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New Italian Reduced Self-Employed Tax System In Effect

by Ulrika Lomas,, Brussels

06 January 2015

A new reduced tax regime introduced for Italian self-employed individuals has been introduced with effect from January 1, following parliamentary approval and gazetting of the 2015 Stability (Budget) Law.

The new 15 percent fixed tax regime will be available for self-employed individuals, including entrepreneurs and sole traders, with an annual turnover of between EUR15,000 (USD17,900) and EUR40,000, and will substitute for their payments of individual income tax (federal, regional and local), value added tax and the regional tax on production.

The amount of tax paid will depend on the sector of activity in which their business is placed – for example, commercial and retail, the manufacture of food and drink, and restaurants and tourism. For each activity, the law establishes a coefficient of expected profitability, from 40 percent to 86 percent. The fixed tax rate is payable on the result of applying the coefficient to the individual's business turnover.

A fixed rate of five percent is also available for startups for their first three years, and self-employed individuals of not more than 35 years of age can still choose to continue with the previous 5 percent five-year regime on the turnover of newly-established business activities.

However, individuals will not be eligible for the new regime if their other income as an employee exceeds their self-employed income, unless their employment income has ceased or their total income is not greater than EUR20,000. Non-residents will also not be eligible, unless they reside in another European Union of European Economic Area country which allows for an adequate exchange of tax information, and they produce at least 75 percent of their total income in Italy.

Annual expenses are therefore irrelevant to the calculation of the tax payable by individuals taking up the fixed rate for their businesses, while they will also not have to produce accounting records, aside from the maintenance of their sales invoices and receipts.

TAGS: individuals | compliance | tax | business | value added tax (VAT) | tax compliance | law | accounting | entrepreneurs | corporation tax | self-employment | legislation | tax rates | Italy | tax breaks | individual income tax | Europe

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