Question: What are the taxes applicable to Italian Lawyer fees?
Answer: Italian Lawyers invoices are typically subject to a 4% pension tax. Also the total of fees + 4% pension tax is subject to VAT. For invoices issued up to 30 September 2013 the applciable VAT rate is 21%. The aggregate burden on the client is equal to 25.84% of the legal fees. For invoices issued after 30 September 2013 the VAT rate for legal services is 22% and the aggregate burden on the client is 26.88%.
Under certain circumstances, invoices issued by Italian Lawyers are not subject to Italian VAT. This might happen mainly due to two circumstances.
When Italian Lawyers start their carrier they can opt for some beneficial tax model to apply to thier business. Under some of these tax models, the invoices are not subject to VAT for the initial period of practice.
Also, Italian VAT does not apply to Italian legal services when directed and invoiced to (i) non EU subjects or (ii) EU VAT subjects, in any case non Italian residents with no Italian tax representation. Due to a recent law change, invoices issued from 1 January 2013 to said subjects (i.e., non EU or EU VAT) are subject to the 4% pension tax even if they are not subject to VAT.
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