# Is the Italian Regime Forfettario (Freelancer Partita IVA) a scam?



## bellicose

I live in Italy but work remotely for a US-based employer (income in dollars, which go to my American bank account). I'm drowning in tax rules and conflicting information. The Regime Forfettario/Freelancer Partita IVA sounds like a pretty good deal, but is it too good to be true? Things are so often not what they seem in this country.

Is anyone using it now? Please advise.


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## Bevdeforges

Have moved you to the Italy forum where you're more likely to find someone familiar with the regime in question.

But, generally speaking, where your employer is based and where you are paid or in which currency have no bearing on which country you pay your taxes to.


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## bellicose

Bevdeforges said:


> Have moved you to the Italy forum where you're more likely to find someone familiar with the regime in question.
> 
> But, generally speaking, where your employer is based and where you are paid or in which currency have no bearing on which country you pay your taxes to.


Oh, yes, I know that I'm obligated to file here. I'm just trying to find the best way to do so (that doesn't kill me financially) and I'm getting conflicting information about how to do it. And I've been here long enough that I know not to trust the system. So any personal experiences with this situation would help me so much!


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## NickZ

Schede - Regime forfetario (le regole 2020) - Che cos'è - Agenzia delle Entrate


Regime forfetario (le regole 2020)




www.agenziaentrate.gov.it







> le persone fisiche la cui attività sia esercitata prevalentemente nei confronti di datori di lavoro con i quali sono in corso rapporti di lavoro o erano intercorsi rapporti di lavoro nei due precedenti periodi d’imposta ovvero nei confronti di soggetti direttamente o indirettamente riconducibili a tali datori di lavoro, fatta eccezione per chi inizia una nuova attività dopo aver svolto il periodo di pratica obbligatoria ai fini dell’esercizio di arti o professioni


Under exclusions. That basically means an employee can't convert themselves to this.


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## modicasa

The forfettario works well for alot of people, it avoids the need for a partita IVA, but obviously you pay a flat rate of tax and have no deductions. Bear in mind though that there is talk of phasing it out, so if you opt for it this year, its not a given that itll still be there in 3 or 4 years, and then your options will be very limited. If your employer allows you to work freelance, and you are eligible, its a valid option.


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## bellicose

Yes, that's exactly what I mean - it may or may not even last, so is it just a scam to catch out freelancers who have been working in nero? 

Also, I read that there's the obbligo to pay with an electronic invoice; how is that possible if your clients are overseas and you have double tax obligations? I can't invoice my clients twice.

If anyone has gone through the process, please do get in touch as I'm tearing my hair out!


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## NickZ

An Italian business with no US presence has no USA income tax liability. If you're an US citizen and that's what you're worried about that's not the business.


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## bellicose

NickZ said:


> An Italian business with no US presence has no USA income tax liability. If you're an US citizen and that's what you're worried about that's not the business.


It's the oher way around - living in Italy, working remotely for a US company, US and Italy double citizen. So tax liability in both countries, just not sure how to do it.


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## modicasa

No, if you're on forfettario then you can avoid the electronic invoice it seems. I have regular partita IVA and have to do it, but my geometra for example doesnt. If you've been working in nero in Italy then yes it would catch you out for some of your income, but if you're working for a foreign company and ducking under all the red tape, it wouldnt save you.


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## NickZ

bellicose said:


> It's the oher way around - living in Italy, working remotely for a US company, US and Italy double citizen. So tax liability in both countries, just not sure how to do it.


If you're an employee you're subject to Italian tax. Like any other employee. Employment income is almost always taxed in the country of work.

The option you're asking about is basically running your own business. You're still wholly liable to pay Italian tax. 

The US treatment of citizens is something else. Bev can comment on that better than me but IIRC you need to clear above a certain threshold before it becomes an issue.


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## Bevdeforges

Your US tax obligations are distinct from the Italian situation. If you set up some sort of Italian business entity (what I assume this forfettario thing is) then you are not employed by a US employer. You are a "contractor" in the US parlance and you must invoice your "customer" for your services. You would then file a Schedule C with your US returns - but "self-employment" income like that is still subject to the US Foreign Earned Income Exclusion (form 2555). See IRS publication 54 for all the gory details.

Don't know about Italy, but the US is very sensitive to situations where a "sole proprietorship" (i.e. a freelance set up) has only a single "customer" and you usually need to be very cautious about how much "control" that single customer exercises over you. The notion of being a contractor is supposed to mean that you run your own business, so are free to set your own hours, rates and can take on additional customers as you please.


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## modicasa

Just for those who dont know - the forfettario si a scheme to simplify the notoriously complicated Italian fiscal system. Instead of opening a VAT number and all that, you can opt for the forfettario which is a flat tax with no deductions and no further red tape. It does look like its going to be phased out in the not too distant future, though we dont know if that will be for new applicants or existing ones too....


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## bellicose

modicasa said:


> Just for those who dont know - the forfettario si a scheme to simplify the notoriously complicated Italian fiscal system. Instead of opening a VAT number and all that, you can opt for the forfettario which is a flat tax with no deductions and no further red tape. It does look like its going to be phased out in the not too distant future, though we dont know if that will be for new applicants or existing ones too....


Yes, this is exactly what I'm talking about. Does the flat tax only exist to weed out freelancers and then slam them with heavy taxes in the future? 

Also, is the forfettario different from the Partita IVA for freelancers? I thought they were the same thing.


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## Bevdeforges

France has a similar business status - the auto-entrepreneur or micro-entreprise. Basically, it's sort of lightly regulated "sole-proprietorship" - as such it isn't recognized by the US IRS as a corporation, but rather as a single person business of the type that is reported on one's personal income tax form using a Schedule C. The US allows you to take expenses against your revenue - but the French Fisc treats it somewhat like the description above of how Italy does.


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## NickZ

PIVA is a bigger group. Earlier on I posted a link to the requirements for the forfettario . The people who don't qualify or because the math doesn't work would still be P. IVA they'd just have different reporting requirements.

For example I don't think anything but a really tiny shop could opt for the flat tax. IIRC only 20K a year in purchases. That's aimed at services industry not retail.

But for the 15% you're giving up all your deductions . When Italy brought in the flat tax for rental properties many people jumped until they did the math and realized that even with a then 10% tax rate the loss of deductions made many older smaller owners worse off.

Today only wealthy investors use that flat tax.


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## bellicose

I was talking to our family accountant this morning and he said that the Regime Forfettario has been around since 2014, so it's not a scam to catch out freelancers - if it were a scam, it would have been abolished after one year. He also said that yes, Draghi wants to phase it out, but so many people are benefitting from it that it most likely won't happen, and even if it does, it will be replaced with something that suits people. Does that track for anyone? 

Also, I don't have a business. I am a freelancer for a company in the United States making under 65K euro a year, and don't really need any deductions. They just told me that I can only invoice them using my US tax ID. Does that seem like I can still take advantage of this?


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## Bevdeforges

bellicose said:


> They just told me that I can only invoice them using my US tax ID.


By which I assume they mean your US SSN. Is there any reason you wouldn't be able to include your Italian business number on your invoices, too? In France there are certain requirements for an invoice to be "legal" - in similar circumstances, I'd make sure my invoice conforms to the local requirements - and then just add your SSN and/or any other information your employer is asking for.


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## bellicose

Yes, you're right - the accountant at work said it's possible to submit an invoice with both tax IDs.

Has anyone done this personally?


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## modicasa

Deducting expenses depends on your business. If you own a shop selling food then you get about an 85% deduction rate. An author will get less than 10%. The forfettario is for people earning up to 65000 pa, and is very widely used and appreciated - lots of freelance people use it.


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## bellicose

I don't actually have a business; I provide freelance editorial services for a company in the US. All I want is to be in regola and not get killed in taxes.


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## Bevdeforges

If you are working "freelance" then you do have a business of sorts and you need to declare and register it. (At least that's how things work in much of Europe.) It is the business that is responsible for paying the various taxes and social insurances for you, even if ultimately you declare and pay them on your personal tax declaration.


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## dave2020

If you are a resident in Italy, you pay taxes to Italy, period. It doesn't matter that you work for a U.S. company. The only income exempt from Italian taxation is U.S. or State govt. pension income.

I have seen a lot of people in this and other forums who believe that they can live a carefree "bella vita" in Italy, yet not have to deal with Italy's high taxes and complex and confusing bureaucracy. That is a myth.

There is no question that Italy is a beautiful place, but it also has its difficult realities, just ask any Italian. 

You stated "All I want is to be in regola and not get killed in taxes". Well, you are going to get killed in taxes if you live in Italy. One doesn't get to only enjoy the benefits of living in Italy without also having to deal with the negative aspects like taxes. 

Dave


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## modicasa

Taxes in Italy depend on lots of factors, but its certainly nothing like as complicated as the US which has perfected nitpicking to an art form. As a freelancer, alot can depend on your age - there are incentives open to young people, first timers, first time IVA (up to 55 yrs old) so its not blaket rules. It also can depend where you go - in the south there are preferential tax schemes for the first 7 years. You need a professional commercialista frankly who will guide you. 
Of course Dave you can be a resident and not have to pay to taxes at all, but you're also not allowed to work - if you choose elective residency you can have the best of both worlds, but you need the money in the bank to start with.


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## NickZ

modicasa said:


> Of course Dave you can be a resident and not have to pay to taxes at all, but you're also not allowed to work - if you choose elective residency you can have the best of both worlds, but you need the money in the bank to start with.


That assumes you have zero income. No pension income. No interest income. Very few people have enough cash to live like that. Bill Gates?


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## modicasa

NickZ said:


> That assumes you have zero income. No pension income. No interest income. Very few people have enough cash to live like that. Bill Gates?


No it doesnt. it just means you Can't work in italy


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## NickZ

Then you pay tax.

Even the non dom tax status they brought in a few years back has I think a 5% worldwide income tax rate.

If you're just a normal expat (even if elective non working) you pay full tax.


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## modicasa

I suggest you read the normativa for residenza elettiva. You can start here 
La Legge per Tutti - Informazione e consulenza legale › ...
Extracomunitari: lavoro in Italia e tassazione - La Legge per Tutti


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## NickZ

I'd suggest reading the TUIR instead. 

If you think that's true why does the US consulate tell US retires they have to pay taxes on American pensions? 






Internal Revenue Service (U.S. Taxes)


There are no U.S. Internal Revenue Service offices in Italy. For tax assistance, please visit the official IRS website or the "International Services"




it.usembassy.gov





Believe some random website or believe the USA government


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## GeordieBorn

My understanding is that you do NOT pay Italian tax with ER, but like Nick would want to see this on an official site. Trouble with that is it is likely to be in the legislation quoted in the link provided by Modi and my Italian would not be up to it. I don't think any "official" US government site counts for anything as I doubt very much the IRs will be aware of every Italian VISA. Many a site I've come across indicated it is the case you don't pay tax other than in the country you came from/earned income. Perhaps there is a site (like the UK have) whereby you can actually read the legislation?


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## Bevdeforges

GeordieBorn said:


> Many a site I've come across indicated it is the case you don't pay tax other than in the country you came from/earned income.


Not sure what sites you're talking about, but they are dead wrong. You can try over on the Expat Tax forum here and see what folks there tell you, but the general rule is that the country in which you are resident has "first dibs" on taxing all elements of your worldwide income. Then, you go to the tax treaties between the country that is the source of your income and your country of residence for the gory details.





Italy: tax treaties


Tax treaties and related documents between the UK and Italy.




www.gov.uk




I haven't read the treaty, but it's available here - and generally these tax treaties include considerable information on pensions and investment income, plus whatever mechanism is available for avoiding double taxation on these or other categories of income.


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## GeordieBorn

Yes Bev, but that all omits the fact your talking about Italy only, and a specific kind of residency "residenza elettiva ". Like Nick, I too would want to see it on an official Italian site, as it's something many a UK person I know is looking at due to Brexit.


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## NickZ

Honestly people can believe anything they want but I'll ask a simple question. IF ER persons didn't pay tax why did the government invent this?









Italy updates special tax regime for HNWIs and inbound individuals


Article 16 of the Law Decree n° 147 released in September 2015, introduced the 'special tax regime for inbound', becoming operative in January 2016. Read the latest on the amendments to this regime.




www.grantthornton.global





Was it boredom? Did they just forget?



> *Special tax regime for retired people*
> Retired people moving their tax residency to South Italy and receiving pension benefit can opt in for a STR granting the following:
> 
> 
> Any foreign sourced income earned by the taxpayer *is subject to a 7% flat rate tax*. The taxpayer cannot recover the double taxation on income subject to Italian substitutive taxation;


That's Grant Thornton but there is this from PWC



https://www.pwc-tls.it/en/services/assets/docs/non-domiciled.pdf



Like I said the information is in the TUIR if somebody needs some bedtime reading. The TUIR is the Italian tax act or code.

NB that 7% is a very special case. Most people don't get the special rate. Likewise the 100K rate isn't something most people are going to want.


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## GeordieBorn

ER was there long before....


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## modicasa

The TUIR is the guide to tax on income.. All the other links you provide are for people who are fiscally resident in Italy, 'normal' residency if you like. If you get a visa for elective residency then you remain fiscally resident in your home country, but you can live in Italy for a determined period (renewable) and not falling under the Italian tax system as long as you fulfil the prerequisites of the visa. If the IRS disagrees, thats a problem for Americans, it certainly doesnt affect the thousands of Canadians, Swiss and Brits who have elective residency. All the other links you provide are for people who may want to take advantage of incentives under normal residency rules and may not qualify for elective residency visas. Its exactly the same as a someone in Italy on a student visa - they do not fall under the Italian tax system because of their visa type.


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## NickZ

No offense but you're dreaming in technicolor.

What is the first requirement for somebody on an ER when they arrive in Italy?

To register for residence? Yes?

What's the first test for tax residence in Italy? Hint being registered in the Anagrafe

Oh and if you think the Canadian tax office thinks you aren't Italian tax resident? You'd be VERY surprised.


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## modicasa

OK. I give up. I spend half my life in the anagrafe - its my job.


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## alan-in-mesicali

bellicose said:


> I don't actually have a business; I provide freelance editorial services for a company in the US. All I want is to be in regola and not get killed in taxes.


IF I were in your position I would check with a US international accounting firm that is up to date with Italian laws and ask them for a "quote" to handle BOTH your US and Italian tax liabilities. Someone mentioned that the IRS is look hard at "freelancers" with only ONE client... you should examine that carefully to make sure you are "truly" a FREELANCER... Believe me when I say YOU DO NOT WANT TO BE ON THE WRONG SIDE OF THE IRS!!!


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