists, yoga experts, naturopaths, etc.
Artisans: Bricklayers, tile setters, decorators, carpenters, plasterers, cabinetmakers, woodworkers, furniture restorers, blacksmiths, welders, window and door fitters, tinsmiths, electricians, plumbers, photovoltaic system installers, bakers, pastry chefs, ice cream makers, pizza makers, chocolatiers, tailors, stylists, upholsterers, embroiderers, car and motorcycle repairers, tire specialists, body shop technicians, ceramic artists, sculptors, painters, mosaic artists, engravers, hairdressers, barbers, beauticians, tattoo artists, 3D printing professionals, electronic device repairers, etc.
Retailers: Owners of physical or online stores.
Sole proprietors: Individuals starting a business on their own.
Companies: Both partnerships (Società Semplice (SS), Società in Nome Collettivo (SNC), Società in Accomandita Semplice (SAS)) and corporations (Società a Responsabilità Limitata (SRL), Società per Azioni (SPA), Società in Accomandita per Azioni (SAPA), Società a Responsabilità Limitata Semplificata (SRLS)).
Difference between a VAT number and a tax code: while the tax code identifies an individual or legal entity for personal tax purposes, the VAT number identifies those who carry out a habitual economic activity.
Types of tax schemes available
Choosing the right tax scheme is decisive for the tax and accounting management of your business. In Italy, the main schemes include:
Flat-rate scheme (regime forfettario): Intended for taxpayers whose revenue or fees do not exceed specific legal limits. It offers simplified accounting and a reduced tax rate.
Ordinary scheme (simplified if certain requirements are met): Applied to those who exceed the flat-rate thresholds or voluntarily opt for it. It entails more complex accounting obligations and taxation based on actual income.
The most suitable tax scheme depends on various factors, such as the expected turnover and the type of activity carried out.
Fixed and variable costs of having a VAT number
Opening a VAT number involves various costs, both fixed and variable:
Fixed costs:
Social security contributions: Mandatory payments to INPS or specific professional pension funds.
Accounting fees: Costs associated with bookkeeping, especially if you use an accountant.
Professional insurance: Obligatory for certain professional categories.
Variable costs:
Income taxes: IRPEF for individuals, IRES for companies.
VAT: Paid periodically, unless exemptions apply under the chosen tax scheme.
Operating expenses: Rent, utilities, consumables, etc.
Careful planning of these costs is essential to ensure your business remains financially sustainable.
Advantages and disadvantages of the flat-rate scheme
The flat-rate scheme offers several advantages:
Simplified accounting: Fewer bureaucratic and accounting obligations.
Reduced tax rate: Lower substitute tax compared to ordinary schemes.
VAT exemption: No VAT is applied on issued invoices, simplifying fiscal management.
However, there are also disadvantages:
Revenue limits: A maximum threshold of revenue or fees to maintain eligibility.
Limited deductions: Certain expenses cannot be deducted since income is determined in a flat-rate manner.
Exclusion from certain benefits: Ineligibility for specific incentives reserved for other tax schemes.
It is crucial to carefully assess whether the flat-rate scheme is the most beneficial choice for your business.
5.Documents required to open a VAT number
To open a VAT number, you need the following documents:
Form AA9/12: For individuals, to be filled in with personal and business information.
Valid ID: Identity card or passport.
Tax code: Required for personal identification.
Possible additional documentation: Professional qualifications or specific licenses, depending on the type of activity.
You can submit these documents in the following ways:
Through a qualified professional, such as an accountant.
Online: Using the Italian Revenue Agency’s digital services.
In person: At a local Revenue Agency office.
Via certified email (PEC): Sending the completed form along with a copy of your ID.
It is advisable to consult an accountant to ensure you have all the necessary paperwork and correctly complete the required forms.
ATECO code for professional activity
The ATECO code is a classification identifying the type of economic activity performed. Choosing the correct code is essential, as it affects:
Tax scheme: Certain codes may determine access to or exclusion from specific schemes.
Social security contributions: Different contribution rates depending on the activity.
Administrative obligations: Different bureaucratic requirements depending on the business sector.
For example, an IT consultant might choose the ATECO code “62.02.00 – IT consulting activities.” An incorrect code may lead to penalties or the application of irrelevant regulations.
INPS contributions for VAT holders
Social security contributions are mandatory for VAT holders and vary by professional category:
Separate INPS management: For freelancers without a specific pension fund. The contribution rate is established annually and is applied to taxable income.
Professional pension funds: For certain professionals such as lawyers, engineers, or accountants, who must enroll in their respective pension funds (e.g., Cassa Forense, Inarcassa). Contribution rates and payment methods differ for each fund.
Artisans and retailers: Required to pay fixed INPS contributions, including a portion calculated on business income.
Careful planning of these contributions is vital to avoid any surprises when facing major tax deadlines and to optimize the financial management of your business.
Tax obligations for new VAT numbers
Anyone opening a VAT number must comply with a range of tax obligations, which vary depending on the chosen scheme:
Flat-rate scheme:
No VAT applies to invoices.
No requirement to record purchase invoices.
Annual income tax return with a substitute tax.
Ordinary scheme:
Mandatory registration of issued and received invoices.
Periodic VAT filing and payment.
Preparation and submission of both the income tax return and the VAT return.
In both cases, keeping track of tax deadlines is crucial to avoid penalties.
Deductions and tax credits for freelancers 💼
Properly handling deductions and tax credits is essential to optimize your tax burden. However, it’s important to understand how they apply in different tax schemes, especially in the flat-rate scheme.
Difference between deductions and tax credits 🔍
Tax deductions: Amounts that reduce taxable income before taxes are calculated, thereby lowering the base on which tax rates are applied.
Tax credits: Amounts subtracted directly from gross tax, reducing the total amount of tax payable.
Flat-rate scheme: predetermined costs and no tax credits ⚖️
In the flat-rate scheme, taxable income is calculated by applying a profitability coefficient to your revenue, without the possibility of deducting specific expenses. This means expenses incurred by the freelancer (e.g., rent, utilities, or equipment costs) are not factored in on an itemized basis.Example:
If the profitability coefficient is 67%, for €20,000 in revenue, taxable income is €13,400 (67% of €20,000). Actual business expenses do not affect this calculation.
Sole exception: Mandatory social security contributions can be deducted, thus reducing taxable income and consequently the amount of tax due.
Ordinary scheme: detailed deductions and tax credits
📊Under the ordinary scheme, many expenses can be itemized as deductions and tax credits, including:
Tax deductions:
Social security and welfare contributions.
Expenses for capital goods, such as equipment and software.
Rent and utilities for a professional office.
Tax credits:
VAT on business-related expenses (for VAT-registered taxpayers).
Medical expenses, mortgage interest, and insurance premiums (for personal taxes).
This flexibility makes the ordinary scheme more advantageous for those with significant operating costs.
How to make the most of deductions and tax credits 💡
Keep all tax documentation: invoices and receipts must be properly filed.
Plan your tax management: assess which scheme best fits your business, considering revenue and expenses.
Seek professional advice: an accountant can help identify all available tax advantages.
10.Tips for managing a VAT number without errors
Managing a VAT number may seem complex, but with the right precautions, you can simplify the process and avoid mistakes.
Here are some practical tips:
Plan tax deadlines: use a tax calendar or digital tools to keep track of tax payments.
Automate accounting: investing in management software can help you efficiently monitor revenue and expenses.
Consult an accountant: an experienced accountant can guide you on the best tax choices and handle the necessary formalities.
Stay up-to-date on regulations: tax rules can change, and keeping informed is key to avoiding mistakes.
Studio Paci: the ideal partner for managing your VAT number 🤝
By relying on Studio Paci, Chartered Accountants in the heart of Milan, you have a team of highly qualified professionals who will guide you through every stage of managing your VAT number.
We offer tailored services to ensure peace of mind and tax compliance, giving you the freedom to focus on growing your business.
🧾💼Our services related to opening a VAT number
Strategic consulting for the most advantageous tax scheme: We help you choose the best option among the flat-rate scheme, the ordinary scheme, and other solutions, maximizing your tax benefits.
Comprehensive accounting management: We guarantee impeccable bookkeeping, ensuring every detail complies with current regulations.
Cost optimization strategies: We analyze your situation to reduce your tax burden legally and effectively.
✨📈Why choose Studio Paci?
With years of experience and a personalized approach, Studio Paci is your ally for:
Opening a VAT number: End-to-end assistance choosing the ATECO code and handling bureaucratic requirements.
Ongoing support: We assist in day-to-day management, preventing mistakes and streamlining every process.
Reliability and expertise: With a customized service, we ensure all your tax and accounting needs are consistently met.
📧Contact us for a personalized consultation and discover how we can help you manage your professional activity in the best way possible.
Thanks to our expertise, you can handle every aspect of your VAT number with peace of mind and success.