Daily News

View All News

Italy – Self-employment tax system revamped

27 March 2015

Following Parliamentary approval, a modified tax regime for the self-employed has been introduced in Italy, affective as of 1 January 2015, according to Capital Consulting; a global provider of employment and payment solutions.

Previously, when registered as self-employed, or a sole trader, Italian income tax was fixed at 5% and based on an individual’s business turnover up to a maximum €30,000.

Following the approval of the Stability (Budget) Law; for self-employed workers with an annual turnover of between €15,000 and €40,000 the new 15% fixed tax regime is applicable. From the beginning of 2015, this tax substitutes individual income tax; as well as VAT and regional taxes on production.

The taxable amount is predetermined by the local authorities and coefficients of expected profitability are applicable depending on the sector of activity.

With a view to encouraging new business to set up, a fixed tax rate of 5% of the annual turnover is applicable to start-ups in their first three years of existence and to self-employed individuals of not more than 35 years of age.

For non-local workers, the new tax regime of 15% will only be applicable if at least 75% of the worker’s total annual income is generated in Italy and if the worker resides in another EU country, which has agreed to exchange tax information.

As far as the social security contributions are concerned, these are currently set at around 27% and will increase to 33% by 2018.

Following the protest around the spike of social security charges and lower benefits offered compared to the previous tax regime, the Italian Prime Minister Matteo Renzi announced in early February that his government will work to improve the new self-employed tax system and confirmed his willingness to change the current terms.