What are the differences between being enrolled in the monotribute (RS) and in the so-called General Regime (RG)? If we consider the amounts paid by those on the highest scale of the Monotax in 2022 and how much a self-employed person should pay next year in IRPEF for this year’s sales and expenses, what fits?

Adherence to the General Regime implies compliance with certain parameters o Indicators which the Treasury will take into account in the annual sworn statement: the amount consumed and the payment of the tax itself.

With the monthly fee of the Simplified Regime you pay VAT, Earnings, Pension contributions and contribution to social work.

In the General Regime, the pension contribution and VAT must be paid month by month and the income tax return must be presented and paid annually.

The VAT is neutral (I collect VAT from customers and subtract the VAT I paid to suppliers), but the law of support and inclusion for small taxpayers gives an edge regarding this tax for those who have opted for GR in order to encourage the transfer.

This incentive consists ofan to pay only 50% of that VAT balancewith what the difference remains in the hands of the taxpayer and that’s when still. In the second year, in the RG, the benefit drops to 30% of the balance and in the third year to 10%.

The benefit starts from the first month of the year following the date of resignation or exclusion from the Monotax. It also allows for the calculation for the first year in the RG in addition to the tax credit and deduction of all expenses related to the activity of the

What’s new in the General Regime

The annual income tax affidavit includes the sales minus the expenses incurred in obtaining those sales, which it produces a net result of the activity.

From this result some typical deductions must be made which the Income Tax Act allows.

The most common general deductions are the payment of prepaid medicine and the self-employment pension. In the case of prepaid, the deduction is only permitted with a maximum of 5% of the result.

The personal deductions are the non-taxable minimum, the special deduction (it corresponds if the pension contributions have been fully paid) and family responsibilities (spouse, children, etc.).

In the affidavit of earnings there are two new concepts that need to be taken into account: the amount consumed and the payment of income tax.

The amount consumed

It is the amount that the taxpayer needs for those non-deductible expenses. These are, for example, expenses for food, entertainment, lodging and property not affected by the activity. There is no standard or predetermined amount, since It depends on one’s standard of living.

Some information available to the Treasury, such as debit and credit card expenses and other consumption that derive from information it receives from other agencies, allow it to establish the consumer profile of a taxpayer.

Without going into a detailed analysis, there is an acceptable amount of income and it has to do with, for example, wage benchmarks in the economy, which provide an income guideline for daily expenses.

On the 2022 annual earnings returns (which are filed in 2023), a reasonable amount consumed must not be less than $2,400,000 (i.e. an average monthly expense of $200,000).

Fixed income tax of the previous year

The tax of the first year is paid upon expiry of the sworn declaration and, from the same year, the advances on the future annual declaration of the current year are paid.

Thus, the 2022 Declaration is filed in 2023, the determined tax is paid, and from there arise the advances to the 2023 DDJJ account, which will be deducted from the determined tax in the 2023 DDJJ.

The first year there is no tax determined by the previous year, but there is in the following ones.

Minimum net income, amount of consumption plus payment of earnings

From what has been explained, it can be deduced that the net result of the activity must be sufficient to live on (consumed) and to have paid the Irpef (tax determined from the previous year).

Sales – activity expenses = activity result

Result of activity (minimum) = quantity consumed + payment of income tax

If the utility exceeds this minimum there will be an increase in equity (or a decrease in debt) (savings). Conversely, if the utility is below the acceptable minimum, it will be necessary to sell assets or go into debt in order to live.

In summary, not only must the benefit of the activity allow consumption and daily expenses, but also the funds for the payment of Income Tax must derive from this benefit.

Analysis of a case

Let’s look at a case of service provision:

Income level: $4,200,000 (Monotax category H limit in 2022 for services is $4,229,985)

Estimate of expenses Deductibles related to the activity carried out: 20% of the income.

SINGLE TAX: If the taxpayer is under the simplified regime, he will pay 12 monthly installments of $16,114.67, i.e., $193,376 annually

GENERAL SCHEME (Income Tax Affidavit):

– self-retirement (Category II): Adjusts quarterly and the total for this year would be approximately $111,152 ($10,901 per month).

conclusions

• To determine the true cost of the General Regime The temporary benefit of the VAT reduction for the first 3 years should not be considered, as it is not enjoyed in the fourth year.

• In this case the cost of the General Regime was analysed triples the cost of the Monotax ($594,340 vs. $193,376).

• The analyzed case assumes a high utility (quite real in the case of services provided on an individual basis). To the extent that the profit margin is lower, the profit payout will be proportionately lower.

NEITHER