Are you planning to hire a freelancer from Italy? Learn about different kinds of contracts and taxes, as well as how to make billing easier using the Useme platform. Discover who a freelancer in Italy is by reading our blog post.
Who is a freelancer in Italy?
Italian regulations describe freelancers as self-employed, independent workers or occasional workers.
Only those freelancers who are not registered for VAT are subject to a separate management for social security. In other cases freelancers are subject to tax payments to IRPEF and social security contributions, which are obligatory for everyone in Italy who works legally.
Freelancers work for companies, organisations and individuals, but they do not have a binding full-time employment contract.
What type of contract to choose if you want to hire freelancers from Italy?
If you want to hire freelancers from Italy, both parties will need to sign a specific contract. In Italy it can be done in a number of ways:
Contract with a self-employed person
Contract with a self-employed person – when a freelancer performs their work in a steady and continuous manner resembling a permanent position – this person is recognised as self-employed. A freelancer in Italy who acts as such is obliged to register for VAT purposes in order to sign a contract with a client. After registering they can issue regular VAT invoices and account for the costs of revenue – both these processes can be assisted by Useme.
Project work contract
Project work contract – it is applicable for subcontractors performing occasional work, such as Polish freelancers who in Poland use contracts for specific work. In Italy, occasional work is billed as „occasional performance”. Occasional freelancers act on the basis of a project work contract. It is drawn up for a one-time assignment, which is not performed on a regular basis and which cannot extend for more than 30 consecutive calendar days. The freelancer is not obliged to have a VAT number and does not have to declare their National Insurance Number (Codice Fiscale, mostly used by foreigners, e.g. for renting an apartment after arriving in Italy).
On-call employment contract
On-call employment contract – anyone who wants to undertake a so-called job on call should apply for a tax number as soon as they arrive in Italy. It will help them not only sign an on-call job contract, but also rent a flat. “On-call jobs”, also known as a „self-employment” are applicable to natural persons who are not entrepreneurs.
Employment contract
Employment contract – a person who wants to be hired in Italy full-time, not as a freelancer, can work on the basis of an employment contract. In this scenario it is the employer who deals with all the legal aspects of accounting for an employee.
Cooperation agreement / contract
Cooperation agreement / contract – a person who wishes to start their professional journey as a freelancer or who considers launching their own company in Italy in the future (for instance, in order to perform their work in a regular manner and benefit from tax reliefs), might want to work on the basis of a cooperation agreement. Initially the work can be defined for a period no longer than 3 months or as seasonal work. This way, the newly minted freelancer can be accounted for the same way as in the case of occasional work, unless the cooperation or contract are to guarantee longer billing, thus forcing the freelancer to VAT registration and accelerating the change in the form of self-employment as well as tax levels, if their income exceeds their expectations.
Other formalities
In order to hire a freelancer from Italy and the agreement between the commissioner and the contractor to be valid, you will need the following data: name and surname, company name (if applicable), tax number and address. You will also need to know how to pay your freelancer.
Foreigners who undertake work in Italy must register their stay upon their arrival in the country. Completing this process allows them to work legally for 3 months. This also gives them the right to work regardless of their contract and even to officially become a freelancer who performs various assignments on an irregular basis – either locally or online.
Risks
If you want to hire a freelancer from Italy, the biggest threat in the Italian job market is falling victim to a fake VAT. As an employer, if you suggest not to sign a contract, you have to realise that in Italy illegal labour is unacceptable and subject to criminal sanctions.
Contributions and insurance
If both parties know what kind of a contract is needed for the assignments, they are also legally obliged to account for the work performed, since they have entered the employment relationship. What are the commissioners’ obligations when it comes to contributions and insurance then?
When it comes to standard employment, an employer has to pay employee contributions and taxes, which are deducted on the payslip. The Italian tax rates on employment contracts vary from 23% to 43%, depending on the amount of money made by an employee.
This form of billing is applicable both to full-time employees, as well as self-employed ones, whose contributions are paid by their employers or themselves. On top of that, every taxpayer who is an Italian resident is obliged to file an annual tax declaration (from May 1st to July 31st of the year following the billing year). By doing so they can apply for a refund of overpaid tax and tax reliefs, which had been paid in salary settlements by their employer.
If a freelancer decides themselves that they want to register for VAT and undertakes various short-term assignments, they are obliged to pay direct taxes to IRPEF as well as social contributions. IRPEF stands for personal income tax in the Italian taxation system and it applies to everyone in Italy who works legally. Individuals who perform work that provides income from other sources and different employers, file an annual declaration on a document called Modello Unico.
Freelancers working on the basis of a project work contract and performing one-time assignments for not longer than 3 months, are subject to separate management INPS (Istituto Nazionale della Previdenza Sociale, National Social Security Institute). In order to recognise a full fiscal year, for 2023 the annual rate is €17,504. Up to this amount, the freelancer can perform works on the basis of the previously mentioned “occasional performance”, without having to register the activity for VAT or registering as entrepreneurs.
If you want to hire a freelancer from Italy then you must know that a freelancer who is self-employed on a permanent basis for a period longer than 3 months, is subject to registering for VAT and pays taxes according to the rates varying from 23% to 43%, depending on the industry. For the self-employed, the tax-free amount is approximately €4,500, so the tax settlement is based on the excess to the tax-free amount.
A freelancer registered as entrepreneur, with an obligation to VAT registration, is subject to taxation according to its rates varying from 23% to 43% (namely: 27, 38, 41, 43%), while settling IRPEF contributions from the excess to a specific annual income in euro (the tax-free amount is €8,000).
Income tax rates in Italy
By knowing the form of employment or realising a project on the basis of a specific revenue and annual income, it is worth learning more about income tax rates in Italy. They will affect any possible change to taxation of your choice and the billing of work if the annual income grows.
Taxation of freelancers from Italy is different from those in Greece, Croatia, the Netherlands, or Romania.
Italian tax rates are as follows:
- Tax rate of 23% applies to those whose annual income does not exceed €15,000.
- From €15,000 to €28,000, the tax rate increases to 27%,
- From €28 000 to €55 000, the tax rate increases to 38%,
- From €55,000 to €75,000, the tax rate increases to 41%,
- For annual income above €75,000, the tax rate increases to 43%.
How to easily and legally hire a freelancer from Italy?
If you want to hire a freelancer from Italy it’s good to know that Useme makes the process of settling accounts with a freelancer much easier. By using it,you do not need to fulfil all the formal obligations related to the contract yourself, and a freelancer can issue an invoice through the Useme system. Useme takes over the role of an employer who hires a freelancer. Choosing Useme to bill your freelancers guarantees that the contract is legally binding and in accordance with country-specific regulations, the transaction is secure, and the project is finished on time.
How do you start billing freelance work with Useme? Simply invite your freelancer to Useme by requesting an invoice for the work that needs to be done. The freelancer will start with filling a short form regarding some details of the work. Once the pro forma invoice is paid and your freelancer uploads the completed assignment, you will get the rights to the project and a tax invoice.
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