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.
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.
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.
Little has changed since its inception, 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 - is due to move from analogue to digital, bringing new requirements to use digital invoicing software.
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 didn't have to do this previously.
The rules have 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 do 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 official 'Interchange System', the so-called Sistema di Interscambio (SdI).
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 can handle the entire process on your behalf, the revenue agency confirms.
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 tax agency 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 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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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.
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.
Little has changed since its inception, 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 - is due to move from analogue to digital, bringing new requirements to use digital invoicing software.
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 didn't have to do this previously.
The rules have 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 do 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 official 'Interchange System', the so-called Sistema di Interscambio (SdI).
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 can handle the entire process on your behalf, the revenue agency confirms.
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 tax agency 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 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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