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Setting up as a freelance translator in Italy as British citizen
Thread poster: Simon Hoddinott

Simon Hoddinott
Germany
Local time: 22:07
German to English
+ ...
Mar 11, 2016

I'm not sure if anyone will be able to help me, but thank you in advance for reading! I'll just use the original Italian/British terminology to avoid confusion.

Now that I am nearing the €5,000 limit, over which (I believe) I am required to register for a partita Iva and pay taxes in Italy, I would like to set up as a sole trader. I am a dual British/Italian citizen but as far as I know my residence is still in the UK, because I never changed it. It may well be that my tax residence is now in Italy, because I have been living here for the past three years and moreover I intend to carry on living here for several more years.

My first reaction was to apply for a partita Iva under the new regime forfetario "start up", which imho offers some reasonable benefits, i.e. the imposta sostitutiva at 5% on a taxable base of 78% of one's income, plus 27.72% INPS and maybe (?) some other regional taxes and the fees for the services provided by a commercialista. However, even with these favourable conditions it all seems rather disadvantageous compared to the tax burden for salaried employees in Italy. Furthermore, I only intend to work part-time and if I have to cough up every time I visit the commercialista it might become quite unprofitable.

An acquaintance told me that I may be able to register as a sole trader in the UK instead. To my knowledge, the tax burden in the UK is much lower and the registration process seems very straightforward, and I would also avoid the expenses for a commercialista. I don't know if it's possible to choose to pay UK taxes and then simply live in Italy, or if it is possible to set up as a sole trader in the UK (to avoid the red tape in Italy) and then pay Italian taxes. Even if it were legally possible to work in Italy and make out invoices as a Brit, it would also entail transferring my income from a UK account to an Italian one (?), which in my understanding doesn't come free of charge. I currently only work for clients based in Italy so I would need to convince them to pay to a UK account, which might also prove troublesome.

What would you recommend me to do? Any advice would be greatly appreciated! I am also open to other solutions that I haven't considered above. Please correct me if I'm wrong regarding anything I've written!

Simon


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Don't Mar 12, 2016

I don't know anything about Italy in particular, but there are laws, regulations and international conventions to determine where you pay tax and social charges; it is not something you decide yourself.

What tax is concerned, so-called double tax agreements between countries determine which country is entitled to tax which type of income under which circumstances. The agreement between the UK and Italy is here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/412181/italy-dtc.pdf .


ARTICLE 14

Independent personal services

(1) Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

(2) The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.4


As nearly all such agreements, this one determines that the activity is taxed where it actually takes place.

What social charges are concerned within the EU, the EEA and Switzerland, European Regulations define where they are due, more particularly REGULATION (EC) No 883/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 29 April 2004 on the coordination of social security systems
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32004R0883R(01)&from=EN

Article 11 3. (a) stipulates that "a person pursuing an activity as an employed or self-employed
person in a Member State shall be subject to the legislation of that Member State;"

Not surprisingly, you have to pay tax and social charges in Italy if that's where you work. You can set up all the structures you want in the UK, but unless you actually work in the UK, income earned through these structures would still be subject to Italian tax and social security, and you would just make things even more complicated with different tax years and a lot more.

It doesn't matter if you are paid to a bank account in Italy or the UK or the North Pole; it has no relevance for the question of determining where you have to pay tax and social charges. You can get British clients to pay in pounds into a British bank account, but it is still subject to Italian tax and social charges if you work in Italy.

By the way, you said your residence may be in the UK. Your residence for tax purposes is where you actually fulfil the criteria for being subject to tax. English law has provisions for another concept: where you are domiciled. That can be elsewhere, but it would not change anything for you, and many countries have no such concept.

If you want to do this legally, you either have to do it the Italian way or go and work in another country.


 

Sheila Wilson  Identity Verified
Spain
Local time: 21:07
Member (2007)
English
+ ...
Oh dear Mar 12, 2016

You seriously need to consider your position, I think. Stop listening to acquaintances and start reading up laws. Being an EU citizen allows you to stay for 90 days in another EU country without completing any paperwork, not years. And AFAIK a freelancer is always deemed to be resident in the country from where the invoices are issued (being taxed as physical person). A limited company owner can be resident elsewhere.

As said, there are few choices and many obligations. Only the rich and powerful get to chooseicon_frown.gif. How much do you want to live in Italy? I know my financial position would be better in my native UK but I still moved from there to France to Spain (even worse for tax). But now I'm here I have a mountain of forms to fill in and taxes to pay. No choice at all.


 

Tom in London
United Kingdom
Local time: 21:07
Member (2008)
Italian to English
Get an accountant Mar 13, 2016

Simon Hoddinott wrote:

An acquaintance told me that I may be able to register as a sole trader in the UK instead. .....
What would you recommend me to do? Any advice would be greatly appreciated! I am also open to other solutions that I haven't considered above. Please correct me if I'm wrong regarding anything I've written!

Simon


I feel your pain, and I understand why you are looking for a way out of the Italian administrative nightmare, but "an acquaintance told me" is not the correct approach to correctly managing your tax affairs. Your place of residence **FOR TAX PURPOSES** is Italy, and for that reason you are exclusively subject to Italian tax rules. Not the UK, or wherever else you have been told you might get a better deal.

I speak as one who lived and worked in Italy for more than 20 years and finally gave up, despite all the other outstandingly positive aspects about living in Italy. The administrative requirements in general, particularly the tax requirements, were just too onerous, time-consuming, and impossible to understand; added to which as a non-Italian with a very non-Italian surname, I had to be much more scrupulous than native Italians about complying with all the rules because whilst Italians have many ways to "fare il furbo" with their authorities, foreigners can't do that.

Your options are:

1. Remain in Italy, "take it in the teeth" (as the Italians say), get yourself a good (i.e. well informed, and non-furbo) accountant, and enjoy all the delights of living in a wonderful country. Read Kafka. It will help you to understand your situation.

2. Re-establish yourself in the UK and enjoy the general greyness, the unsociabiity of the British, etc.. but the very simple tax and administrative system.

Your choice !

[Edited at 2016-03-13 08:09 GMT]

P.S. You may find this thread illuminating, or not:

http://www.proz.com/forum/getting_established/281995-setting_up_as_a_freelancer_in_italy.html

[Edited at 2016-03-13 08:13 GMT]


 

Simon Hoddinott
Germany
Local time: 22:07
German to English
+ ...
TOPIC STARTER
Thank you! Mar 13, 2016

Thank you very much for your kind replies! The link to the other thread was also particularly useful, Tom.

I will have to take some time to do some calculations, because at this rate it seems obvious that it would be more profitable and less time-consuming simply to work at weekends in a shop. As I said, this would only be a part-time occupation, as I will be studying full-time for a degree during the week.

It appears that I'm not even eligible for the €5,000 tax-free allowance, because as soon as your occupation stops being occasional (i.e. taking place on more than 30 days a year), you have to register for VAT/a partita Iva. But the agencies I've worked with so far have been more than happy to pay me with ritenute d'acconto even on a monthly basis, which would seemingly violate the 30-day rule.

Perhaps it would be better to simply seek some other form of employment, but I still haven't tested the water; as far as I know part-time jobs are quite rare in Italy.

Thank you once again for taking the time to answer my questionsicon_smile.gif


 

Mirko Mainardi  Identity Verified
Italy
Local time: 22:07
Member
English to Italian
I'm afraid that's not how it is... Mar 13, 2016

Simon Hoddinott wrote:

... which imho offers some reasonable benefits, i.e. the imposta sostitutiva at 5% on a taxable base of 78% of one's income, plus 27.72% INPS and maybe (?) some other regional taxes and the fees for the services provided by a commercialista.
Simon


I think you have those numbers mixed up. The 5% "substitute tax" is from the previous "lighter regime", while the "profitability coefficient" is from the new one (don't forget that this also means you won't be able to deduct any costs...).

From the Agenzia delle Entrate website:

"Il reddito imponibile è determinato applicando all'ammontare dei ricavi o dei compensi percepiti un coefficiente di redditività, diversificato a seconda del codice ATECO che contraddistingue l'attività esercitata. Sul reddito imponibile si applica un'imposta sostitutiva dell'Irpef, delle addizionali regionali e comunali e dell’Irap, pari al 15%." - http://goo.gl/FldPNt

As things stand, the only "advantage" you have is slightly less bureaucracy and paperwork (and not being subject to the hideous "studi di settore"), but you should definitely ask a "commercialista", hoping they're knowledgeable in international services regulations and up to speed with the (appallingly continuous) changes.


 

Simon Hoddinott
Germany
Local time: 22:07
German to English
+ ...
TOPIC STARTER
New legislation 2016 Mar 13, 2016

I wasn't aware that the substitute tax replaced all other taxes apart from INPS, thank you Mirko.

For the benefit of anybody who happens to stumble on this thread, I shall post some links to a few websites to help clarify the matter. Frustratingly I cannot find information which confirms the 5% substitute tax on the website of the Agenzia delle Entrate. However if I am not mistaken, it appears that as of January 2016 the "regime agevolato" is no longer accessible; instead, anybody who wishes to register for a partita Iva will have to choose from the regime ordinario, regime forfetario or regime forfetario "start up", whereby the last type prescribes this 5% imposta sostitutiva.

http://24o.it/tQU4fq
https://www.fiscoetasse.com/approfondimenti/12025-la-legge-di-stabilit-2015-presenta-il-nuovo-regime-agevolato.html
http://www.professionearchitetto.it/news/notizie/21727/Regime-dei-minimi-vademecum-per-le-partite-IVA-dal-2016

Having said that, please correct me if I'm wrong.

[Edited at 2016-03-13 18:45 GMT]


 

2G Trad  Identity Verified
Italy
Local time: 22:07
Member (2000)
English to Italian
+ ...
First 3 years Mar 13, 2016

Mirko Mainardi:
Simon Hoddinott:
... which imho offers some reasonable benefits, i.e. the imposta sostitutiva at 5% on a taxable base of 78% of one's income, plus 27.72% INPS and maybe (?) some other regional taxes and the fees for the services provided by a commercialista.
Simon

I think you have those numbers mixed up. The 5% "substitute tax" is from the previous "lighter regime", while the "profitability coefficient" is from the new one (don't forget that this also means you won't be able to deduct any costs...).

From the Agenzia delle Entrate website:

"Il reddito imponibile è determinato applicando all'ammontare dei ricavi o dei compensi percepiti un coefficiente di redditività, diversificato a seconda del codice ATECO che contraddistingue l'attività esercitata. Sul reddito imponibile si applica un'imposta sostitutiva dell'Irpef, delle addizionali regionali e comunali e dell’Irap, pari al 15%." - http://goo.gl/FldPNt

For newly created businesses (even though it seems Simon has been doing this for many years) the tax rate is reduced by one third for the first 3 years (= 5%).

For translators the default deduction rate is always 22%.

Cheers
Gianni


 

Mirko Mainardi  Identity Verified
Italy
Local time: 22:07
Member
English to Italian
See? Mar 13, 2016

Simon Hoddinott wrote:

I wasn't aware that the substitute tax replaced all other taxes apart from INPS, thank you Mirko.

For the benefit of anybody who happens to stumble on this thread, I shall post some links to a few websites to help clarify the matter. Frustratingly I cannot find information which confirms the 5% substitute tax on the website of the Agenzia delle Entrate. However if I am not mistaken, it appears that as of January 2016 the "regime agevolato" is no longer accessible; instead, anybody who wishes to register for a partita Iva will have to choose from the regime ordinario, regime forfetario or regime forfetario "start up", whereby the last type prescribes this 5% imposta sostitutiva.


Appallingly continuous changes, as I was saying...
It seems that neither me, nor the Agenzia dell Entrate were aware of it (although, if you navigate back on the page I linked, there is a "Attenzione: le informazioni contenute in questa scheda informativa sono in corso di aggiornamento").

At any rate, the prerequisites for access (which are the same as 2015, apparently) could still pose a problem, so you should look into that.

Break a leg!icon_smile.gif


 

Tom in London
United Kingdom
Local time: 21:07
Member (2008)
Italian to English
Football Mar 13, 2016

Mirko Mainardi wrote:

Appallingly continuous changes, as I was saying...


Yes: like a game of football in which the goalposts are being continuously moved. Appalling indeed!


 

Fiona Grace Peterson  Identity Verified
Italy
Local time: 22:07
Member
Italian to English
Please Mar 13, 2016

get yourself an accountant! Although changes to the system happen so swiftly, even they risk getting left behind at times (no joke).

I have an excellent accountant in Bologna, if you want I will happily pass his name on to you.


 

Balasubramaniam L.  Identity Verified
India
Local time: 01:37
English to Hindi
+ ...
Wait till the referendum is over Mar 14, 2016

I think there is a 50-50 chance that UK voters may decide to bid adieu to the European Union and politically and financialy separate from the Continent and its euro currency.

If that happens it will put all UK citizens currently living in Europe in a mess, both financially as well as socially as they could be made the target of vindictiveness or opprobium of a thwarted EU which is already stretched to its limits of patience by the immigration crisis and the financial downturn.

It could result in a massive exchange of population between UK and Europe with the concomittant disruption in financial matters.

So, if I were you, I wouldn't burn my boats either way. There could be advantages in your dual citizenship position in the coming days of uncertainty.

Wait for six more months when the picture will become more clear visavis the status of UK in the EU.


 

Tom in London
United Kingdom
Local time: 21:07
Member (2008)
Italian to English
Hmmm Mar 14, 2016

Balasubramaniam L. wrote:

I think there is a 50-50 chance that UK voters may decide to bid adieu to the European Union and politically and financialy separate from the Continent and its euro currency.

If that happens it will put all UK citizens currently living in Europe in a mess, both financially as well as socially as they could be made the target of vindictiveness or opprobium of a thwarted EU which is already stretched to its limits of patience by the immigration crisis and the financial downturn.

It could result in a massive exchange of population between UK and Europe with the concomitant disruption in financial matters.

So, if I were you, I wouldn't burn my boats either way. There could be advantages in your dual citizenship position in the coming days of uncertainty.

Wait for six more months when the picture will become more clear visavis the status of UK in the EU.


That is a very interesting point. Mr. Balasubramaniam is right; it's all up in the air until June. If the UK takes the (foolish, in my view) decision to leave the EU, British citizens in Italy will find themselves on a par with African, Asian, or American citizens living in Italy, and an already knotty situation will probably become well-nigh impossible unless, of course, as someone said above, you are very, very rich.

[Edited at 2016-03-14 13:31 GMT]


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Pure conjecture Mar 14, 2016

Balasubramaniam L. wrote:

I think there is a 50-50 chance that UK voters may decide to bid adieu to the European Union and politically and financialy separate from the Continent and its euro currency.

If that happens it will put all UK citizens currently living in Europe in a mess, both financially as well as socially as they could be made the target of vindictiveness or opprobium of a thwarted EU which is already stretched to its limits of patience by the immigration crisis and the financial downturn.

It could result in a massive exchange of population between UK and Europe with the concomittant disruption in financial matters.

So, if I were you, I wouldn't burn my boats either way. There could be advantages in your dual citizenship position in the coming days of uncertainty.

Wait for six more months when the picture will become more clear visavis the status of UK in the EU.


I disagree with this advice. First of all, nobody can predict if Brexit will happen of not. Secondly, nobody knows how conditions will be for expats and businesses in case of a Brexit, so there is no way of predicting that they will be in a mess. Someone who is a dual citizen will keep his rights in both countries anyway.

In many cases, expats bring money and prosperity to their host countries, so it would be beyond stupid to start making life difficult for them. Again, we don't know, but until we know, all we can do is to apply the existing rules and not put our lives on hold.

Those who have already lived legally in a country for more than five years will in most cases be able to obtain permanent residence rights. There may also be agreements to the effect that people already in place before the referendum may keep their rights, and there will almost certainly be transitional provisions, so someone who followed your advice could actually lose out on such rights.

It is in nobody's interest to cause a sudden mass migration in Europe, and no matter what one may think about the EU, I don't believe leaders will be so dumb as to cut their noses to spite their faces.


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Or not much may change for them Mar 14, 2016

Tom in London wrote:

That is a very interesting point. Mr. Balasubramaniam is right; it's all up in the air until June. If the UK takes the (foolish, in my view) decision to leave the EU, British citizens in Italy will find themselves on a par with African, Asian, or American citizens living in Italy, and an already knotty situation will probably become well-nigh impossible unless, of course, as someone said above, you are very, very rich.

[Edited at 2016-03-14 13:31 GMT]


As you say, it will all be up in the air, so we don't know which rights they will keep and which they will lose and which transitional provisions may apply. It can be anything in between all or nothing. If they end up with agreements like Norway or Switzerland, it won't make much difference, if any.

In any case, I don't see that it would be in anyone's interest to cause a major upheaval.

A Brexit vote will not have instant effect, so nothing will change in the short term. Should Brexit be the result, conditions for leaving will first have to be negotiated, and until that process is over, everything will remain is it is now, and the UK will still be a Member State in that period.


 
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