VAT ITALY: Income declaration | Is it mandatory?

[alinavadean]

Hi,

I have some doubts regarding the income declaration for the works done on Upwork. 

If I'm not having a VAT number (and have no intention to get one), but I'm currently being charged by Upwork with 22% of VAT (cause, of course, I don't have a VAT number added), is it mandatory to get a VAT number if you have an income exceeding 5000 Euro/year?

I mean, I would prefer to keep being charged 22% by Upwork for the VAT tax they transfer to Italy, but is it possible in this context? Do I have to make income declaration anyway?

Thank you in advance!

[mario-palermo]

you have to ask these aspects to your consultant business

Ciao

[alinavadean]

True. The big deal is finding one who understands this online process or web incomes from abroad companies.

[r_satta · Accepted solution]

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Alina V wrote:

Hi,

I have some doubts regarding the income declaration for the works done on Upwork. 

If I'm not having a VAT number (and have no intention to get one), but I'm currently being charged by Upwork with 22% of VAT (cause, of course, I don't have a VAT number added), is it mandatory to get a VAT number if you have an income exceeding 5000 Euro/year?

I mean, I would prefer to keep being charged 22% by Upwork for the VAT tax they transfer to Italy, but is it possible in this context? Do I have to make income declaration anyway?

Thank you in advance!

---

Always ask your accountant first.

In the meantime, you are missing some fundamental points. 
A: "Prestazione occasionale": Example of what you should do (don't delete it, Upw mods, It's only an article about this particular "occasional professional service" in Italy)

• < 5000€
• work must done occasionally, not habitually
• you actually pay 20% of "ritenuta d'acconto" on every "prestazione occasionale". If you have not done it, do it.
• if you make only 500€ but you work continuously for 2 months, that's not under "prestazione occasionale" anymore, since it is habitual.

B: is it mandatory to get a VAT number if € > 5000?

• Yes, it is mandatory. Ask your accountant wether you should make a "partita IVA regime forfettario" or not. Plus you have to consider the INPS registration. That's the most important (and pricey) thing for a freelancer.

C: will Upwork invoices suffice for your individual income determination?

• No, it is waste paper. Upwork will automatically produce an invoice that it's not enough for you (but enough for them) You need to make your invoices in Italian, using euros, using your own numeration, paying a 2€ tax stamp for every invoice higher than 77,47€, and in some cases you should say which law are your following (e.g. "Operazione effettuata ai sensi dell'articolo 1, commi da x a y, legge n. z, etc. etc.). This is if you have a VAT number of course, if you have to make a "prestazione occasionale" it's entirely different but the logic is the same, Upwork invoices are not valid for the Revenue Agency.

As I said at the beginning, always ask your accountant. We are just random people on the internet. I tried to make myself clear, since we can't write in Italian in this forum, but I'm not familiar with the English terminology (it should be clear anyway)

[alinavadean]

Thank you for the complex answer! I actually didn't overpass the 5000 Euro (since I had a long break on Upwork) that's why I was asking those questions regarding the "Apertura P.Iva".

The 22% that Upwork is charging to those who don't register a VAT number was confusing me.

3 years ago I had P.iVa for some works I have done with direct clients in Italy and asking my accountant (and I have even chosen once with experience and costing lots of money) how should I declare those occasional incomes made online.  He said "incomes made abroad, stay abroad. there's no need to bother with them in Italy"

So, the answer is to find a web job specialized accountant.

Thanks again for your helpful reply!

[yulia_sk]

Hello Alina, 

Just see your post, did you find someone who can help you with tax income in Italy? I have similar situation, no one want dealing with abroad income here. If you find it, can you please share your experience with. 

Thank you
Yulia

[5c237e34]

Hi Alina, 

thanks for sharing your story. I'm from Italy and I need to understand if it is actually necessary to open a VAT number in order to collaborate with Upwork and I, like you, have various taxes in Upwork receipts including Service Fee and VAT for Service Fee 22%. Do you have any news about it?

Thank you and have a nice day!

Fabrizio

[hamzatariq380]

Hey Fabrizio,

I'm from Italy too and currently working with direct clients based in the UK and on Upwork. 

The most straightforward answer is YES. You have to open a VAT number because this activity directly goes as self-employed. You can go with a flat tax rate regime which will allow you to avail 5% tax flat tax for the first 5 years + you have to pay an INPS contribution which actually costs a whole leg and it's around 26.23%

This is how your taxes should be calculated. Let's say you're making 10,000 euros per year there's a profit coefficient which is settled by Agenzia Delle Entrate and currently, it's 78% which means only 78% of your income would be taxable. So in the above example, 78% of 10,000 would be 7,800 euros. You have to pay taxes of 7,800 euros. Below would be the taxes breakdown:

5% Flat Tax: 7,800 * 0.05 = 390 euros

26% INPS Contribution: 2,028 euros.

That would be the actual breakdown of your taxes. I find it really difficult to handle this situation with my accountant as he was suggesting it's foreign income and keeping it outside of Italy which is totally wrong by law if Agenzia Delle Entrate will found it then get ready to face some charges however, later on, one of my friend told me about this company called Xolo. 

It's a team of accountants and you just have to pay 40 euros per month as their fee and they will take care of every thing. You can even generate invoices on their accounting software and at the end of the year, they will prepare your tax returns as well. You can find out some more details from here: https://www.xolo.io/ref/HAMTAR1

Do let me know if you have any questions. I found it pretty difficult and there wasn't too much information available but as I have been through this process so know the process really well!

Have a wonderful day.

Hamza

[0d327455]

Hello Hamza I have just seen your reply to this post. Would you kindly tell me what format you used here on Upwork to submit your Partita Iva?I am from Italy and it has been a struggle. Thanks in advance

[hamzatariq380]

Hey Noushin,

When you submit your Italian VAT number on Upwork, it gets rejected and one of the main reasons that Upwork keeps rejecting your VAT is because you have to validate your VAT number. 

Whatever you submit to Upwork, they will reject it as it's an automatic process. You have to go on this website and check your VAT if it's valid here: https://ec.europa.eu/taxation_customs/vies/#/vat-validation

VIES is like a system that exchanges information across all the European Member States and all the states can validate a specific VAT number to see if the VAT number is valid. Mainly Upwork tries to validate your VAT number from here, but as you haven't registered here, Upwork keeps rejecting your request. 

You need to speak to your commercilista who is managing your VAT number and you should request him to do VIES for you. Once he does it it takes a couple of hours for the system to be up to date and if your information is showing on the VIES website then just re-submit your VAT number on Upwork again and they will verify it in a couple of hours!

[0d327455]

Thank you very much for your time and explanations. I validated my VAT but my commercialista told me that issuing monthly invoices is something I can't do on my own and he has to do that and also said that I will need to pay him twice as much! I wanted to make sure he is telling me the truth or I can do it myself without paying anyone. Your response will be a great help.

[hamzatariq380]

Hi Noushin,

No that's wrong and your commercialista is trying to rip you off. 

You can definitely create invoices by yourself and you don't have to pay anyone at all. You can buy a third-party service to create invoices that directly goes to Agenzia delle entrate. 

I will suggest you to use Aruba. Here is the link: https://www.pec.it/acquista-fatturazione-elettronica.aspx

I myself use this service and it costs like 25 euros per year. When signing up please make sure to upload everything such as your VAT number and your codice fiscale too. Once you have this active service you can create as many invoices as you can without paying anyone at all but be careful while creating invoices and make sure to do everything all right such as adding stamp duty and everything. It might be tricky for you for the first time so happy to help if you need any other help here. 

Moreover, if you don't wanna have too much hassle I suggest you get an online commerilista. I used to be with these guys: https://www.xolo.io/it-en.

Their support speaks English and is pretty quick but you have to pay 43 euros per month. 

Lastly, you don't have to pay any commerlista for invoices your guy is just trying to rip you off and that's all!

[0d327455]

Thank you cery much again Hamza for your reply. yes I am also using Aruba but my commercialista said it is different to issue invoices for upwork than to other people in Italy and I can't do it myself. how can I see an invoice sample you have already issued so I learn how I should make it? I would really appreciate it

[alessipier]

Hi, I was subcribed in England without make jobs by personal reasons, now I moved to Italy and continous asking me for this form, an italian tell me that I,ve to pay my contribution in USA and after substract the sum from the italian tax (Partita IVA) Thanks.

[nanakant]

Helly everybody, 

since i have to start understanding better the invoicing as owner of P.IVA Forfettario , could somebody give me exsemples how you create invoice, it should be made in USD or in euro? should it be done on client's name or you put there Upwork data ?
If you can give me some more info i will be more than grateful! 
thanks  🙂 

[hamzatariq380]

Hey Nana,

Try to make invoices in Euros as it would be challenging to prepare your tax returns at the end of the year. 

Secondly, you will make invoices in Upwork's name because, in the end, you will receive payment from Upwork as Upwork is usually releasing funds so it's better to make the invoice on Upworks names.

[5c237e34]

Hi Hamza,

thank you so much for your reply up here, it was very valuable and I have already contacted that expert platform, I will open vat with them shortly. They ask me for the references of the company to make the invoices, in fact, I would have asked you the same thing too, that is, if the invoices should be made to the company with which you collaborate here on Upwork or to Upwork itself. So the invoices have to be made to Upwork? And where are the company details? I also ask you, once you have opened the VAT number and registered on the vies international portal, what should you do in your profile settings? Just put your VAT number and it's done?

Thank you very much, good evening, Fabrizio.

[alexandernovikov]

Certainly you have to do a tax declaration because it's not about VAT on your commissions. It's about self-employment or similar tax on your Upwork income.

[5c237e34]

Hi Alexander,

thank you so much for your reply up here, it was very valuable and I have already contacted that expert platform, I will open vat with them shortly. They ask me for the references of the company to make the invoices, in fact, I would have asked you the same thing too, that is, if the invoices should be made to the company with which you collaborate here on Upwork or to Upwork itself. So the invoices have to be made to Upwork? And where are the company details? I also ask you, once you have opened the VAT number and registered on the vies international portal, what should you do in your profile settings? Just put your VAT number and it's done?

Thank you very much, good evening, Fabrizio.

[4ad95ae2]

Acodind italian ruls if your business incume is les then 5000€ you dont need ( PARTITA IVA ). but as upwork ruls if you sell any of your service you have to pay the tex until you dot add ( PARTITA IVA ).