Q Question: What is the Italian Airbnb Tax?
A Answer: The so called “Italian Airbnb Tax” is the new taxation system applicable to the short-term rental of Italian properties. Here is how it works:
- Since 2017 the law (decree no. 50/2017) gives landlords* the option to apply a flat 21% tax to short-term rental income, instead of the traditional progressive taxation based on total personal income brackets (ranging from 23% to 43%).
- A lease qualifies as “short-term” for the purposes of the 21% flat tax if it is not longer than 30 days.
- It was named after Airbnb as this company is one of the most popular players in the short-term property rental industry. However, the Italian Airbnb Tax is not exclusive to Airbnb rentals.
- Although it is called the Airbnb Tax, the 21% flat tax option can also be used by property owners who rent their property directly, without any intermediary.
- So, if you were to replace the word “Airbnb” in the name “Airbnb Tax” with “short-term property rental”, it would make it clear which rentals it applies to.
- The 21% flat tax option is applicable only if both the landlord and the tenant are acting as private individuals, as opposed to a business (e.g., a company or self-proprietorship).
- The 21% tax applies to the gross amount charged by the landlord without any deductions.
- The option is available only for short-term leases of residential units (property class on record A/1 to A/11, but not A/10, which is defined as an office unit).
- If the landlord opts for the 21% flat tax, the short-term rental income is not subject to Municipal and Regional income tax (average aggregate total is 2.5%).
- If the short-term rental property is booked through a qualifying intermediary, such intermediary, after receipt of rent payment from the tenant, shall transfer to the Italian Revenue Agency 21% of the paid rent and transfer the remainder to the landlord. Airbnb disputed for several years in court the application of this obligation to its business. Finally, in December 2019 the European Court of Justice decided the case in favor of Airbnb: Airbnb does not qualify as an intermediary for the purposes of the application of the 21% withholding tax obligation above. Therefore, Airbnb shall transfer the full rent amount to the landlord and the latter shall then pay the applicbale taxes directly (21%, if elected, or based on standard progressive brackets rates).
- The intermediaries who meet the following three requirements are subject to the 21% withholding tax duties above:
(i) act as a business;
(ii) offer the landlord and the tenant the service through which they confirm the short-term property rental contract (for example, a website where properties are listed with availability, prices and the possibility to complete the reservation online); and
(iii) collect the rental payment from the tenant, on behalf of the landlord.
- The Italian property short-term rental provisions above apply regardless of the nationality or residence of the landlord, the tenant or the intermediary.
- If the tenant makes a payment to the landlord using a financial intermediary, for example via bank transfer or credit card or PayPal, directly into an account in the name of the landlord, this is considered a direct payment to the landlord, thus it is not subject to 21% with holding tax duties.
- If the property owner who has rented the property through a qualifying intermediary does not want to opt for the 21% flat tax, the intermediary shall still apply the 21% withholding tax and transfer it to the Italian Revenue Agency. This 21% payment can be used by the landlord as a tax credit against the income taxes owed based on the standard progressive income taxation.
- In the event of multiple short-term leases between the same parties within the same year, each lease can be subject to the 21% flat tax.*
- In the event of a sublease, also the sub-landlord is entitled to opt for the 21% flat tax.
* Update 17 November 2020: The Italian Government just issued a law proposal that, if approved, will affect landlords who short-rent more than four residential units. In particular, should such provision be approved, short term individuals running more than four units will automatically qualify as a business and will be subject to business accounting and tax rules. As a consequence, their short-rent income will not qualify for the 21% flat tax option.
Here is an example to illustrate how the 21% withholding tax works.
A tourist books a room through an intermediary for two nights at the cost of EUR 50 per night, so the total rent for the short-term stay is EUR 100. The tourist is the tenant in this example and pays EUR 100 to the intermediary. The intermediary transfers EUR 21 to the Italian Revenue Agency and transfers the remaining EUR 79 to the landlord. If the intermediary and the landlord had agreed that the intermediary would take a 20% commission on the rent, the intermediary would keep EUR 20 and transfer the landlord EUR 59.
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