Italian Rental Law Updates: What Property Owners Need to Know in 2024

In recent years, Italy has made significant changes to its laws regulating holiday home rentals, introducing measures to combat tax evasion and ensure fair practices for both property owners and intermediaries. The key legislative milestone was the enactment of Italian Law 96/2017, which revolutionized how taxes on rental income are calculated, collected, and reported. Here’s an updated guide to what every property owner—resident or nonresident, Italian or foreign—needs to know about renting out holiday homes in Italy.

The Rental Landscape Before Law 96/2017

Before June 15, 2017, property owners in Italy were subject to the following tax obligations:

• Local Taxes: Owners paid the annual Council Tax (IMU) and Waste Tax (TARI) for their properties.
• Government Tax: A flat 21% tax was applied to gross rental income, payable annually. Owners were responsible for declaring and paying this tax through an Italian accountant, typically by June of the following year for the previous year’s rental income.

The Current Rules Under Law 96/2017

With the enactment of Law 96/2017, starting from September 12, 2017, the Italian government shifted the responsibility of collecting and paying taxes from property owners to intermediaries (e.g., rental platforms and agencies). This was a crucial step to tackle widespread tax evasion in the short-term rental market.

Key Updates

1. Intermediaries Must Withhold Tax
   • Intermediaries, including platforms like Airbnb, Booking.com, and HomeAway, must withhold 21% of the gross rental income and transfer it directly to the Italian Revenue Agency (Agenzia delle Entrate) on behalf of the property owner.
   • This withholding must be completed by the 16th of the month following the guest’s stay.
2. Owner’s Responsibility if Direct Payments are Made
   • If the guest pays the owner directly (e.g., via cash, bank transfer, or non-platform methods), the responsibility for declaring and paying the 21% tax remains solely with the owner.
3. What Counts as Gross Rental Income
   • Gross rental income is defined as the total amount paid by the guest, including any additional charges such as:
     • Utilities (electricity, water, gas)
     • Cleaning fees
     • Linen or service costs
     • Rental agency commissions (if paid by the owner).
   • Exemptions: If the guest pays the platform’s service fee directly, this portion is excluded from the gross rental income subject to taxation.
4. City Tax Obligations
   • City tax (imposta di soggiorno) is now mandatory for private vacation rentals but only applies in municipalities where the local government has implemented it. Owners must verify applicability based on their property’s location and comply with local regulations.

Recent Updates and Considerations in 2024

1. Digital Tax Reporting
   • Intermediaries are now required to submit detailed tax data digitally through the Revenue Agency’s dedicated platform. This ensures greater transparency in the rental sector.
2. New Enforcement Measures
   • Italian tax authorities have strengthened enforcement mechanisms, introducing penalties for intermediaries that fail to withhold taxes or for owners who underreport income.
   • Penalties: Failure to comply may result in fines ranging from 120% to 240% of the unpaid tax.
3. Lower Thresholds for Tax Audits
   • Properties consistently rented out for more than 30 days per year are more likely to be flagged for review. Owners should maintain detailed records of income and expenses.
4. Special Provisions for Foreign Owners
   • Non-Italian residents must ensure compliance with local tax laws, even if their home country has a tax treaty with Italy. It is advisable to work with a tax professional familiar with Italian and international tax laws.

Practical Tips for Property Owners

1. Work with Accredited Platforms
   • Use well-established rental platforms or authorized agencies to ensure taxes are withheld correctly and paid to the Italian authorities.
2. Track Your Expenses
   • Keep accurate records of all property-related expenses. While the 21% tax applies to gross income, expenses may still be relevant for other tax reporting requirements.
3. Check Local Regulations
   • City tax rates and requirements vary by location. Confirm the specific obligations for your property to avoid fines.
4. Seek Professional Assistance
   • Collaborate with an Italian tax advisor or accountant to ensure compliance with all national and local regulations, especially for direct bookings.

Why the Changes Matter

Italy’s updated rental laws aim to level the playing field for all property owners and ensure proper taxation in the tourism sector. For property owners, these changes bring clarity but also additional responsibility to ensure compliance. By adhering to these regulations and using authorized intermediaries, owners can avoid potential penalties while enjoying the financial benefits of Italy’s thriving tourism market.