Taxes on Italian legal services

Taxes on Italian legal services

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Question: What are the taxes applicable to Italian legal fees?

Answer: Italian lawyers’ invoices are subject to 4% pension tax. The fee amount + 4% pension tax is then subject to Value Added Tax (VAT), except for clients who do not live in the EU, with some exceptions. The VAT rate for legal services is 22%. Therefore total tax paid by a client, when VAT applies, is 26.88% of the applicable fee. For example, for a legal fee of EUR 1,000, the client pays EUR 1,268.80.

Under certain circumstances, invoices issued by Italian lawyers are not subject to Italian VAT. There are two key circumstances when this might occur.

  1. When Italian lawyers start their career or when their total professional income does not exceed a certain threshold, they can opt for some beneficial tax exemptions. Under some of these tax exemptions, invoices are not subject to VAT until the provided requirements are met (time and/or threshold).
  2. Likewise, Italian VAT does not apply to Italian legal services when invoiced to (i) a client who is not a EU resident or (ii) a EU VAT subject who is not an Italian resident and does not have Italian registered tax representation.

As an exception to the above mentioned no-VAT rule for non EU residents, Italian legal services are generally subject to VAT when they refer to some types of Italian real estate matters, in general when a property title transfer is involved.

Our legal team has extensive experience in assisting clients with everything to do with Italian real estate. Our bi-lingual team would be happy to talk with you should you have any queries.

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