New short-term house rental taxation

This publication is part of the Ashurst Milan Budget Law Series. Please be in touch with our Italian Tax Team if you would like to receive the whole collection.

Article 1, paragraph 63 of the Italian Budget Law for 2024 amended article 4 of the Law Decree no. 50 of 24 April 2017, which regulates the taxation of individuals renting residential properties for short terms.

Before this amendment, individuals renting out their residential properties as private owners (as opposed to entrepreneurs) were granted the option to apply for a 21% flat tax on the relevant income (so-called cedolare secca).

The flat tax has now been increased to 26% as of 1 January 2024. Nevertheless, individuals still have the possibility to apply for the 21% rate taxation on one residential property of their choice used for short-term rents. Starting from the second property, the higher 26% rate would apply.

In addition, the access to the cedolare secca flat tax regime is denied when the owner allocates more than 4 properties in the same fiscal year for short-term rent purposes. If more than four units are in fact used by the same individual for short-term rental purposes, the activity would be deemed to have entrepreneurial nature and the taxation would follow the ordinary corporate income tax rules.

Real estate intermediaries involved in short-term rents, whether they are collecting rentals or facilitating their payment, are required to operate as withholding agents and apply a withholding tax of 21% on the total amount of rents collected for or paid to the owner of the property. The owner may still be responsible for paying the remaining 5% balance when the new rate of 26% is due.

Reference to "real estate intermediaries" includes not just professional brokers pursuant to Law No. 39 of 3 February 1989, but more generically all those through whom short-term rents are entered into, such as, for example, those who habitually, though not exclusively, offer technical and data processing tools to facilitate the meeting of supply and demand for short-term rents.

A detailed compliance regime for foreign intermediaries is also introduced by the new provision of the Italian Budget Law for 2024. The new paragraph 5-bis of article 4 of the Law Decree n. 50 of 24 April 2017 states that non-Italian resident intermediaries with a permanent establishment in Italy must fulfil their withholding obligations (please see above) through such permanent establishment, if they collect rents or fees related to the relevant contracts or participate in the payment of such rents or fees.

Foreign intermediaries without a permanent establishment in Italy must appoint a tax representative therein, save for EU intermediaries or those having a permanent establishment in a EU Member State, which could be directly registered and manage autonomously their tax compliance. A joint liability has been introduced among Italian resident companies belonging to the same corporate group.

Finally, intermediaries have other minor obligations and duties, such as the payment of the tourist tax and the visitor's tax or other possible duties provided for by law and municipal regulations.