VAT account: obligations and advantages

After setting up their own business or becoming self-employed, many people wonder about the obligation to open a VAT account. And between the information gathered from the web, what banks tell you, or the advice of a friend already in the industry, it is not easy to navigate through the various types of accounts and choose the solution that best suits your needs!

Therefore, we decided to shed some light and answer the most frequently asked questions regarding the VAT account. First of all, what exactly is a VAT account? Is it mandatory to open an account dedicated to one's professional activity? What are the advantages?

The answers in our article.

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VAT Registered Current Account: definition

The current account for VAT registration is a current account that takes the name of business account. It takes on this particular name because it is an account aimed at freelancers with a VAT number or businesses that need to better control the management of their employees, and need additional features.

VAT account: for whom is it mandatory?

To date, there is no regulation requiring an individual to open a VAT-registered current account, that is, a business account that records incoming and outgoing movements concerning professional activity.

Therefore, in case you fall into the category of freelancers (lawyers, doctors, mental coaches, commercial agents, real estate agents), you are not required to have a current account linked to your VAT number.

For whom is it mandatory then?

Businesses that are registered with the Chamber of Commerce Register of Companies as sole proprietorships should have a dedicated VAT account.

It is not a requirement, but a sole proprietorship that does not have a VAT account would give rise to much suspicion and doubt at the Internal Revenue Service.

Decree Law No. 112/2008 established that it is not mandatory to have a VAT registration account. However, it remains mandatory to have a personal checking account in order to make tax payments.

The Bersani Decree has, in fact, contributed to the implementation of this measure. Since 2006, one must make tax and contribution payments only through telematic systems, such as online banking. One can no longer go directly to the Internal Revenue Service and lay down the amount in cash.

In conclusion, therefore, VAT holders are not obliged to open a VAT account. However, it is strongly recommended, since, as we have seen, it is vital to have a current account through which tax and contribution obligations and procedures can be carried out.

What are the necessary documents?

Opening a VAT account does not involve the same procedures as for an individual checking account. The documents that must be submitted to open a business account are more numerous and must be well detailed.

Here is what specifically is needed to open a VAT-registered checking account:

• the information you want to appear on the account
• everything about the company
• tax code and VAT number issued by the Internal Revenue Service
• tax documents required for checks for authorization purposes

There is also the option of opening a VAT registration account online. This choice facilitates the procedure of opening a business account, as it proves to be more agile, streamlined and quick. The individual, who wishes to open a VAT registration account online, simply needs to fill out the online forms and can proceed to open the business account.

Please note that every company or business is registered under a certain legal form. Therefore, tax and personal documents may change from legal entity to legal entity.

VAT account VS Business

Now we can to the analysis of the differences between the two individuals can open a VAT account, namely freelancers and sole proprietors.

A freelancer presents fewer obligations than a sole proprietor. In fact, a freelancer can safely decide to continue using the personal account to pay taxes and contributions related to the VAT number.

For a sole proprietorship registered with the Registrar of Companies, however, the situation changes. In fact, when clients of the sole proprietorship make payments and transfers to the individual, the owner of the business. problems may occur.

Banks, for example, might not accept the transit of large sums of money in favor of a sole proprietor. For anti-money laundering reasons, banks find it difficult to accept deposits of thousands of euros in favor of a private person, and would also be obliged to report these transactions as suspicious to the relevant agency.

For this reason, those who own a sole proprietorship have every interest in opening a corporate business account, dedicated only to the movements of their business.

This is the situation of many artisans and merchants who have decided to open a sole proprietorship and a related account, giving them a fancy name.

What are the advantages?

In the previous paragraph we have already seen one of the advantages of having a VAT account. But what are the others? Can a self-employed person also benefit from opening a checking account?

Here, then, are all the other advantages.

1. A VAT-registered checking account allows you to better manage the finances of your business. A business account allows one to have a clear view of expenses and income, thus emphasizing what needs to be improved, changed or totally eliminated.
2. A VAT-registered checking account allows one to have a separate account for business expenses, which thus are not confused with personal expenses
3. A VAT-registered checking account proves to be a security if the Internal Revenue Service decides to conduct audits. With a VAT-account, you have all invoices with appropriate justification of outgoing and incoming movements from the business account. This prevents the Internal Revenue Service from accusing you of recording unauthorized or black receipts.
4. The VAT-account corresponds to a snapshot of the economic and financial situation of the business. You can easily deduce the performance of the business.

However, it should be specified that in the face of all these advantages, banks charge higher costs for opening current accounts for VAT registration and a fee schedule that changes depending on the services and benefits made available.

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VAT Current Account: is it really convenient?

As we have explained, there is no law requiring a VAT-registered current account. However, having a business current account specifically for one's professional or commercial activity may be a strategy to consider.

• They should consider opening a VAT-registered checking account:
• freelancers who receive substantial sums of money
• those who conduct transactions with foreign clients and suppliers
• those who wish to have access to bonuses and tax breaks (e.g., tax credit for the purchase of capital goods)
• those who need a clear and accurate view of the financial situation of their enterprise or business.
• those who need to accurately justify income and expenses and all invoices arising from their professional activity.

Do you still have questions or are there topics that remain unclear? Write to us in the comments. And if you want to deepen your knowledge of accounting, check out the dedicated section.