In recent years, the taxation of VAT-registered self-employed workers has become one of the main topics in Italy’s economic debate. Professionals, craftsmen, shop owners and freelancers often complain about a high tax and social security burden, while governments and business associations continue to discuss how to make the system more competitive without compromising public finances.
The question many people ask is straightforward: is opening a VAT number still worthwhile in Italy, or are there countries with more favourable tax systems?
Contents
How taxation currently works in Italy
Those who carry out a self-employed activity can generally operate under two main tax regimes.
The first is the flat-rate tax regime , designed for smaller businesses and professionals who meet the requirements established by Italian law. In this system, taxable income is calculated by applying specific profitability coefficients to revenues, and the taxpayer pays a substitute tax, which is generally more favourable than standard personal income tax (IRPEF).
The aim of this system is to simplify administrative procedures and reduce the tax burden during the early stages of a business activity.
The second option is the ordinary tax regime, where professionals calculate their income by subtracting actual business costs from revenues. This taxable income is then subject to IRPEF, Italy’s personal income tax, based on progressive tax brackets, as well as possible regional and municipal surcharges.
In addition to these taxes, self-employed workers must also pay social security contributions, which represent one of the main costs for many freelancers and independent professionals. Alongside direct taxation, there are also obligations related to VAT, electronic invoicing, tax declarations and other administrative requirements established by Italian tax regulations.
What has changed in recent years
Compared with the recent past, Italy’s tax system has undergone several significant changes. The reform of IRPEF tax brackets reduced the number of rates, with the goal of making taxation more gradual and reducing the burden for part of the population.
At the same time, access requirements for the flat-rate tax regime have been updated several times. In recent years, this system has become one of the most widely used options among freelancers and small entrepreneurs. Italian lawmakers have tried to find a balance between simplifying taxation and preventing the improper use of preferential tax schemes.
Despite these measures, many business associations continue to argue that the overall burden of taxes and social security contributions remains high, especially for those who exceed the limits of the flat-rate regime and move to ordinary taxation.
Comparing Italy with other European countries
Looking beyond Italy’s borders reveals a highly diverse picture. In France, the tax system provides simplified regimes for some categories of self-employed workers, although social security contributions are generally significant. In recent years, Paris has introduced several measures to encourage the creation of new businesses and support entrepreneurship.
Germany applies a particularly rigorous approach from both a tax and administrative perspective. However, the relationship between public administration and taxpayers is often considered more efficient thanks to digital procedures and generally shorter administrative timelines.
In Spain, recent years have seen the introduction of incentives for newly self-employed workers, including reduced contributions during the initial phase of their activity. As in other European countries, the system continues to evolve in an effort to support the growth of small businesses.
The Netherlands is often considered one of the most attractive environments for professionals and businesses thanks to relatively streamlined bureaucracy and the availability of certain tax deductions for self-employed workers.
Ireland continues to attract companies and professionals due to a tax policy focused on international competitiveness, while Portugal has developed particularly attractive tax schemes in recent years for certain categories of workers and for those transferring their tax residence, although some of these measures have recently been modified.
The United States model
The US tax system is significantly different from the European model. In addition to federal income tax, taxpayers must also consider state taxes, which can vary considerably from one state to another. Some states apply particularly low taxation, while others impose a much heavier tax burden.
Self-employed workers in the United States must also pay contributions supporting federal social security and healthcare programmes. However, the American system generally offers a wide range of tax deductions linked to professional activities, which can significantly reduce taxable income when documented business expenses are available.
Tax rates are not the only factor
When comparing different tax systems, it is important not to focus only on tax rates. A country may apply apparently high taxation while offering more extensive public services, faster administrative procedures or stronger incentives for those who invest and create jobs.
At the same time, lower taxation may be accompanied by weaker social security or healthcare protection, making comparisons far more complex than they may initially appear.
Italy’s challenge remains competitiveness
In recent years, Italy has started a process of reforming its tax system in an attempt to make it simpler and more competitive. However, many analysts believe that important challenges remain: the complexity of administrative procedures, the weight of social security contributions and the need to guarantee greater regulatory stability.
For professionals and self-employed workers, the real objective is not only to pay fewer taxes, but also to rely on clear predictable and stable rules over time. This will be one of the key factors determining Italy’s ability in the coming years to attract investments, retain skilled professionals and encourage the creation of new economic activities.
