VAT Guide for Freelancers in Italy

The Italian government levies VAT on items and services that are consumed in Italy. If you are a freelancer with clients in Italy and whose yearly turnover exceeds EUR 65,000, you are required by law to register for VAT in Italy. The Inland Revenue of the Italian Government administers the VAT system, and you can find routine updates regarding VAT on their website.

The standard VAT rate in Italy is 22%, but there are also reduced rates of 10%, 5%, and 4% applicable based on the kind of products you supply. While the Italian VAT system may seem complex, you shouldn’t be disheartened. This guide will cover all that you need to know about the Italian VAT system. Let's get started!

Italy VAT Rates

What are the different VAT rates in Italy? The Italian government levies four VAT rates, and freelancers must charge the amount that applies to their products and services.

The Standard Rate of 22% - You must always charge 22% VAT on products and services that do not fall under the reduced rates or zero rate categories.

The Reduced Rate of 10% - Applies to some foodstuffs, some social housing, private buildings - renovation and repair, some construction work, some agricultural supplies, hotel accommodations, restaurants, some listed drugs, admission to some sports events, firewood, waste-water treatment, alcoholic beverages in bars and cafes, etc.
The Reduced Rate of 5% - Applies to some social services, passenger transport, foodstuff, etc.
The Reduced Rate of 4% - Applies to some food products, certain books, some agricultural supplies, some social housing, certain motor vehicles for disabled people, newspapers, supplies for new buildings, etc.
Zero Rate (0%) - Intra community and international transport are subject to a zero VAT rate. You should still record zero-rate transactions and create a report based on your returns.

Here is a list of VAT-exempt goods and services.

When should you register for VAT in Italy?

If you are a solopreneur whose annual turnover exceeds EUR 65,000, you are obliged to charge and pay for VAT in Italy.

There is no VAT threshold for expat freelancers. Therefore, if you are a non-resident freelancer conducting commercial activities catering directly to final consumers or non-commercial entities who aren’t VAT registered, you should register for VAT. However, if you are a non-resident freelancer who sells their services exclusively to other VAT registered entities in Italy, you are not required to register for VAT. In this case, the Italian VAT-registered operator you sell to is responsible for fulfilling all VAT obligations.

If you are a distance-selling freelancer providing goods over the internet to Italian consumers, the VAT registration threshold for you is EUR 35,000 per annum.

Besides these parameters, the Italian government also specifies other scenarios determining when you must register for VAT.

How to register for VAT in Italy

Freelancers in Italy are treated like entrepreneurs for VAT-related purposes and must pay VAT on their income. To register for VAT, you should complete and submit a declaration of commencement of activity form to the Italian Revenue Agency. This declaration needs to include some basic information and supporting documents about you:

Identification details
Type of the activity to be pursued
Business location
A power of attorney for the fiscal representative (if you are from a non-EU country sending a fiscal representative on your behalf)

You can submit the form online or digitally using the “Single Business Reporting Platform,” or you can submit it in-person or via post together with the identification proof to the Italian Revenue Agency office. The day you submit the form is also the effective registration date: you are liable to charge, pay, and report VAT starting this day.

Freelancers not set up in EU countries have to appoint a tax representative to represent them legally. Even if you are residing in another EU country, you can choose to appoint a tax representative. This appointment must follow all required processes to formally include the representative in the register held by the Revenue Agency’s office.

You can also choose to register for VAT using the Mini One-Stop Shop (MOSS) online portal. VAT MOSS is a singular online platform that allows you to coordinate your VAT transactions across several EU countries and submit all VAT returns in one place. This system is beneficial if your freelancing practice extends to different EU countries outside Italy.

Alternatively, you can hire an accountant (or agency) to handle your VAT returns and dealings with the Italian Fiscal Department. Xolo provides services like Xolo Go and Xolo Leap, which help with precisely this and any other VAT concerns you may have.

Financial Obligations of VAT Registered Freelancers in Italy

After you register for VAT, you should ensure that:

You charge the correct VAT rate to anyone you provide your services to
You file VAT returns and pay the right VAT amount owed to the Italian Revenue Agency every year
You maintain detailed VAT records and a VAT account

Additionally, you should:

Keep records of all your purchase and sales activity and financial transactions
Ensure that all your VAT invoices include your and your client’s VAT identification number, sequential invoice number, customer’s data, clear description of the goods or services exchanged, exact amount subjected to VAT, the appropriate VAT rate for that amount, and VAT-included total amount
Keep self-billing invoices for purchases from non-resident entities.

You need to maintain financial records for all the transactions you perform for at least ten years, in either electronic or physical format. If you are an Italian freelancer trading with clients based in Italy, then starting January 1, 2019, you are required to create and store all invoices electronically. These records need to be clear, complete, and well documented.

The specific records you should maintain are:

Printed copies of the invoices you send out
Received invoices
Agreements on sell-billing
The self-billing vendors' names, addresses, and VAT numbers
Credit/debit notes
Records of imports and exports.
Records of bank statements, check stubs, cash books, till rolls, and paying-in slips in addition to your VAT account.

Getting overwhelmed? Xolo’s got your back! We future-proof your records by automatically generating, sending, and storing all your invoices for you, so you won’t have to worry about ever missing any steps or misplacing any documents ;)

How Xolo Can Help?

Learning all the Italian tax guidelines can be challenging, especially if you’re a sole proprietor and in charge of several aspects of your business. Luckily, at Xolo, we offer a range of solutions that can handle all the paperwork and legal jargon, allowing you to focus on your core competencies.

Xolo Go is a quick and efficient way for freelancers who may or may not have a registered LLC or sole proprietorship to invoice clients legally.

Signing up takes only 10 minutes, and once you do, taxation, corporate compliance, and all the tricky VAT calculations are all automatically taken care of in the background!
We charge a flat rate of 5% from every withdrawal to your personal bank account. No surprise fees, no contracts, and no BS.
Xolo Leap is the easiest and most effective way to create your own company through Estonian e-Residency! Reduce time spent on mundane business administration and focus on what you do best!
We offer different tiers of service depending on the solopreneur's (or as we call them, Xolopreneur's) individual needs.
Once you get your business set up with Xolo Leap, you can run it from anywhere in the world! So whether you’re a freelancer looking to gain access to the EU market or a digital nomad who can’t be tied down - this is the place for you!

Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Italy in no time!