If you are renting out a property in Italy, there are several things to keep in mind. One of these things is rental agreements with "Cedolare Secca". But what is Cedolare Secca in Italy? A tenancy agreement with a Cedolare Secca is an optional taxation arrangement that is basically an annual flat tax that replaces IRPEF (income tax) and additional income tax. This includes income received from rent, but also other fees and expenses such as stamp duty. We have all the details on what exactly a rental agreement with "Cedolare Secca" in Italy is, as well as the advantages and disadvantages.
Italian flat tax (Cedolare Secca) on rental incomes
When we talk about a rental contract with a flat rate, we are referring to a rental contract to which a favourable tax regime is applied. This contract is not subject to the payment of registration tax and stamp duty, and instead of these taxes, you are required to pay a flat rate on the annual rent. Bear in mind that the "Cedolare Secca" does not replace the registration tax in the event of a lease transfer.
Signing a rental contract with a flat rate means losing the opportunity to increase the rent, such as changes in ISTAT indices. The rent set when the contract is signed remains the same for the entire duration of the contract. It is important to bear in mind that it is possible to opt for this flat tax regime either at the time of contract registration or in subsequent years in the case of multi-year leases.
Cedolare Secca: Rate of 21% or 10%?
Those who decide to enter into a rental contract with a "Cedolare Secca" have the option to choose whether to apply a rate on the annual rent of 10% or 21%, depending on the type of rental contract. The 21% rate applies to rental contracts for properties rented for residential purposes, and the 10% rate to rental contracts with an agreed rent:
- 21% flat rate: this is levied on the total property income received by the taxpayer in the year. There is no payment of all the other taxes linked to the act of registering the contract, and no additional IRPEF tax is paid.
- 10% flat rate: this rate can be applied to leases for residential use that do not exceed a certain limit established in relation to the amount of monthly rent.
It should be emphasised that the requirements for the application of the 10% flat rate are much stricter than those with a 21% flat rate.
Short term leases with Cedolare Secca
With reference to the flat rate provided for short-term rentals, such as holiday or AirBnb rentals, it is worth pausing to outline what the rules are in this particular case. Short term leases refer to a lease of a property for residential use of a duration not exceeding 30 days, stipulated by natural persons and outside the exercise of business activity. Those opting for short-term rentals may also opt for the 21% flat rate. The application of this taxation is possible for a maximum of four flats per tax period.
How much does it cost to register a rental contract with Cedolare Secca?
The cost of registering a rental contract with a flat-rate tax is calculated by applying a rate of 21% on the annual rent established by the parties, or 10% for rental contracts with an agreed rent. There is no need to pay the regional and municipal additional IRPEF, registration tax and stamp duty.
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