Registering for a value-added tax (VAT) number in Italy means fulfilling a series of tax obligations that extend beyond paying income tax. Among them, VAT is one of the most important obligations to manage correctly, both for freelancers and businesses that sell goods or services.

VAT rules vary depending on the tax scheme, type of business, and target market. Businesses operating exclusively in Italy must be familiar with the obligations relating to VAT registration, electronic invoicing, and tax rate management. Businesses that sell to customers in other EU countries must also take into account the rules governing cross-border B2C sales and the One Stop Shop (OSS) scheme.

In this article, we explain how VAT works for freelancers and VAT-registered businesses in Italy, outline key thresholds to monitor, detail how to properly manage electronic invoicing through Italy’s Exchange System (SdI), and describe the rules that apply to sales to customers in other EU countries.

Key takeaways

• Registering for value-added tax (VAT) entails specific VAT obligations, including issuing invoices, correctly applying tax, and complying with legal reporting obligations.
  
• Electronic invoicing via the SdI is now the standard for most Italian VAT-registered businesses and allows for invoice management in digital format.
  
• For B2C sales to other EU countries, there is a single threshold of €10,000 per year. Above this limit, VAT is generally charged at the rate of the customer’s country.
  
• Under the One Stop Shop (OSS) scheme, businesses and freelancers can report and pay VAT due in different EU countries through a single registration and a periodically filed tax return.
  
• Stripe Tax helps businesses monitor tax thresholds, automatically calculate applicable VAT, and meet compliance obligations in the markets where they operate.
  

VAT numbers and obligations

When a business is set up on a regular and ongoing basis in Italy, VAT registration is necessary in most cases. A VAT number is the identification number assigned by the Italian Revenue Agency that allows individuals to legally carry out professional, commercial, or craft-related business and fulfill their related tax obligations.

Registering for a VAT number generally requires a few preliminary steps:

• Submit the declaration of the start of business activity to the Italian Revenue Agency via Form AA9/12 for natural persons and AA7/10 for companies, entities, and associations.
  
• Choose the Classification of Economic Activity (ATECO) code that identifies the business.
  
• Choose the applicable tax scheme, such as the flat-rate regime or ordinary regime.
  
• Register in the Business Register with the Chamber of Commerce, if required for the business type.
  
• Register with the relevant social security agency, such as the Italian National Social Security Institute (INPS) or a professional pension fund.
  

Once registration is complete, the professional or business must comply with a series of administrative and tax requirements. These include issuing invoices, keeping accounting records, filing tax returns, and, where applicable, managing VAT.

Understanding the VAT obligations that apply to the business from the outset can help avoid administrative errors and manage invoicing. This applies both to those who operate exclusively in Italy and to those who sell goods or services to customers abroad.

What are the VAT obligations for freelancers?

With VAT for freelancers, one of the main issues involves the tax scheme. Professionals operating under the ordinary regime are generally required to charge VAT to customers, record transactions, and pay the tax due to the Revenue Agency.

However, those who operate under the flat-rate regime follow different rules. In this case, VAT is typically not charged on the invoice, and the right to deduct purchase tax does not apply. This is the ability to recover the VAT paid on goods and services purchased for business purposes. However, certain specific requirements can still apply for international transactions or particular types of transactions.

Tax thresholds and key considerations

Unlike in some countries, Italy does not have a revenue threshold that allows businesses and professionals to routinely carry out economic activities without registering for a VAT number. The requirement does not depend on the revenue generated. Instead, it depends primarily on the nature of the business and whether it is ongoing.

This distinction is important because people often believe that it’s not necessary to register for VAT if revenue stays under €5,000. However, this amount is actually associated with occasional self-employment. Once a professional exceeds this threshold, specific contribution obligations to the INPS can arise.

However, this amount does not constitute a general threshold for registering for VAT. If business occurs on a regular and ongoing basis, the obligation to register for VAT can apply, even for smaller revenue amounts.

After registering for VAT, it’s important to keep track of certain limits set forth in tax legislation. Exceeding certain thresholds can affect the tax scheme applicable to the business or change the VAT obligations associated with transactions in Italy and abroad.

Some of the most important aspects to consider include the following:

• Limits set for eligibility and continued participation in certain tax schemes, such as the flat-rate regime
  
• Volume of sales made to customers residing in other countries
  
• Thresholds that can lead to new tax or reporting obligations in foreign markets
  

Tax schemes and thresholds

The most well-known thresholds are those associated with preferential tax schemes. For instance, the flat-rate regime has specific eligibility and continuity requirements, including the annual revenue or compensation limit set forth in current legislation. Exceeding this limit can result in exclusion from the flat-rate regime and the application of different tax rules, including those regarding VAT.

Selling abroad and new VAT obligations

As business increases, many companies and professionals begin selling goods or services to customers located in other countries. In such cases, new tax rules can apply that are different from those applicable to domestic transactions.

Depending on business type and markets served, exceeding certain thresholds can result in new obligations regarding VAT registration, reporting, or payment. One of the most important thresholds for businesses operating in the EU concerns cross-border B2C sales, which we examine in the next section on the OSS scheme.

Cross-border B2C sales and the OSS scheme

To simplify VAT management for B2C sales to other EU countries, the EU has introduced the OSS scheme. It allows businesses to report and pay VAT owed in multiple member states through a centralized procedure.

When does the OSS apply?

For businesses selling online to private customers residing in the EU, one of the most important thresholds is the one applicable to cross-border B2C sales.

Legislative Decree No. 83 of May 25, 2021 introduced a single threshold of €10,000 per year (excluding VAT). This threshold is applicable to the total value of the following transactions carried out with private customers residing in other EU member states:

• Intracommunity distance sales of goods
  
• Provision of telecommunications, broadcasting, and electronic (TBE) services
  

As long as the total value of these transactions remains below the threshold, the VAT rate of the country where the business is established generally continues to apply. However, once the threshold is exceeded, VAT must generally be applied at the rate applicable in the customer’s country, along with reporting and payment obligations.

The OSS scheme in Italy: How it works

The OSS scheme in Italy allows businesses to avoid setting up separate VAT accounts in each member state where they make B2C sales. In fact, through a single registration, businesses can report and pay the VAT owed in various European countries via a centralized procedure managed by the Italian Revenue Agency.

Depending on the type of transaction, the OSS scheme—and Import One Stop Shop (IOSS) scheme for imports—can be used to manage the following transactions:

• Intracommunity distance sales of goods
  
• Distance sales of goods imported from third countries or territories—excluding goods subject to excise taxes—via the IOSS scheme
  
• Certain domestic sales of goods made through online platforms or other electronic interfaces that are considered suppliers for VAT purposes
  
• Provision of services to individuals by taxable entities not established in the EU or established in a member state other than the one of consumption
  

Participation in the OSS scheme is optional, but for many digital businesses, it’s especially effective for simplifying international tax compliance.

Do businesses need the OSS scheme to sell abroad?

If cross-border B2C sales remain below the threshold and the conditions set forth in the regulations are met, it might not be necessary to join the OSS scheme immediately. However, many businesses still choose to use it to simplify European VAT management and prepare for future business growth.

Electronic invoicing and the SdI

For most Italian VAT-registered businesses, electronic invoicing is now the standard method of issuing invoices. Unlike a traditional portable document format (PDF) invoice sent by email, an electronic invoice must be generated in a structured format (e.g., extensible markup language [XML]) and transmitted via the SdI, which is a platform managed by the Italian Revenue Agency.

The SdI acts as an intermediary between the invoice’s issuer and recipient. When an issuer submits an invoice, the SdI performs a series of formal checks (e.g., to ensure that all required data are included and that the file complies with the technical specifications set forth in the regulations). If the invoice passes the checks, it is sent to the recipient. Otherwise, the system rejects it and flags the errors that need to be corrected.

For VAT-registered businesses, electronic invoicing also offers certain advantages. Since documents are transmitted and stored digitally, it’s possible to reduce many of the manual tasks associated with filing, searching for invoices, and managing administrative tasks.

How does electronic invoicing work for VAT-registered businesses?

The process of issuing an electronic invoice generally follows these steps:

• Invoice creation via invoicing software or a compatible business management system
  
• Generation of the document in XML format, as required by the Italian Revenue Agency
  
• Submission of the invoice to the SdI
  
• Automatic data verification by the SdI
  
• Delivery of the invoice to the customer and digital storage of the document
  

For businesses that issue a large number of invoices or sell online, automating these processes can help reduce administrative errors and simplify the management of tax compliance.

VAT rates on goods and services

One of the most important aspects of VAT management is applying the correct rate. In Italy, there is no single tax rate that applies to all transactions. Instead, the applicable rate depends on the nature of the goods or services sold. In some cases, it also depends on the characteristics of the customer or the country where the transaction takes place.

The main VAT rates currently in effect in Italy include the following:

• 22%: Standard rate applied to most goods and services
  
• 10%: Rate provided for specific categories of goods and services, such as certain tourism, hotel, and restaurant services
  
• 5%: Rate applied to specific goods and services identified by law
  
• 4%: Reduced tax rate applicable to certain categories of essential goods
  

For many professional, consulting, and digital businesses, the applicable tax rate is generally the standard rate of 22%. However, there are many exceptions and specific rules that can affect the tax treatment of particular transactions.

The treatment of taxes can become even more complicated when selling abroad. In some cases, the applicable tax rate is not determined by Italian rules but by those of the customer’s home country. For this reason, it’s important to verify the correct VAT treatment of transactions, especially when selling goods or services online to international customers.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and 42 countries
  

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You’ll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.