Letting your property in Italy can be a great source of income, whether you are considering long-term rentals or short-term rentals through popular platforms like Airbnb. However, it is important to note that as a homeowner, you are liable for rental income tax in Italy on any payment you receive from the rental of your Italian property, regardless of the duration of the rental.
In this blog post, I discuss the two income tax options available to homeowners in Italy, with a focus on the cedolare secca tax, how to opt for it, and other important considerations.
Understanding the options for rental income tax in Italy and implications of renting out a property in Italy are complex. As such, I advise that homeowners should seek professional advice before making any decisions. If you need help calculating rental income tax in Italy, please connect with me below.
Rental Income Tax in Italy: Two Options Available to Homeowners in Italy
Homeowners in Italy who rent out their properties as individuals and are not professional landlords have two options when it comes to paying rental income tax in Italy. They can either:
- 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 applicable only to the rental income (cedolare secca option).
What is Cedolare Secca and How to Opt for It?
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.
Important Considerations Regarding Rental Income Tax in Italy
It is important to note that 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. Homeowners should therefore consider opting for it if their tax rate is higher than 21%. On the other hand, it is not possible to deduct any costs or expenses related to the property maintenance or rent services, if there are any. Homeowners should therefore calculate if it would be worth opting for the flat tax rate or not.
If the homeowner rents the property through a professional website or online portals such as Airbnb and similar hosting services, the provider must settle the cedolare secca on behalf of the homeowner and carry out all the relevant formalities on the homeowner’s behalf. Homeowners should make sure to retain relevant receipts if they use hosting services.
In conclusion
If you are considering renting out your Italian property, it is important to understand the tax obligations and options available to you as a homeowner. While the default option of adding rental income to your total income is straightforward, the cedolare secca tax can offer a simpler and potentially more advantageous alternative.
Have you had any experience renting out your Italian property? I would love to hear about it in the comments section below! If you have any questions or concerns about rental income tax, contracts or other legal matters in Italy, feel free to contact me for a free consultation.
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