Two big changes for the 2022 flat-rate scheme. The turnover limit increases from €65.000 to €85.000. New anti-avoidance clause introduced. Ordinary regime starts as early as the year in which turnover exceeded €100.000. Immediate application of VAT on excess revenues. The 2023 Budget Law has introduced two big changes concerning the flat-rate scheme applied to buinesses and professionals. The requirement regarding turnover for access to the preferencial regime increases from €65.000 to €85.000. In addition, a threshold amount is introduced beyond which one lapses from the flat-rate scheme as early as the current tax year.
What changes: raised to €85.000 the turnover that allows access to the flat-rate scheme
The Law No. 197 of December 29th, 2022 (the 2023 Budget Law), paragraph 54 of Article 1,introduced an important change to one of the requirements for access to the flat-rate scheme.
For those who adopted the flat rate in 2022, the requirement for staying in the scheme, with reference to turnover, is raised from 65.000 to 85.000. Specifically, from 2023 those individuals engaged in business, arts or professions who had receipts not exceeding €85.000 in 2022, taking into account the existence of the other requirements, will be able to use the flat-rate scheme.
Please note that the limit of 85.000 should be proportionate to the months of activity.
Therefore, if the base year for checking the turnover limit is the year in which the business started, the limit will not be 85.000. In fact, to get the correct limit, the €85.000 limit has to be divided by 365 and multiply by the actual days of activity.
Example: opening vat on March 20, 2022.
The limit to be taken into account to check the permanence in the flat-rate scheme also for 2023 will be: 66,835 euros (85,000/365 multiplied by 287 days).
Further changes: what happens if the flat-rate worker exceeds €100.000 in turnover
Along with the raising of the turnover limit to €85.000, the 2023 Budget Law has brought another change by introducing an important anti-avoidance clause in the flat-rate scheme.
In fact, with the exceeding of €85.000 of turnover is determined the exit from the flat-rate scheme from the subsequent year, provided that the revenues/fees received in the year are below €100.000.
Whenever the taxpayers exceeded the €100.000 limit, they will have to disapply the favorable regime as early as the year in which the excess occurred and the apply VAT starting from the next day.
The consequence: the entire year’s income will be taxed at ordinary IRPEF rates, and all income/fees exceeding €100.000 will be subject to VAT.
Therefore, the taxpayer will have to issue invoices by applying the rules of the ordinary regime immediately: subjecting revenues/fees to VAT and withholding tax.
It will also be subject to the typical fulfillments of the ordinary regime including: periodic VAT settlement, annual VAT return, ISA Form, Form 770.
The introduction of this new condition has an anti-avoidance purpose. Until now, in fact, the flat-rate scheme was expected to be disapplied only from the following year. Therefore, upon failure to meet the stipulated income threshold (currently €85.000), it was possible to take advantage of the preferential tax on the entire amount received regardless of the amount in excess.
Recap of situations that may occur in the year 2023 for the flat-rate scheme:
- Received turnover less than €85.000: application of the flat-rate scheme (if the other requirements are also met)
- Received turnover above €85.000 but equal to, or less than, €100.000: flat rate will be applied in 2023 with consequent exit from the regime for the year 2024
- Received turnover exceeding €100.000: exit from the regime as of 2023 and application VAT on turnover exceeding €100.000.
2022 Flat-rate scheme: other requirements
For completeness, the other requirements for entering and remaining in the flat-rate scheme are summarized below. In fact, the 2023 Budget Law left the rules already in force for the 2022 flat-rate scheme unchanged.
In order to qualify for the flat-rate scheme for 2023, in addition to the turnover limit, it must be verified that:
- in 2022, no employee or incidental labor expenses exceeding €20.000 were incurred;
- the taxpayer who intends to apply the flat-rate scheme is tax resident in Italy;
- partnerships, professional associations or family businesses joint ownership are not detained;
- joint ownership in corporations that result in direct or indirect control of the corporation are not detained, and the corporation itself does not carry out an activity that is directly or indirectly related to those carried out by the taxpayer who intends to opt for the flat-rate regime;
- the activity is not carried out primarily against the former employer. If the employment relationship ended prior to the last two tax periods, the condition does not apply;
- in 2022, no employee or assimilated labor income (art. 49 and 50 of TUIR) exceeding €30.000 was received. If the employment relationship ended before December 31st, 2022, the condition does not apply.