How to invoice without partita IVA
Thread poster: Holly Carlile

Holly Carlile  Identity Verified
Italy
Local time: 04:39
Italian to English
+ ...
Jul 15, 2009

Hi everyone,

I know this topic has already been covered many different times, but I've not yet found a thread with information that is fully relevant to my situation, so I hope someone can give me some advice or pointers...

I've been living in Italy since September 2008, working for a law firm (permanent contract, indeterminato). I already pay tax on what I earn from this, obviously, but now am getting very confused about the tax situation when it comes to freelance jobs I do outside of my full-time job.

Following advice from a tax law expert here, I have discovered that I can only issue a quietanza/ricevuta for prestazioni occasionali. He told me to invoice each agency or person for the full amount they quoted me to begin with, without including a 20% ritenuta reduction for VAT, then to only add this to the receipt if they ask me to do so after. For example, in the case of a agreed 5 cents a word for a 2000 word job, I should issue a receipt for €100 and then wait to see if they ask me to deduct the 20%.

What I'm not clear on is if this is right and whether I need to include the reduction in my fees straight away, or whether the company will pay. Using the same example from before, if I then have to deduct 20% it comes out as €80, i.e. 4 cents a word, not 5. If this is normal practice, then fair enough, but what I then don't understand is the tax return (dichiarazione dei redditi) which I have to do at the end of each year - if I have already paid 20% tax on each job (via each company who pay it for me, if I'm not mistaken?), I surely shouldn't have to pay tax twice? In any case for the moment I am under the €5000 limit. I also don't understand why companies find it completely normal to pay VAT in addition to the arranged fees to a translator with a partita IVA but not to a translator without a partita IVA - what's the difference??

Another question - if at some point I happen to go over this limit, what is the situation with opening a partita IVA (just out of curiosity)? Because surely if I have to detract the tax from the agreed tariff, instead of adding on the tax as with an invoice for someone with a partita IVA, surely it would be more beneficial to me to open a partita IVA anyway? But what are the drawbacks to this? Does it cost a lot to open it (I've heard it does)? And is it true that as a dipendente in a studio professionale I cannot legally open a partita IVA?

I have to say that the tax situation of translators is such a grey area, even the top lawyers here are a bit sketchy about it. If anyone happens to know anything concrete or has been in a similar situation, please get in touch!

So, in summary:

1. invoicing without a partita IVA - do I automatically have to detract 20% from my fees??
2. why do I have to submit my income for assessment at the end of the year if I have already paid tax on everything?
3. why is the agency or company unwilling to pay VAT for my work in addition to my fees but willing to do this for someone with a partita IVA?
4. what are the drawbacks to opening a partita IVA? i.e. why shouldn't I just do that now?
5. is it true I cannot legally open a partita IVA if I am a dipendente in a studio professionale in Italy?

MANY MANY THANKS in advance for any help!!!

Holly


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Kate Chaffer
Italy
Local time: 04:39
Italian to English
Post in the Italian forum Jul 15, 2009

Hi Holly,

If I were you I'd post this in the Italian forum (in Italian of course). You're likely to get some better replies there although you'd be much better off talking to a 'commercialista' in Italy who will be able to give you all the relevant information for your case.

I work with the partita IVA but as far as I know the 20% ritenuta is compulsory. This 20% is a contribution towards the total amount of tax you have to pay. At the end of the year when you do your tax return, you take however much you've already paid away from the amount due and you just pay the rest. Unfortunately tax is more than 20%!

There's no need to add VAT to your invoices if you don't have a partita IVA! The VAT is never yours to keep, you simply collect it from the client and pass it on to the state so you wouldn't make a profit out of it anyway.

For your other questions you really need to speak to someone more qualified. Take a look at the Agenzia delle Entrate website and that might give you some more info.

Good luck!

Kate


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Marie-Hélène Hayles  Identity Verified
Local time: 04:39
Italian to English
+ ...
Don't confuse VAT with the 20% deduction Jul 15, 2009

I agree that you should post in the Italian forum, but the main issue seems to be confusion between VAT and the 20% deduction from your invoices - these aren't the same thing (and I doubt the person you consulted told you that they were - I think you probably misunderstood, which is very easy to do in this area).

IVA is a value added tax on the cost of goods and services. It works the same way in Italy as it does in the UK - anyone with a VAT registration number (Partita IVA) is obliged to add VAT to the invoices they issue, but offsets the VAT forwarded to the authorities against the VAT they have themselves had to pay on invoices they have received. Essentially, you can forget it - you add it to your invoice and pass it on to the authorities.

The 20% deduction is income tax which is subtracted from your invoice and paid by your client to the authorities.

The fact that both IVA and the deduction are 20% of the total is neither here nor there - they are totally diferent beasties.

In any case, as Kate says, as you don't have a P. IVA, you do not (and cannot) add IVA to your invoices - in fact you can't issue an invoice (fattura) at all, but must instead issue a parcella. IIRC you do have to apply the 20% deduction to your parcelle, but as Kate says, this is then offset against the tax you have to pay at the end of the year.

So, to answer your questions as best as I can:
1. invoicing without a partita IVA - do I automatically have to detract 20% from my fees??
yes - this is income tax.

2. why do I have to submit my income for assessment at the end of the year if I have already paid tax on everything?
It's standard practice. You will probably end up paying more tax - although you may get a rebate if you've paid too much

3. why is the agency or company unwilling to pay VAT for my work in addition to my fees but willing to do this for someone with a partita IVA?
It's nothing to do with the agency - you cannot apply IVA unless you have a P. IVA

4. what are the drawbacks to opening a partita IVA? i.e. why shouldn't I just do that now?
The cost of opening a P. IVA isn't that high (about €200 IIRC), but the taxes and contributions are extortionate for freelancers in Italy. However, there is now a regime agevolato which is designed to help new freelancers with greatly reduced contributions. Try searching for "regime agevolato" in the Italian forum

5. is it true I cannot legally open a partita IVA if I am a dipendente in a studio professionale in Italy?
can't answer that, sorry

[Edited at 2009-07-15 13:57 GMT]


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Francesca Pesce  Identity Verified
Local time: 04:39
Member (2006)
English to Italian
+ ...
a few answers Jul 15, 2009

As Kate suggested, I would post this in the Italian forum: you would obtain more answers.

In the meantime, I will try and answer a few of your questions, but I have the feeling that you should study some booklets on taxes, because you seem a bit confused on some issues.


Holly Carlile wrote:

1. invoicing without a partita IVA - do I automatically have to detract 20% from my fees??


You have to detract that 20% if your customer is a company or a professional, i.e. someone who can then reverse that amount to the internal revenue. If you are working for a normal, private individual, then you should not detract that 20%, because a private individual does not have a direct link with the revenue.


2. why do I have to submit my income for assessment at the end of the year if I have already paid tax on everything?


You have to report all your incomes on the assessment at the end of the year. That is the logic of an assessment. Same goes with your other job, even though most of the taxes (or even all of them) have already been paid.
While you report your income, you also report the withholding tax (that 20%) that has been withheld, and eventually paid, by your clients. By summing up your different revenues and the taxes already paid, you then get the result of what (and if) you still have to pay.


3. why is the agency or company unwilling to pay VAT for my work in addition to my fees but willing to do this for someone with a partita IVA?


It is not a question of being willing or not. It is the law. Value added tax is the norm on every transaction, but some subjects are allowed to not charge it. In this case, the clients don't pay VAT. In any case, as Kate pointed out, VAT is not something that goes into your pocket; it is a tax that is just collected by the person that issues the invoice, and immediately reverted to the revenue. There is no advantage in collecting VAT for the government.


4. what are the drawbacks to opening a partita IVA? i.e. why shouldn't I just do that now?

Wait a second. First of all, if you invoice over the 5,000 euro limit, the first consequence is not VAT: it is that you have to open a specific position with INPS (the pension system) and start paying a certain percentage of your revenue to INPS. Even if you already pay pension contributions for your other job. So this is the first answer to your question, you have to start paying specific pension contributions. And then you also have to start keeping your accounts and registers in a specific way. In the end, you earn less, have more costs, have more bureaucratic procedures to carry out.


5. is it true I cannot legally open a partita IVA if I am a dipendente in a studio professionale in Italy?


You can certainly open a partita IVA in your position, but as everyone would tell you, don't do it.

I hope I have answered most of your questions, but again I would suggest you study a few issues on taxes in general (what a withholding tax is, what VAT is etc.). It will certainly help you in your freelance activity.


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Tamara Fantinato
Italy
English to Italian
+ ...
ritenuta d'acconto Jul 15, 2009

Posso risponderti in italiano?
allora io ho un lavoro full-time e nel tempo libero faccio traduzioni.
Devi emettere nota con ricevuta d'acconto del 20%.

Ossia nell'esempio fatto da te per un lavoro di 2000 parola e 0.5 USA $ per parola emetterai nota di USA 100
- ricevuta d'acconto del 20% USA $ 20
Totale netto USA $ 80

TU riceverai in pagamento 80 dollari e il tuo cliente dovrà poi versare la ricevuta d'acconto di 20 dollari e inviarti relativo cedolino di versamento.

In questo modo tu sei a posto con il pagamento delle tasse.

Ma non devi superari i 5000 euro l'anno, altrimenti devi aprire partita iva.

spero di esserti stata d'aiuto.

Ciao tamara


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Kate Chaffer
Italy
Local time: 04:39
Italian to English
Free to open P. IVA Jul 15, 2009

Marie-Hélène Hayles wrote:

I[b]The cost of opening a P. IVA isn't that high (about €200 IIRC), but the taxes and contributions are extortionate for freelancers in Italy.


It's actually free if you go to the Agenzia delle Entrate yourself and don't use a commercialista. Completely agree about the contributions being extortionate!


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Christel Zipfel  Identity Verified
Member (2004)
Italian to German
+ ...
Permettimi una piccola osservazione Jul 15, 2009

Tamara Fantinato wrote:

Devi emettere nota con ricevuta d'acconto del 20%.

Ossia nell'esempio fatto da te per un lavoro di 2000 parola e 0.5 USA $ per parola emetterai nota di USA 100
- ricevuta d'acconto del 20% USA $ 20
Totale netto USA $ 80

TU riceverai in pagamento 80 dollari e il tuo cliente dovrà poi versare la ricevuta d'acconto di 20 dollari e inviarti relativo cedolino di versamento.

Ciao tamara


L'esempio da te scelto è certamente infelice, in quanto potrebbe sembrare che il cliente (che si presume americano, visto che vuole pagare in dollari) debba versare il 20% di ritenuta d'acconto allo Stato italiano. Questo non è assolutamente vero né possibile, in quanto i clienti stranieri non versano mai nessuna ritenuta d'acconto a chicchessia per conto nostro.

Se invece dall'esempio si tolgono i dollari, tutto ok:-)


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Tamara Fantinato
Italy
English to Italian
+ ...
ritenuta d'acconto Jul 15, 2009

hai ragione io intendevo per l'Italia, ho omesso di sottolinearlo.

Per quanto riguarda la fatturazione all'estero avverrà come operazione fuori campo iva.

Sorry!!!


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Giles Watson  Identity Verified
Italy
Local time: 04:39
Italian to English
Find a good accountant, Holly Jul 15, 2009

Hi Holly,

First of all, let me reassure you that there is nothing "grey" about translation.

There is a superabundance of legislation and case law about the various manifestations of our craft in this country and any good "commercialista" will be able to set you straight. Get your tax expert friend to recommend one and go and have a chat with him/her.

When I struck out on my own as a translator in Italy nearly 20 years ago, the first thing I did was to find a solid firm of accountants. It wasn't a great problem because, like you, I had good business contacts. In fact, I have stayed with the firm I started out with, which has grown over the years as indeed has my own much more modest enterprise.

Your main problem is that Italian legislation doesn't - for the time being, at least - encourage employees to work on a freelance basis as well, no matter how much in demand their skills are. If your translations turn out to have a ready market, you may find yourself having to make some sort of a decision (it doesn't take very long to earn 5,000 euros!).

The only advice I can offer is to make very sure that you have a decent client portfolio and serious prospects of earning more than your current gross salary before you give up the day job.

Oh, and good luck when you do

Giles

[Edited at 2009-07-15 20:27 GMT]


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Holly Carlile  Identity Verified
Italy
Local time: 04:39
Italian to English
+ ...
TOPIC STARTER
Thank you! Aug 10, 2009

Just a quick message to thank everyone who replied to this thread so quickly - all the information you provided me with was really very useful and helped me to better understand the situation. I've also been doing further research on the internet and talking to tax lawyers and commercialisti as suggested, and now feel much clearer on things.

Thanks again to everyone and buone vacanze a tutti!

Holly


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xxxLionel_M
Local time: 04:39
English to French
+ ...
Resident in Italy Aug 10, 2009

I wish also to point out an important issue in this case: "la residenza"

Indeed, if you do not have "la residenza in Italia", i.e. if you are not resident in Italy, even though quite unlikeky if you work full time in Italy, you cannot open a PIVA, as far as I know.

In this case, let's imagine that you are a UK resident, then you do not have to apply 20%RA nor worry about IVA issues. You should issue your invoice from UK, you can even get paid in Italy, but of course will have to pay your taxes in UK, according to UK laws.

I hope this may help.

Good luck

Lionel

[Edited at 2009-08-10 13:50 GMT]


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