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WORKING IN ITALY

‘Smart working’? What you need to know about going self-employed in Italy

The pandemic has triggered a shift in how businesses operate, priming the culture for a freelance boom and with it, creating new living and working opportunities. Is now the time to set up as a freelancer in Italy?

If we can now work from anywhere, why not work from Italy?
If we can now work from anywhere, why not work from Italy? Photo: Unsplash

The lockdown-induced rise of ‘smart working’, as remote work or working from home is referred to in Italy, has provided a fresh perspective on how workers and entrepreneurs can do business. A different and more flexible way of doing things has now established itself as the norm since work-from-home measures were first ordered around a year ago.

READ ALSO: Freelance or employee: Which is the best way to work in Italy?

The Italian government has recommended remote working where possible throughout the Covid-19 emergency, and it’s set to continue as the crisis measures roll on.

Some 90% of large businesses and 73% of medium enterprises switched to a remote system, according to Istat, the Italian statistics body. Over a third of small businesses also took up agile working in order to ensure business continuity, while movement continues to be restricted.

The country wasn’t prepared for the sudden shift to working from home, with many areas suffering internet connectivity issues or simply having no internet at all. However, the pandemic is dragging Italy into a digital future, accelerating the supply of fast internet services to meet the demand of this changed working environment.

High speed fibre will pass 202 million houses in the European Union and Britain by 2026, according to a joint report by consultancy firm IDATE and industry group FTTH Council Europe. Italy is one of the countries expected to experience significant growth with a predicted 218% rise of homes served by high speed internet.

With the number of freelancers or liberi professionisti in Italy increasing year-on-year and currently making up a quarter of the workforce, now could be the time to jump on the momentum and become your own boss in Italy.

READ ALSO: These are the thousands of job vacancies that Italy can’t fill

It sounds idyllic to be able to make a living from your laptop while enjoying ‘la dolce vita’, but exactly what does it entail and how much bureaucracy is involved?

Here, we drill down the options for those looking to freelance in Italy, the advantages on offer and the drawbacks to watch out for.

As the process is complex and variable, it’s strongly advised you seek professional legal and accounting consultation before setting up your business plans.

Where you come from determines your route to gaining freelance status in Italy.

If you move to Italy from an EU country, you have the right to stay and work in Italy with a relatively straightforward process of achieving self-employment.

On the other hand, if you’re leaving a non-EU country, which of course now includes British citizens, it’s a longer and more tangled process. Getting authorisation to work and a visa for self-employment varies according to your country of origin.

As a rule of thumb, if an Italian would face limitations in setting up a business in a particular non-EU country, then it’s likely the citizen of that country will face the same restrictions if wanting to set up a business in Italy. The Italian Ministry of Foreign Affairs is a good source of information on reciprocity agreements.

Remote work is becoming much more common in Italy – but is it getting easier? Photo: Andreas Solaro/AFP

Non-EU nationals already living in Italy may need to convert their permit in order to be eligible for self-employment.

Accountant and tax advisor, Nicolò Bolla, who runs finance firm Accounting Bolla, advised that some residence permits allow you to freelance, whereas others, such as the ERV (Elective Residence Visa) for instance, don’t.

You can find out which visas can be converted and the relevant application on the www.interno.it website.

It’s important to have a strategy if you’re planning to freelance in Italy, according to Nicolò. He advised to get your papers straight and create a rigorous plan regarding immigration and tax.

As it takes months to go through the bureaucracy, even for an accounting professional, he recommended taking a long-term view of moving to Italy to freelance.

“If you fail to set up a proper immigration and business strategy, it could cost you time and money. Make your calculations before making any decisions,” he said.

If you’re coming from outside the EU, what visa and permit do you need?

To be self-employed in Italy, you need to apply for a self-employment visa before leaving your country. This applies to non-EU nationals and those exempt from the Schengen visa.

The process can be tricky and take months, so it’s best to ensure you account for long timescales before hopping on a flight.

READ ALSO: What type of visa will you need to move to Italy?

It’s also far from guaranteed, even if you’re ready to take on the bureaucracy. Tax advisor Nicolò warned that this visa has one of the highest rejected application rates.

What’s more, there is a cap on how many foreign national workers are allowed to come into Italy each year, which is determined by the so-called Inflow Decree, or ‘decreto flussi’. This only opens for a few months every year and it’s the only time non-EU nationals can apply for a work visa.

What you need to consider before choosing your type of self-employment

Different professions fall under different laws, regulations and taxation. Each type of employment or source of income has a code, known as a ‘codice ATECO‘, which has to be communicated to the Revenue Agency (Agenzia delle Entrate).

Therefore if you’re working online as a teacher, you’ll have a different code and regulations than if you wanted to join the rising number of donkey farmers in the Alps.

To achieve the libero professionista status, you need to open a ‘ditta individuale’, which is effectively a sole trader company. When you do this, you will get a partita IVA, a mandatory tax number.

Without this code, you can’t legally make invoices or receive payments.

How do I open a ‘ditta individuale’?

If you already reside in Italy, a trip to your local Chamber of Commerce or INPS office ‘Istituto nazionale della previdenza sociale’, the National Institute of Social Security, will allow you to enrol. This is a requirement by law.

You can also list your business with INPS online, but this is notoriously thorny and it’s recommended you get professional assistance with this.

If you’re not already in Italy and are doing this remotely from your non-EU country of origin, your first step is to obtain a Nulla Osta from your consulate. In this case, it serves as work authorisation to allow you to apply for the visa.

“If you manage to secure a self-employment visa, you are then granted entry to Italy”, stated Nicolò.

These are the steps:

  1. Apply for a Nulla Osta (authorization to perform self-employed work) from the local Immigration Desk (Sportello Unico Immigrazione – SUI). You may need to hire a proxy in Italy to do this on your behalf.

  2. Get the documentation relevant to your work activity in Italy.

  3. Apply for the Self-Employment Visa at the Italian consulate of your country.

  4. Enter Italy and apply for an Italian residence permit (permesso di soggiorno) to be allowed to live and work in Italy legally.

The documentation needed to apply for the visa changes according to your country and profession. It may include the following as an example:

  • Italian Long-stay visa application form.

  • Two passport-sized pictures.

  • Valid passport with at least two blank visa pages, which must be valid for at least three months longer than the visa you will be issued.

  • The Nulla Osta authorisation (original and photocopy).

  • Proof of suitable accommodation, such as a purchase or rental agreement.

  • Proof of income from the previous year, which must be higher than the minimum level required by law for exemption from healthcare contribution (€8,400).

  • Certificate issued by the Chamber of Commerce in the area you will be working, recognising you have enough resources for the self-employed work you plan to do

If you’ve made it this far and have been awarded a self-employment visa, you can enter Italy.

Once you’re in the country, you have eight days to apply for a ‘permesso di soggiorno’ (a residence permit), which will be issued by your local Questura (the provincial police headquarters).

The visa is valid for two years initially and can be renewed.

What’s it like to freelance in Italy?

Zoe Adams Green, a British citizen living in Rome with her husband and toddler, has been freelancing as a technical translator in Italy since 2018.

She opened a partita IVA with a commercialista, an accountant. She admits this was relatively smooth as going self-employed wasn’t dependent on obtaining a self-employment visa. Britain was still part of the EU at that time and so Zoe could benefit from the EU’s freedom of movement and work.

However, no matter where you come from, she advised keeping your eyes open and checking the taxation fine print. Zoe believed she was eligible for a tax break for highly qualified professionals who were new to Italy.

“My husband and I were pretty sure I was eligible but my accountant wasn’t familiar with the scheme. So I contracted another commercialista who looked into it and confirmed I qualified for a tax reduction,” she said.

READ ALSO: ‘Do your homework’: An American’s guide to moving to Italy

Thanks to her persistence and diligence, she now only pays income tax on 50% of her earnings for the first five years of business. 

However, she is still liable for full INPS contributions, the payments that provide benefits in the event of illness, maternity or unemployment, for example. For the self-employed, this begins at a rate of 24% of income, so she admits it’s a “heavy tax burden overall”.

“There are other tax regimes which might better suit your circumstances, so it’s worth talking to a commercialista to consider your options,” Zoe said.

You could, in theory, claim a hefty tax deduction on your outgoings. “Petrol, rent, utility bills and other payments related to running your business can all be taken down from your taxes as a self-employed professional,” he added.

Nicolò confirmed there are tax breaks for various skilled professionals coming to Italy. “There are also overheads you can offset, depending on the freelance regime you choose”, he stated.

Where in Italy is best to set up as a freelancer?

If you’ve met all the requirements and secured the relevant self-employed visa, you need to consider the best spot to base yourself. You’ll need to weigh up rent prices, which fluctuate considerably from north to south and from city to countryside.

The impact of the pandemic saw a surge in demand for homes in the south, where properties are often cheaper. If you can cut your overhead costs such as rent, your profits will clearly rise, making it a more viable career choice.

However, it’s also a good idea to check that the internet speed in your area is up to scratch beforehand if your business is online.

READ ALSO: Foreigners rank Italy ‘worst in Europe’ for internet and paying without cash

Once the coronavirus restrictions are lifted, there are also many bars in the cities offering wifi connectivity thanks to the rise of freelance activity. This can also be a good way to curb the loneliness that is sometimes a drawback of working alone.

The idea of being your own boss in a country where you can reward yourself with a spritz in the sun just might be enough to push you through the tricky red tape.

If the spoils are great enough to justify the endeavour, it’s wise to seek professional help throughout the process. Even once you’re up and running, you’ll likely need advice with declaring taxes to ensure you are legal and compliant.

Get through all that and you’ve most definitely earned that spritz with a ‘bella vista’.

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BUREAUCRACY

EXPLAINED: What is Italy’s digital invoicing rule for freelancers?

Italy has brought in rules that mean changes for freelancers on the 'flat tax' rate. Here’s what you need to know about the ‘fatturazione elettronica’, or digital invoicing system.

EXPLAINED: What is Italy’s digital invoicing rule for freelancers?

Italy has been slowly moving more of its bureaucratic systems online in recent years, and in many cases this has made it quicker and easier for residents to access services and get their considerable amounts of Italian life admin in order.

It was hoped that the new electronic invoicing rule would do the same for freelancers on Italy’s flat-tax regime, by doing away with the existing need to print out invoices and affix tax stamps by hand.

READ ALSO: Beat the queues: 19 bits of Italian bureaucracy you can do online

But a close look at the details of the new rules shows that it probably won’t make life easier for those on the flat tax rate, who have so far been spared the bulk of that infamous Italian red tape – but now need to get to grips with a new online system.

Known as the ‘regime forfettario‘, Italy’s flat-rate tax scheme for individuals and small businesses was introduced in 2015 to encourage more commercial activity by slashing tax rates and simplifying bureaucracy.

New freelancers who choose this tax system generally pay somewhere between just five and 15 percent tax on earnings, regardless of overheads.

READ ALSO: The pros and cons of Italy’s five percent flat tax for freelancers

Little has changed since its inception seven years ago, but freelancers using the scheme now need to be aware of new rules that came into force on July 1st, 2022.

How you invoice – how you send, receive and store receipts, therefore – is due to move from analogue to digital, bringing new requirements and know-how on digital invoicing software.

Here’s what changed for freelancers with the so-called ‘fattura elettronica‘.

Who is required to send electronic invoices?

While this was already a requirement for the self-employed on other tax regimes, those on the flat tax rate were included from July 1st.

They were previously exempt, but that changed under the PNRR (National recovery and resilience plan or piano nazionale di ripresa e resilienza) – the Italian government’s plan for using EU funding for post-pandemic economic recovery.

Digital invoicing is intended to fight Italy’s major problem with tax evasion, as well as to further automate accounting processes.

For now, not all freelancers under this tax scheme need to move to digital accounting – only those who received an income in excess of €25,000 in the previous year are required to comply with the new rule.

It will then extend to all freelancers using the flat-rate scheme from January 1st, 2024.

From that date, everyone subscribed to the ‘regime forfettario’ will have to switch to electronic invoicing and there are hefty penalties in place for those who don’t.

How will electronic invoices work?

Italy’s tax authority has defined a couple of notable differences between the digital or electronic invoice (fattura elettronica) and a paper invoice (fattura di carta) in its updated guidelines.

Firstly, the digital invoice has to be created using a digital device (a computer, tablet or smartphone), and secondly it has to be sent to the client via an ‘Interchange System’, the so-called Sistema di Interscambio (SdI).

READ ALSO: ‘Smart working’? Here’s what you need to know about going self-employed in Italy

Italy’s flat-rate tax scheme is going digital. Photo by Christian Dubovan on Unsplash

This electronic postal system checks whether the invoice contains the required data for tax purposes, as well as checking the verified e-address (or the so-called PEC address) of the recipient.

In doing so, the electronic invoice automatically checks that the VAT number (partita IVA), or the tax code (codice fiscale) depending on who you send the invoice to, really exist.

Once the checks are completed, the system sends the invoice to the client, which will trigger an alert to the freelancer with a delivery receipt, showing the date and time the document was delivered.

How can you send an e-invoice?

There are a few accounting software options on the market if you’re now faced with having to send electronic invoices.

Some charge a fee of around €1-€4 per month or come at a cost per transaction.

Platforms such as ‘Aruba‘ or ‘Fatture in Cloud‘, are competitive and may offer you a free trial before you deciding to buy.

The Italian revenue agency (Agenzie delle Entrate) has also created free-of-charge services to help send and receive e-invoices. These include websites as well as apps for completing the required steps, which are detailed in their guide here.

You can access their Invoices and Receipts (‘Fatture e Corrispettivi‘) portal to benefit from these free services.

You’ll either need a Spid ID (‘Sistema Pubblico dell’Identità Digitale‘), a Carta Nazionale dei Servizi (CNS) or accounting credentials known as Fisconline/Entrate, which are issued by the Agenzie delle Entrate.

You can also delegate this task to an intermediary, such as an accountant (commercialista) who would do this on your behalf, the revenue agency stipulates 

What about the Italian tax stamp?

Until now, freelancers issuing invoices under the ‘regime forfettario‘ have had to attach a €2 stamp, called a ‘marca da bollo’, to every invoice over the value of €77,47.

So what happens when e-receipts go digital and you can’t physically stick a stamp on a document? Well, that goes digital too and the Inland Revenue has issued a 16-page guide on how you need to go about it.

It seems the previously attractive ‘light’ accounting of this regime is about to get bogged down by time-consuming bureaucracy too.

Authorities will systematically check that the fee has been paid each quarter for all the invoices that require it.

As a general rule, you can see if there are any discrepancies by the 15th day of the first month following each quarter on their Invoices and Receipts portal.

You or your intermediary have until the end of that month to fix any accounting errors, but make sure to check with an accountant if you have any difficulties or need specific advice for your personal circumstances.

Once you receive your final stamp duty bill for each quarter, you can pay either via IBAN, which you set up on the portal, or by filling out an electronic F24 form – details of how to do that are included in the guide.

For further information and FAQ’s, see Italy’s Inland Revenue Agency website on the electronic invoice here.

Please note The Local cannot advise on personal cases and seeking expert financial advice is recommended.

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