How to open a VAT number: all the procedures for your business

Have you decided to start a new business or have you changed to self-employed status? Now is the time to open a VAT number. But how do you open a VAT number? Do you already know all the procedures to follow?

How to open a VAT number: the process is relatively simple, but are there additional costs? Are there any advantageous concessions? And above all, the question most people ask: is it really worth it?

Nowadays, the economic situation is not the most favourable. So it is very important to weigh up the costs and benefits before making this decisive choice, particularly because of the maintenance costs involved.

But one step at a time. Let us first look at the administrative, bureaucratic and tax procedures to follow in order to open a VAT number. That way, you will be able to assess for yourself whether the game is worth the candle.

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How to open a VAT number: procedure to follow

Opening a VAT number is a simple and straightforward process which does not involve any major complications.

The VAT number is a code of 11 numbers:

• the first 7 represent the taxpayer
• the next 3 specify the Revenue Office code
• the last number performs a control function

The first step in opening a VAT number is to notify the Revenue Office of the opening of your business activity, within 30 days of the first day of operation. It is then necessary to complete a declaration to be sent to the Revenue Office:

• form aa9/12 for sole proprietorships and self-employed workers
• form aa7/10 for persons other than natural persons, i.e. partnerships

Both forms are available on the Inland Revenue website and the pdf version can be downloaded free of charge.

The second step is to transmit the form, duly completed, to the relevant tax office, through three different channels

• by delivering the documents directly to the tax office, with an identification document;
• by sending a registered letter with acknowledgement of receipt, which also includes a photocopy of the identification document;
• in telematic format, using the software made available by the revenue agency and downloadable from the site.

When completing these documents, you will have to choose the ATECO code that relates to the commercial activity you have opened.

In addition, you will have to specify the accounting regime for your activity. The tax system provides for three, from which you can choose and we will analyse them in detail in the next section.

The third step is to receive your VAT number, after you have sent the required documents to the tax office. The VAT number will remain the same until you cease your activity.

The fourth and final step is to acquire your social security position by going to the INPS.

In addition, if you have a sole proprietorship, registration with the chamber of commerce is required. In addition, you will have to go to your local municipality to communicate the start of your activity.

Let us now see the difference between the possible regimes once you have opened a VAT code.

The ordinary regime

All persons who have decided to embark on the road to freelance activity, by opening a company or being self-employed, can open VAT registration by choosing the ordinary regime. You will therefore have to comply with the accounting, administrative and bureaucratic rules that this regime imposes.

For example, if you are the owner of a sole proprietorship, you will have to

• register your company with the Trade Register
• perform VAT settlements and payments
• compile accounting records
• draw up the synthetic indices of reliability (the ISAs, which as of 2018 have replaced the sector studies).

In addition, you are required to use electronic invoicing. You will therefore have to be able to send and receive all invoices issued by your business and at the same time keep track of outstanding invoices, cash flows and accounting movements during the business year.

The ordinary regime still implies the implementation of certain administrative and tax procedures:

• you will have to register with the INPS separate management;
• you will have to register with INAIL for the compulsory insurance to be provided for your employees. For sole proprietors without employees, registration becomes an obligation only if they are artisans
• you have to make annual payments for income tax, IRES, IRAP and IRPEF. The first two have single rates, although IRAP varies from region to region. For IRPEF, you have to consult the fiscal attachment to the Budget Law, as it is the latter that sets the rates year by year.

The flat-rate regime

Those who opt for the flat-rate regime will enjoy several advantages over the ordinary regime:

• no enrolment in accounting registers
• no registration with Inail
• no registration with the ISA
• no registration with the companies register
• a tax regime with a single tax rate. From the tax base, derived from your annual income and calculated according to the flat rate model, you will have to pay 15% tax. Depending on the Ateco code that corresponds to your activity, you can make use of a variable flat-rate deduction.

The flat-rate scheme is not open to all professionals with a VAT number. Precise criteria must be met to fall under this facilitated regime. The 2020 tax connection stipulates that

• your activity must produce an annual income of less than EUR 5,000
• if you work two jobs, one as a freelancer and the other as an employee, the income of the second must not exceed 30,000 euros per year
• your collaborators may not be remunerated above EUR 20,000
• you may not be a partner in a joint stock company

Furthermore, if you choose the 'forfettario' regime, you are not obliged to have electronic invoicing. However, in 2020, the Italian government has made several bureaucratic and accounting incentives available to encourage the use of e-invoicing also for VAT holders under the flat-rate regime. Indeed, this method proves to be more straightforward and allows streamlined and efficient management of one's business accounts.

The contributory regime

Regardless of the type of regime chosen for opening a VAT number, the Italian state also requires compulsory registration with a social security fund. Usually, for the category of workers who have opened a VAT number, registration in the separate INPS management fund is recommended, which guarantees different rates according to the activity practised or the choice between the ordinary or flat-rate regime.

For freelancers belonging to specific professional orders, such as doctors, journalists, lawyers, psychologists, architects, registration with the order's social security fund is required, with the consequent annual payment of contributions.

Persons entitled to open VAT registration

Those entitled to open a VAT registration number are:

• self-employed professionals
• company owners
• partnerships

In general, they are all taxpayers who carry out an economic activity for the purpose of selling, producing and exchanging goods or services.

What are the costs of opening a VAT number?

Opening a VAT number is a free procedure if the person concerned takes care of the paperwork himself. Obviously, any stamp duty and secretarial fees must be taken into account. If you decide to enlist the help of a professional for the implementation of the procedures, the payment of a fee may be an additional cost.

Additional costs

As we have seen, opening a VAT number is free of charge, but you have to calculate the maintenance costs, which can have a major impact on your business activity.

Ordinary accounting regime

For those who are subject to the ordinary accounting regime, opening a VAT number must provide for high annual revenues in order to be able to meet the running costs.

You have to take into account the registration of the company with the Chamber of Commerce with the payment of a fee of 80-100 euros per year. In addition, you have to calculate the cost of an accountant (around EUR 1,000 per year) for drawing up the required annual accounting documents and the contributions to be paid to INPS.

In addition, Irpef, Ires and Irap taxes also come into play, which are accounted for on the basis of the income and added value produced by your business.

Flat-rate scheme

Those eligible for this facilitated regime are VAT holders with annual revenues of less than EUR 65,000.

In this case, you are exempt from paying VAT and can benefit from a subsidised rate for the payment of personal income tax, i.e. 5% for the first five years of activity, which then increases to 15%.

However, you will not be able to benefit from the deduction or deduction of expenses and production costs booked during the year, apart from compulsory social security contributions.

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To open or not to open a VAT number

If you fall into the self-employed category, opening a VAT number undoubtedly has its benefits. However, you have to take into account the maintenance costs.

For this reason, it is advisable to make a calculation between your annual income and the costs of opening a VAT number. If your chosen business activity is in a profitable sector, then the VAT number is strongly recommended.

If you are self-employed, but your annual income is more than EUR 5,000, it would be better to open a VAT number in order to regularise your situation as a taxpayer at the tax office. If your annual revenue is less than 5,000 euro, you need to make an analysis report, as management and maintenance costs could halve your revenue.

So ready to open a VAT number for your professional activity? Are you thinking of adopting the ordinary regime or the simplified accounting regime?

And if you still have questions, write to us in the comments.