VAT current account: obligations and advantages

After setting up their own business or becoming self-employed, many people wonder about the obligation to open a VAT account. And between the information gleaned from the web, what the banks tell you or the advice of a friend already in the industry, it is not easy to find your way around the various types of accounts and choose the solution best suited to your needs!

We have therefore decided to clarify and answer the most frequently asked questions regarding a current account for VAT. First of all, what exactly is a current account for VAT holders? Is it compulsory to open an account dedicated to one's professional activity? What are the advantages?

The answers in our article.

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VAT account: definition

The current account for VAT holders is a current account that goes by the name of business account . It takes on this particular name because it is an account aimed at freelancers with a VAT number or companies that need to better control the management of their employees and require additional functionality.

VAT-registered current account: for whom is it compulsory?

To date, there are no regulations requiring an individual to open a VAT account, i.e. a business account that records incoming and outgoing movements relating to professional activity.

Therefore, if you fall into the category of freelancers (lawyers, doctors, mental coaches, commercial agents, real estate agents), you are not required to have a current account linked to your VAT number.

For whom is this mandatory?

Businesses that are registered with the Chamber of Commerce's Trade Register as sole proprietorships should have a dedicated VAT account.

It is not an obligation, but a sole proprietorship that does not have a VAT account would give rise to much suspicion and doubt at the Tax Agency.

Law Decree No 112/2008 stipulated that it is not mandatory to have a VAT account. However, it remains mandatory to have a personal current account in order to make tax payments.

The Bersani Decree contributed to the implementation of this measure. Since 2006, taxes and contributions must only be paid via telematic systems, such as online banking. One can no longer go directly to the tax office and deposit the sum in cash.

In conclusion, therefore, VAT holders are not obliged to open a VAT account. However, it is strongly recommended, since, as we have seen, it is vital to have a current account through which tax and contribution obligations and procedures can be carried out.

What documents are required?

Opening a current account for VAT does not involve the same procedures as for an individual current account. The documents to be submitted to open a business account are more numerous and must be well detailed.

Here is what is needed specifically to open a VAT current account:

• the information you want to appear on the account
• everything about the company
• tax code and VAT number issued by the Internal Revenue Service
• tax documents required for authorisation checks

There is also the possibility of opening a VAT account online. This choice facilitates the procedure for opening a business account, as it is more agile, streamlined and quicker. The natural person wishing to open a VAT account online simply fills in the online forms and can proceed to open the business account.

Please note: every company or business is registered under a certain legal form. Therefore, tax and personal documents may change from legal entity to legal entity.

VAT account VS Business

Now we can look at the differences between the two natural persons who can open a VAT account, i.e. freelancers and sole proprietors.

The freelancer has fewer obligations than a sole proprietor. In fact, a freelancer can easily decide to continue using the personal account to pay taxes and contributions relating to the VAT number.

For a sole proprietorship registered in the Commercial Register, however, the situation changes. In fact, when customers of the sole proprietorship make payments and transfers to the natural person, the owner of the business. there may be problems.

Banks, for example, might not accept the transit of large sums of money in favour of a private individual. For anti-money laundering reasons, banks find it difficult to accept transfers of thousands of euros in favour of a private individual and would also be obliged to report these transactions as suspicious to the relevant authority.

For this reason, a sole proprietor has every interest in opening a company business account, dedicated solely to the movements of his company.

This is the situation of many artisans and traders who have decided to open a sole proprietorship and a linked account, giving these accounts a fancy name.

What are the advantages?

In the previous paragraph, we already saw one of the advantages of having a VAT account. But what are the others? Can a self-employed person also benefit from opening a current account?

Here, then, are all the other advantages.

1. A current account for VAT allows you to better manage your business finances. A business account allows one to have a clear view of expenditure and income, thus highlighting what needs to be improved, changed or totally eliminated.
2. A VAT account allows you to have a separate account for business expenses, which are thus not confused with personal expenses.
3. A VAT current account proves to be a security if the tax authorities decide to carry out checks. With a VAT account, you have all invoices with appropriate justification of outgoing and incoming movements from your business account. In this way, you prevent the Internal Revenue Service from accusing you of unauthorised or undeclared receipts.
4. The VAT account corresponds to a snapshot of the economic and financial situation of the business. You can easily deduce the performance of the business.

However, it should be pointed out that, in return for all these advantages, banks charge higher costs for opening current accounts for VAT holders and a tariff plan that changes according to the services and benefits made available.

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VAT-registered current account: is it really convenient?

As we have explained, there is no law requiring a VAT current account. However, having a business current account specifically for one's professional or commercial activity may be a strategy to consider.

• They should consider opening a VAT current account:
• freelancers who receive considerable sums of money
• those who conduct transactions with foreign customers and suppliers
• those who wish to have access to bonuses and tax benefits (e.g. tax credit for the purchase of capital goods)
• those who need a clear and precise view of the financial situation of their company or business activity
• those who need to precisely justify income and expenditure and all invoices arising from their professional activity.

Do you still have questions or are there topics that remain unclear? Write to us in the comments. And if you want to deepen your knowledge of accounting, have a look at the dedicated section.