Liquid Freelance in Europe: Al Dente - The Italian Style
Italy is the 5th most visited country in the world. Millions of people come every year looking to experience the culture, see ancient monuments, and eat the famously delicious food. But Italy is much more than just the Colosseum and mouthwatering espresso…it’s actually home to many independent workers who are also trying to navigate the freelance economy, just like those we saw in the previous articles.
Deskmag takes a look at a firsthand account from an architectural engineer, who has been working in the Italian capital as freelancer. The levels of complexity are quite high in this case, and the use of a certified Accountant, or Commercialista, is advised.
The term most commonly used here is that of self-employed or freelance (lavoratore autonomo or libero professionista). Even more so, the name of the Value-Added Tax has coined the name of this working category as Partita IVA (IVA meaning VAT).
It is a phenomenon highly on the rise, due to scarcer and higher taxation plans of contract work that make it also more convenient for employers. The taxation system is considered a dual system, as it comprehends two different sorts of freelancers: those pertaining to professional associations and those who exercise their profession independently.
Since belonging to a specific category can be time-consuming and expensive, I decided to start working immediately after my degree. In my first steady employment they asked me to open a freelance account. The freelance workforce in Italy is considered to count over 2 million taxpayers. Nevertheless, the average worker in Italy pays 44-46% in taxes and for freelancers this quota does not vary significantly, although recent estimates have shown reported average income tax to have reached 54%.
For every invoice, I must include my VAT Tax number as well as that of my employer/client, or alternatively their Taxpayer Number (Codice Fiscale) in case the client does not have a company or does not need to detract the invoice from taxes. There are two deductions visible in the invoice: The first one is of 4% and it is the national pension fund. This particular deduction is usually counted additionally to the gross total (in Italian it would be the Totale Lordo), and the sum of these I will call for the purposes of this article the gross-gross.
There is then a 21% Value-Added Tax deducted, which leaves us with the net total (Totale netto). From this total one must then at the end of the year pay one’s income tax, which we could at this point call thenet-net. Last year I paid 27% of income tax, called IRPEF (imposta sul reddito delle persone fisiche).
This percentage varies depending on yearly turnover, between 23% and 43% with bottom and top thresholds of 15’000€ and 75’001€, although the numbers may vary further within different working categories. There is no minimum threshold for which taxpayers are exempt, and there are no separate health insurance costs.