Flat tax: new 2020 minimums

No flat tax at 20% from 2020, the flat rate split and the new lows return: the forecasts of the 2020 budget plan document.

The flat-rate regime is still changing: for those who adhere to this favorable tax regime, in fact, there are new access requirements, and different benefits depending on the income bracket, up to 30 thousand euro per year and from 30 thousand to 65 thousand euro per year.

For those with annual revenues of between 65 thousand and 100 thousand euros, the 20% flat tax will no longer be implemented, but the only possibilities for adhering to the ordinary regime or simplified accounting remain, with the usual income tax taxation for rates and brackets.

The flat tax remains at 15% for workers with revenues of up to 65,000 euros per year, and 5% for the first 5 years, for those who have the requisites for access to the old minimum tax payer regime; income determination remains a flat rate for those with annual revenues of up to 30 thousand euros, while those with revenues from 30 thousand to 65 thousand euros should be able to choose between flat-rate or analytical income, again with a 15% tax rate.

But let's proceed by order, and take stock of the New flat minimum 2020 fees: who can take advantage of the flat tax, that is flat tax, at a single rate, who can benefit from the flat-rate determination of the income and who of the analytical one.

We also see how the requirements and accounting obligations change for those with revenues of up to 65 thousand euros: a reward regime is envisaged for these subjects in the case of electronic invoicing.

New posts are also envisaged: a limit of 20,000 euros for personnel expenses, and a limit for capital equipment equal to 20,000 euros; probably, then, those who have earnings from employment or pensions above 30 thousand euros per year will not be able to join the flat rate scheme.

How does the flat rate scheme work?

The flat it is a facilitated tax system that provides for the determination of income by not subtracting expenses from revenues, but by reducing revenues with a specific percentage, different depending on the activity performed.

Those who join the flat rate scheme can also benefit from the substitute tax reduced to 5% for the first 5 years of activity, if particular requirements are met, and the 15% replacement taxation in other cases.

The 15% (or 5%) tax replaces personal income tax, IRAP and additional tax. In addition, those who adhere to the flat rate benefit from the exemption from VAT and related obligations (VAT declaration, electronic invoicing …), sector studies (now Isa, summary indices of fiscal reliability) and the keeping of accounting records.

Who adheres to the electronic invoicing despite being a flat rate, from 2020, it benefits from a rewards scheme that will have to be defined shortly.

Who can join the flat rate scheme?

At present, the holders of individual company or i freelancers; companies, or members of partnerships (such as Snc or Sas), assimilated associations or transparent limited liability companies (Transparent Ltd) are not allowed.

Furthermore, those who directly or indirectly control a limited liability company are not admitted.Srl) or associations in participation, which carry out economic activities directly or indirectly attributable to those carried out by the company, arts or professions
Even those whose activity is mainly exercised towards are not admitted employers with whom work relations are in progress or work relationships had taken place in the two previous tax periods, or towards subjects directly or indirectly attributable to these employers.

Requirements for joining the 2019 flat rate scheme

For the year 2019, for the stay in the flat-rate scheme it is sufficient not to exceed 65,000 euros of annual revenues. The limits, in force until December 31, 2018, relating to the perception of income from employment or retirement, the expenses for collaborators and employees and the purchase of capital goods have disappeared; however, these limitations should become operational by 2020.

For those benefiting from the reduction of taxation, that is, of the super subsidized flat rate with tax at 5%, the requirements are the same as those for minimum tax payers:

• the tax payer must not have exercised, in the 3 years preceding the start of the activity, artistic, professional or business activity, even in an associated or family form;
• the activity to be carried out must not, in any way, constitute a mere continuation of another activity previously carried out in the form of dependent or autonomous work, excluding the case in which the activity previously carried out consists of the period of mandatory practice for the purposes of performing arts or professions;
• if an activity carried out previously by another person is continued, the amount of the relative revenues and fees, realized in the tax period prior to the recognition of the benefit, must not exceed the limit that allows access to the regime.

To learn more: Flat rate and minimum tax payers.

Requirements for joining the 2020 flat rate scheme

For the year 2020 a sort of split of the flat-rate scheme is foreseen. In particular, the 15% flat tax (or 5% for the first 5 years of activity) will work for everyone, but:

• those with revenues of up to 30,000 euros per year will benefit from the flat-rate, non-analytical, determination of income based on the latest proposals; to these subjects will also be applied a limit of 20 thousand euros relating to personnel expenses and the value of instrumental assets, for these subjects could also operate an additional limit, relating to the possession of income from employment or pension, which should not exceed the 30 thousand euros per year;
• those with revenues of € 30,000 per year up to € 65,000 will be able to choose between an analytical or a flat-rate calculation of income; that is, they will be able to choose whether to reduce expenses from revenues or apply the flat-rate deductions from revenues.

For those benefiting from the reduction of taxation, that is the super subsidized flat rate with 5% taxation, the requirements should remain the same compared to 2019:

• the tax payer must not have exercised, in the 3 years preceding the start of the activity, artistic, professional or business activity, even in an associated or family form;
• the activity to be carried out must not, in any way, constitute a mere continuation of another activity previously carried out in the form of dependent or autonomous work, excluding the case in which the activity previously carried out consists of the period of mandatory practice for the purposes of performing arts or professions;
• if an activity carried out previously by another person is continued, the amount of the relative revenues and fees, realized in the tax period prior to the recognition of the benefit, must not exceed the limit that allows access to the regime.

What is the flat-rate income reduction?

In the flat-rate scheme, the income to be taxed is equal to the revenues reduced by a profitability coefficient that varies, depending on the activity carried out, from 86% to 40%. Costs cannot be deducted, except for social security contributions and previous losses. In detail, the applicable profitability ratios are:

• trade (retail and wholesale): 40%;
• trade of foods and drinks and trade ambulante of foods and drinks: 40%;
• non-food itinerant trade: 54%;
• construction and real estate activities: 86%;
• trade intermediaries: 62%;
• accommodation and catering services: 40%;
• professional, scientific, technical, health, education, financial and insurance services: 78%;
• other economic activities: 67%;
• food and beverage industries: 40%.

In practice, if the professional, in one year, issues invoices for 10 thousand euros, the taxable income is equal to 7,800 euros, as if his expenses amounted to 22% of the income. The trader with 10 thousand euros of revenues, on the other hand, has a taxable income of 4 thousand euros, considering the reduction equal to 60% of revenues.

The social security contributions paid during the year must be deducted from the income determined as a flat rate; previous losses can also be deducted.

The net income undergoes the 15% taxation (5% in the start-up phase, if in possession of specific requirements)

How does the flat tax work with analytical income determination?

Based on what has been disclosed so far, those whose annual revenues are between 30 thousand and 65 thousand euros will be able to opt for the flat-rate determination of income, following the rules just observed. Alternatively, they can determine the income analytically, subtracting the expenses incurred in carrying out the activity from the revenues; the resulting income will be taxed at 15% (or 5% if the company is in the start-up phase; this last possibility must be confirmed at the moment).

This new regime is therefore very similar to the old one minimum tax payer regime.

How long is the flat rate scheme?

The flat-rate scheme does not have a fixed but unlimited duration: in practice, the tax payer can remain in the scheme until he complies with the regulatory requirements for stay in the scheme. The super facilitated flat rate for those who start up the business, ie the regime that provides for the taxation of 5%, instead lasts up to a maximum of 5 years.

It has not yet been announced whether the new regime of minimums, or rather the new regime of the flat tax with analytical determination of income, will allow or not an unlimited stay.

To apply to the flat tax, do you have to ask a question?

For those who start the activity, adherence to the flat-rate scheme, or benefit regime, they must be notified at the time of the application for attribution of the VAT to the Revenue Agency, by crossing the appropriate box.

For those who are already active and want to join, it is not necessary to present any application, as long as they meet the requirements for staying in the tax relief, as the flat rate is the “natural regime"For tax payers for which all the conditions of access are verified.

If the interested party has opted for the ordinary VAT or simplified accounting, the option is binding for 3 years, except for significant changes to the tax regimes.

If you want to join the flat tax regime with analytical determination of income, then in simple words if you want to benefit from the flat tax without the flat rate, probably it will be necessary to communicate the adhesion to the option, with modalities to define.

Can we switch to a flat rate in 2020?

For the year 2020, considering the relevant changes relating to the requirements for entry and stay in the flat rate, as well as the introduction of the possibility of benefiting from the flat tax with analytical determination of income, who is in the ordinary regime or simplified accounting can access to subsidized schemes despite the three-year effectiveness of the previous option.

If the rules in this regard are not modified, to join the flat, or to the flat tax with analytical determination of income, it should be sufficient to issue an invoice without charging VAT to the customer or client, and without withholding tax, specifying the use of the tax relief scheme.

However, the obligation to communicate the adhesion to one of the two new regimes could be introduced.

Flat rate invoice

In particular, in invoice, to specify the application of the flat-rate scheme, the following should be reported wording:

"Transaction carried out pursuant to Article 1, paragraphs 54 to 89, of Law no. 190/2014 as amended by Law number 208/2015 and by law number 145/2018. The non-application of the withholding tax as an advance is required pursuant to Article 1 paragraph 67 of Law number 190/2014.

€ 2 stamp duty paid on the original for amounts greater than € 77.47 "

For members of the flat tax 2020, flat-rate or not, the wording to be included in the invoice may be changed again.

Can employees or collaborators be hired with flat rates?

Who adheres to the flat rate can to hire employees and make use of collaborators, but, until 31 December 2018, the costs for dependent work and for the collaborators must be less than 5 thousand euro per year.

For the year 2019 the limit has been abolished.

From the 2020 a new limitation should come into force: on the basis of what has been announced, the expenses for dependent work and for collaborators must be lower than 20 thousand euros per year.

It is not yet known, however, if this limit will operate only for those who are lump sum with revenues of up to 30 thousand euros per year, or even for flat rate members with revenues of 30 thousand to 65 thousand euros, or, again, for members of the flat tax with analytical determination of income, with revenues from 30 thousand to 65 thousand euros.

Can instrumental goods be purchased with flat rate?

Who adheres to the flat rate can buy capital goods, for example equipment, furniture and cars, but, until 31 December 2018, the annual expenditure must not exceed 20 thousand euros.

From 2019 the limit has been abolished. On the basis of what has been announced, the limit will be reintroduced by 2020. However, it has not been confirmed whether this limit will only work for flat-rate members with revenues of up to € 30,000 per year, or even for flat-rate members with revenues of € 30,000 a year. 65 thousand euro, or, again, for the members of the flat tax with analytical determination of income, with revenues from 30 thousand to 65 thousand euro.

What are the benefits for those who adhere to the flat rate?

The concessions for those who adhere to the flat-rate scheme, or for those who remain in the regime, having already adhered to it, they are:

• taxation of 5% or 15% which replaces Irap, Irpef and additional taxes;
• non subjection to VAT and related obligations (declaration, periodic payments …);
• no obligation to issue an electronic invoice;
• not subject to sector studies and ISAs, summary indicators of fiscal reliability;
• no obligation to keep mandatory VAT records (purchases, sales, etc.), but only to progressively number the invoices and keep them (excluding purchase invoices);
• on the invoices the VAT must not be charged, and the withholding tax must not be withheld;
• 35% discount on contributions for those registered with the INPS merchants management.

The only obligations are therefore the issue of invoices, their numbering and storage and the presentation of the tax return.

Flat-rate tax payers must keep and number the invoices and submit an annual tax return, in which they also calculate the contributions due to INPS. To learn more: Flat rate, how to present the tax return.

From 2020, the obligations could change; the possibility of joining electronic invoicing was also introduced, with a dedicated rewards scheme.

What are the requirements for those who join the flat tax without the flat rate?

The obligations should however be greater for those who adhere to the flat tax with analytical determination of income: in this case, in fact, it would be indispensable document all expenses related to the activity, and electronic invoicing could become, in fact, an obligation.

What happens to those who work as employees?

Based on the provisions of the 2019 budget law, those who work as employees, or have worked as an employee in the last 2 years, are subject to the control of prevailing billing, towards the employer and towards subjects referable to the employer, directly or indirectly.

The following are considered "subjects directly or indirectly traceable" to the employers, the controlling, controlled and related subjects, considering as interposed the relatives for the purposes of income taxes: the spouse, the relatives within the third degree and the similar within the second degree.

This provision will probably not be changed in 2020; then the limit equal to could be added 30 thousand euros, previously in force, relating to the production of income from employment.

Can the pensioner join the flat rate scheme?

Contrary to what is expected until December 31, 2018, the pensioner, for 2019, can join the flat-rate scheme regardless of the pension income to which he is entitled: in essence, even those who receive a pension exceeding 30 thousand euros can join the tax regime of advantage.

Furthermore, ai retirees the limitation linked to the prevailing billing towards current or previous employers, or related parties, as clarified by the Inland Revenue, does not apply.

In particular, those who start to receive a pension and start a self-employed activity carried out predominantly vis-a-vis their previous employer, can still adhere to the flat-rate scheme, in the event that retirement is required by law.

In this hypothesis, in fact, since the termination of the obligatory relationship, the purpose of the cause of exclusion from the flat rate is lost, ie to avoid the artificial transformation of employment relationships into self-employment relationships for the sole purpose of exploiting the tax advantage.

In 2020, however, the limits on the production of pension income, equal to 30 thousand euros per year, should be operational again.

Membership of the flat-rate scheme in 2020 for those who have opted for the ordinary regime

For those who did not adhere to the flat-rate scheme in 2019 even though they met the requirements, probably joining the scheme, or the flat tax regime with analytical determination of income, will be possible in 2020: in the presence of significant regulatory changes regarding the regime flat rate / flat tax, you can in fact get rid of the option for the ordinary regime / simplified accounting, and it is therefore possible to join the facilitated regime.