Here come the application rules for the flat tax in lieu of Irpef for taxpayers with the VAT number. Inland Revenue has spread the circular with indications on the flat tax of 15%, introduced with the 2023 Budget Law, which applies to the 2023 taxable income for the incremental part compared to the years 2020-22. But how does it work? And who is it aimed at? Here is one example to understand who should choose the flat tax.
For now only optional
The flat tax for VAT numbers - explains the taxman - is a optional scheme, valid for this year (and therefore on the tax return that will be presented in 2024) which replaces the Irpef and the related regional and municipal surtaxes. Those who choose the preferential taxation apply aflat rate of 15% on the difference between the business and self-employment income determined in 2023 and the higher amount income declared in the years 2020 to 2022.
Incremental flat tax, who is entitled to it and who is not
The Revenue Agency explains who can benefit or less than the preferential taxation. Natural persons who carry out business activities and/or arts and professions can opt for the new regime. Within the perimeter of the incremental flat tax also the family business and the conjugal business not managed in corporate form, in both cases limited to the owner. While I am excluded from the measure, the income of partnerships, attributed to the partners for "transparency" and those deriving from the exercise of arts and professions in associated form, attributed to individuals. Taxpayers who, in 2023, adhere to the flat-rate regime will also remain excluded, while those who have applied the same flat-rate regime, or the "advantage" regime, will not lose the opportunity to opt for the flat-rate incremental tax (Legislative Decree No. 98/2011) , from 2020 to 2022 (one or more years).
How do you calculate?
The circular explains, through some examples, the calculation mode: the difference between the business and self-employment income determined in 2023 and the higher income (business and self-employment) declared in the years 2020 to 2022 must be calculated. The deductible of the 5%, calculated on the highest income of the three-year period. The fixed rate of 40% is applied to the income thus determined, within the maximum limit of 15 thousand euros. The additional portion of income, not subject to substitute tax, flows into the total income subject to progressive Irpef taxation.
Example of flat tax calculation for VAT numbers
As anticipated, the flat tax is valid for the 2023 tax period. In a nutshell, VAT registered holders can benefit from it with the 2024 tax return. But let's see a practical example to understand how does the flat tax work?. Let's assume that the taxpayer who wants to take advantage of the measure declares the following incomes:
- 90.000 euros in 2020;
- 85.000 euros 2021;
- 100.000 euros in 2022;
- €125.000 in 2023 (in this case at the end of the tax year);
For the three-year period 2022-2022, the taxpayer must take into consideration the year in which he recorded the highest turnover: in this case 2022 (100.000 euros).
The increase between 2023 and 2022 is equal to 25.000 (125.000-100.000 euros), the so-called quota incremental. This difference will have to be reduced by 5% of the highest amount recorded in the three-year period: we are talking about an amount equal to 5.000 euros (100.000×5/100).
The tax base for calculating the flat tax is therefore equal to 20.000 euros (remember the maximum amount set by law at 40.000 euros) and will be subject to a substitute tax of Irpef equal to to 15% (therefore 20.000×15/100) for an amount of 3.000 euros. Savings become important when compared with the reference income bracket (in which Irpef is equal to 43%), which would lead to paying 8.600 euros (from 20.000×15/100). In conclusion, through the incremental flat tax, the taxpayer with a VAT number, in this case, finds himself saving 5.600 euros.
Below is a summary table of the brackets and rates Personal income tax scheduled for this year:
| Echelon number | Irpef income brackets 2023 | Irpef rates 2023 |
| 1° | Up to 15.000 euros | 23 % |
| 2° | Between 15.001 euros and 28.000 euros | 25 % |
| 3° | Between 28.001 euros and 50.000 euros | 35 % |
| 4° | Over 50.001 euros | 43 % |
Flat tax replacing Irpef for VAT numbers: who is it better for?
It emerges that the flat tax can be convenient for all those VAT numbers whose income makes it possible to determine one tax base close to the maximum ceiling allowed and above all when you pass the top tier of 43% of Irpef (therefore above 50 thousand euros), also in relation to the fact that this mechanism exempts from the payment of additional Irpef. So, is it better for those who earn more? According to the Government, the incremental flat tax should encourage the drive to invoice and avoid fraudulent behaviour. Many have raised doubts about the mechanism, among them also Bankitalia. We must first consider the boomerang effect: the risk it's just an increase in escapism. We are in the middle of 2022 and this could push several professionals and entrepreneurs to move the payment of invoices to 2023 in order to benefit from the facilitation.
