Learn the basics behind the various forms of self-employment in Italy, from registration to taxes and beyond.
Italy is known for its long history, rich culture, and fantastic food, but did you know it is also a great place to be self-employed? Over 5 million people in Italy have chosen the independent and flexible lifestyle that comes with self-employment. For many employers across various sectors, hiring freelancers and independent contractors has become the norm in Italy as it can be less risky and costly. Here, we break down the basics behind Italian self-employment and how to comply with regulations there. The information here should not be used in place of legal counsel.
Business structures in Italy
There are limited liability self-employment options in Italy, but the far cheaper and simpler structures are sole proprietorship (ditta individuale) and freelancer (libero professionista). These are recommended for small individual businesses and are relatively easy to set up.
Italian law says that it is illegal to simply put a sign on your door and start operating a business as a self-employed person. You must register for official status to run a business. To decide which business structure you fall under, whether that be a limited liability company, sole proprietor, freelancer, etc., you must consider the nature of your work. It can be helpful to consult a professional to help you figure out what to register for. Still, Italy’s general rule is that traders and artisans who do autonomous activity fall under sole proprietorship (ditta individuale). At the same time, freelancers (libero professionista) are self-employed individuals carrying out a mainly intellectual business activity.
How to register as a ditta individuale or libero professionista
If you are from Italy, you don’t need extra work permits. Similarly, if you are a member of the EU, you have the right to live and work in Italy. As for people not from the EU, you will probably have to obtain a self-employed work visa for non-EU citizens.
In terms of registration, the first step in becoming a sole proprietor or freelancer in Italy is to obtain a VAT number. This can be done with the INLAND Revenue Office, which will assign you an 11-digit number for your business identification. Your VAT number is necessary for the next steps in the registration process.
For sole proprietorship (ditta individuale) classification, the next step is to register your business with the Chamber of Commerce company register. Then you’ll need to register with the INPS (National Institute for Social Security) as well as the INAIL (National Institute for Insurance against Accidents at Work). These are necessary so you can pay for a pension, social security, and work insurance.
For freelancers working as libero professionista, to start working, you have to apply for a Partita Iva at the Agenzia delle Entrate (Revenue Office) and enroll for social security administration at INPS under the Gestione Separata category. For freelancers, tax and administrative costs related to businesses are limited, making independent contracting a convenient option.
Taxes and Invoicing in Italy
Italian residents have to pay tax on income earned in Italy as well as income earned overseas. If you are a foreign person working in Italy, you only have to pay taxes on your income earned in Italy. The Italian Revenue Agency has info on taxes and tax forms, which must be filed online by October 2nd of each year (with some exceptions). Income tax should be paid by June 30th, but remember that income tax is paid in advance and will be offset when filing annual returns. The amount paid in advance is based on estimates using your returns from the last year.
In terms of Value Added Tax (VAT), Italy complies with the EU VAT directives, meaning that it is standard for VAT to be added to the prices of goods/services on your invoice. Italian VAT invoices must be issued on the date of the supply for goods and up to 15 days after the end of the month of supply. You should keep invoices for four years after the supply. According to Alvara, Italian invoices should include the following information, unless the invoice is for a transaction below €100:
Unique invoice number
VAT number of the supplier & fiscal representative details of the supplier if appropriate
Address of both the supplier and customer
Detailed description of the goods or services provided (also quantities of goods, if applicable)
Date of the supply if different from the invoice date
Net, taxable value of the supply
VAT rate(s) applied, and the amount of VAT broken out by rate
Reference to the applicable law where VAT is not charged
Gross, total amount of the invoice
Receiving Payments in Italy via Liquid
Liquid supports payments to Italy and 175+ countries worldwide in USD as well as select foreign currencies, including EUR. Payments arrive in 2-5 business days via wire transfer, whether the invoice was sent to an existing Client using Liquid or a Client who is new to Liquid.
Invoices in Liquid are in USD by default but can also be sent in Euros and other select foreign currencies, allowing Vendors to receive payment in their local currencies instead of USD. In addition, Work orders / Project Proposals can also be agreed to in Euros and other select foreign currencies in Liquid.
Liquid charges Clients who initiate payments $3 per US invoice paid and $8 per international invoice paid.
Liquid never charges Vendors to receive payments, even when Vendors are requesting payments from Clients who are not current users of Liquid.
There you have it!
Those are the basics of getting started as a sole proprietor/freelancer in Italy. The information here combined with proper research and planning will ensure your business is successful. The process of becoming self-employed in Italy is not so challenging or costly with the ditta individuale and libero professionista options. Here’s to independent smooth sailing in your self-employment!
Ready to invoice your United States-based clients? Try Liquid today.