Question: What is the Italian Airbnb Tax?
Answer: The so called “Italian Airbnb Tax” is the taxation system applicable to the rental of Italian residential properties. Originally it was meant for short-term rentals only. As the law evolved, it was extended to long-term rentals too. Here is how it works:
- Since 2017 the law gives landlords the option to apply a flat 21% tax (in some cases 26%) to residential rental income, instead of the traditional progressive taxation based on total personal income brackets (ranging from 23% to 43%).
- If a person leases more than one residential unit under the flat-tax option, all leases longer than 30 days and up to one short-term rental can be taxed at 21%.
- If a person has more than one short-term rental unit, only one can benefit from the 21% tax rate whereas the other short-term rented units will be taxes at 26%. The owner can chose to which property the 21% rate should apply.
- The flat tax option applies per property. This means that the owner can apply the fat tax to one property and have the income of another property taxed based on standard brackets rates.
- It was named after Airbnb as originally it was applied to short-term rentals only and Airbnb at that time was one of the most popular players in the short-term property rental industry. However, the Italian Airbnb Tax is not exclusive to Airbnb rentals and it now applies to residential rentals of any duration.
- Although some still call it the “Airbnb Tax“, the 21%-26% flat tax option can also be used by property owners who rent their property directly, without any intermediary, for short or long-term rentals.
- So, if you were to replace the word “Airbnb” in the name “Airbnb Tax” with “flat residential rental”, it would make it clear it applies to any residential rent.
- The 21% (or 26%) 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% (or 26%) tax applies to the gross amount charged by the landlord without any deductions.
- The option is available only for 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% (or 26%) flat tax, the rental income is not subject to Municipal and Regional income tax (average aggregate total is 2.5%).
- If the 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, Airbnb settled the dispute and starting from January 1, 2024 Airbnb applies the 21% withholding tax to any rent collected on behalf of its hosts. The withheld amount is 21% even if the intermediary has more than one short-term rental with the same owner, in which case the balance 5% will be paid directly by the owner separately.
- 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 residential 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 rental provisions above apply regardless of the nationality or residency 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% (or 26%) 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 leases between the same parties within the same year, each lease can be subject to the 21% (or 26%) flat tax, as mentioned above.
- In the event of a sublease, also the sub-landlord is entitled to opt for the 21% (or 26%) flat tax.
- If a person collects short-term rent from more than two residential units, the rent will automatically qualify as business income and will be subject to business accounting and tax rules. As a consequence, the short-rent income will not qualify for the 21% or 26% flat tax option.
- A lease qualifies as “short-term” if it is not longer than 30 days.
Here is an example to illustrate how the 21% (or 26%) 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.
Here is the official 2019 guide regarding the short-term rental tax issued by the Italian Revenue Agency.
Exceptions apply and we will be happy to find the ones that might help you maximize your return on investment. We assist may clients investing and renting Italian properties. For more information about Italian taxes, deductions, estate planning and other strategies to maximize your Italian property investment. Please do not hesitate to contact us.
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