The regime forfettario (flat tax rate scheme) was introduced in 2014 for those with a VAT position or business. From 2019, for those already in this system or who will be joining it this year (as a new business or transferring from another accounting regime), there are some new benefits.
Under the 2019 budgetary law, taxpayers with VAT position in the flat rate scheme will benefit from a 15% tax rate on last year’s compensation or income (up to 65,000 euro) and a 5% startup rate for a new VAT, applicable over the next 5 years. In addition, there will be subsidized INPS (the national insurance program), and abolition of the 5,000 euro limit on employee expenses and 20,000 euro limit on capital expenses.
Requirements and conditions for access
Able to enter the start-up flat scheme, are those who carry out business, arts, and professionals and declare that they are starting up such activities, or those who in the previous year eared less than 65,000 euro (regardless of their activity’s ATECO code – business sector code). They must not have practiced their business, art, or profession during the previous five years, and their new activity should not be a mere continuation of a previous activity (with some exceptions). If the activity is continued by another person, earnings in the previous year must be below established limits to access the flat-rate start-up regime.
Excluded from the 2019 flat rate scheme are those taking advantage of special VAT positions or forfeiture schemes for determination of earnings; non-residents except for those residing in an EU member state who guarantee information exchanges and produce at least 75% of their earnings in Italy; those carrying out divestitures (exclusively or prevalently) of buildings, buildable lands, and new means of transportation; autonomous professionals or those practicing art or business activities who concurrently participate in individual companies, professional associations, family business, or SRLs (including those in transparency regimes in terms of Art. 116 of DPR n.917/86); and participatory associations. These reasons for exclusion are verified in the year that the flat tax regime is applied.
Dependent workers who cannot apply for the 2019 flat tax are those who have received employment income (or similar), and those who have carried out business activities with an employer over the previous two years (or in any case are directly or indirectly connected to them). This regulation was aimed at those sly persons wishing to take unfair advantage of the flat tax rate scheme.
Flat rate 2019 VAT and flat rate invoicing
To access this scheme, taxpayers, must meet the following VAT requirements and conditions: They must not use VAT reimbursements for transactions in Italy. Within the EU, certain articles of the law apply for sales or purchase of goods or services provided or received. Taxpayers cannot deduct VAT paid, due, or charged on purchases and are exempt from paying VAT and from all other VAT obligations, except for numbering and storing invoices, customs bills, fee certifications, and related documents. For VAT debtors, invoices must be issued or supplemented with an indication of the rate and VAT payment made within the 16th day of the month following such transactions.
How are earnings calculated under the flat rate scheme?
The taxable base for contributions is calculated on the amount of earnings and compensations. For 2019 the new limit is 65,000 euro. To calculate the 15% flat tax, there are various earnings coefficients based on the activity’s ATECO code. Earnings and compensations under the forfeiture regime are not subject to withholding tax from tax substitutes; for this purpose, contributors release a declaration showing that the earnings are subject to substitutive tax.
Fiscal advantages and exoneration from obligations
They are exonerated from the obligations of registering and bookkeeping but must make an earnings statement. They are not required to do withholding at the source. However, the earnings statement should indicate the fiscal code of the provider of earnings and the amount of such.
Although exonerated from sector studies and from parameters, they must still use the approved models of the Agenzia delle Entrate (Revenue Office) for income earnings regarding the activity carried out. They are also exonerated from electronic billing and from the new 2019 Esterometro (document regarding transactions made outside of Italy).
Request for reduced INPS contributions
Contributors under the flat tax scheme can also apply to a reduction in the INPS contribution. If they send specific communication, contributors carrying out business activities can access the INPS contribution scheme at 35%. Based on the new information in INPS memo n.22 of January 31, 2017, the request need not be presented each year before February 28; it is enough to have obtained a reduction the previous year. Those who can access the lightened INPS contribution scheme are VAT holders carrying out business activities. They must enroll in the INPS separate management scheme for artisans and business owners.
Those not having access to the lightened INPS contribution scheme are those who carry out professional activities that are not subject to obligatory enrolment at the Chamber of Commerce or professional pension fund or are obliged to enroll in INPS separate management for professionals without fund category.
Regarding communications made after deadlines, any contribution benefits will begin from the following year.
On April 13, 2022, the CDM approved the measure that obliges electronic invoicing also to flat-rate taxpayers, which applies the flat tax at 15% on incomes up to 65 thousand euros. This measure is part of the decree aimed at implementing the 45 objectives of the PNRR, with targeted interventions for tax evasion.
Currently, those who are on a flat-rate basis are not obliged to issue and receive electronic invoices as they can issue the invoice in paper format or in digital PDF format, except for invoices issued to the Public Administration.
The obligation of electronic invoicing for flat-rate taxpayers, from the first indiscretions, will not start immediately from 1 July but will follow a transitional period, of about three months, where it will be possible to issue the electronic invoice by the end of the month following that to carry out the transaction, without the application of sanctions. Furthermore, based on what emerged from the draft of the decree law, professionals on a flat-rate basis who do not exceed 25,000 euros in annual remuneration can, until 2024, use traditional invoicing.
In addition to single professionals on a flat-rate basis, subjects who have adopted the advantage regime (Article 27, paragraphs 1 and 2 of Legislative Decree 98/2011), amateur sports associations and third sector entities will also be destined to use electronic invoicing.
We remain available for information, explanation and assistance.