In Italy, homeowners are expected to pay tax on any payment they receive from long or short term rental of their Italian properties.
Generally speaking, the Italian law requires that tax from rental income is paid by all the co-owners of the property on a pro quota basis, no matter who actually signed the rental contract or if the rent is paid in favour of only one of the co-owners.
However, as per recent case law, depending on the specific case scenario, different regulations might apply. Please get in touch for a preliminary consultation on rental income tax issues.
With respect to rental income tax in Italy, homeowners who act as individuals and are not professional landlords, have two options:
- Aggregate the rental income, add it to their total income and pay taxes as per the applicable tax rate for their income range (default option).
- opt for a 21% flat tax to be applied to the rental income only (cedolare secca option).
What is cedolare secca and how to opt for cedolare secca.
The cedolare secca is a substitute annual flat tax due on rental incomes. It substitutes not only the general income tax, for the portion of income deriving from the rents, but also other charges related to rental contracts, such as registration tax, stamp duties, etc.
Homeowners can opt for the flat tax rate upon signing a rental contract and shall inform the tenant accordingly.
The option usually lasts for the whole duration of the contract; however, the homeowner can opt out at any time and apply the default taxation rate to the rental income as well.
The cedolare secca tax rate is equal to 21% of the gross rent received, no matter what the overall annual income and tax rate applicable to it are (i.e., it is worth opting for it if your tax rate is higher than 21%);
It is not possible to deduct any costs or expenses related to the property maintenance or rent services, if there are any (i.e., it might not be worth opting for the flat tax rate if your net rental income is quite low).
A final note with respect to Airbnb and other hosting providers’ services.
If the homeowner rents the property through a professional website or online portals such as Airbnb and similar hosting services, the provider is expected to settle the cedolare secca on behalf of the homeowner and carry out all the relevant formalities on the homeowner’s behalf.
Make sure to ask for the relevant receipts if you use hosting services.