Italy remains one of Europe’s most desirable markets for overseas buyers, attracting investors seeking lifestyle homes, holiday rentals, and long-term rental income. While letting a property in Italy can be financially rewarding, non-resident owners must understand how rental income is taxed by the Italian authorities.

Whether the property is listed on Airbnb for short stays or leased for longer periods, rental income generated in Italy is subject to Italian tax rules. Understanding these obligations is essential to avoid penalties, protect your investment, and maximise returns.

Do Non-Residents Need to Pay Tax on Rental Income in Italy?

Yes. Any individual who earns rental income from property located in Italy must declare that income in Italy. This requirement applies regardless of nationality, tax residency, or where the payments are received.

Rental income must be reported even if:

• the property is located in Italy but the owner lives abroad
• the income is taxed in another country
• the property is rented only occasionally
• rental payments are collected through online platforms

If the property is in Italy, Italy has taxing rights.

Short-Term vs Long-Term Rentals

Rental taxation applies to both:

• short-term tourist rentals (including Airbnb, Booking.com, and similar platforms), and
• long-term residential leases

Different regimes may apply depending on the rental model and number of properties involved.

How Rental Income Is Taxed in Italy

Non-resident property owners typically have two main options for taxing rental income in Italy:

1. Cedolare Secca (Flat Tax Regime)

Cedolare Secca is a simplified flat tax available for residential leases. Under this regime:

• long-term leases and some short-term rentals are taxed at 21%
• additional short-term rentals may be taxed at 26%

Key advantages include:

✔ no municipal or regional surtaxes
✔ straightforward calculations
✔ predictable annual liability

Key limitations include:

✘ no deductions for expenses such as maintenance, utilities, or management fees
✘ tax credits cannot be applied
✘ taxed on gross rental income

Cedolare Secca must be actively elected; otherwise the ordinary regime applies.

2. Ordinary Income Tax (IRPEF System)

Alternatively, rental income may be taxed under Italy’s progressive income tax system, IRPEF:

• rates start at 23%
• highest brackets reach 35% and 43%

Under this regime:

• taxable income is calculated as a percentage of gross rent
• some tax credits may offset the final liability
• in certain cases, deductions can apply

This option may be more advantageous where the owner can claim credits or where multiple properties are involved.

Withholding Tax on Short-Term Rentals (Airbnb, Booking.com, etc.)

When short-term rental bookings are processed through intermediaries or digital platforms, a 21% withholding tax is applied at source.

At the end of the year, the platform issues a statement showing the amounts withheld. These can be credited against the owner’s final tax liability when filing the tax return.

International Tax Considerations for Foreign Owners

Many non-resident owners benefit from double taxation treaties between Italy and their home country. These agreements prevent the same rental income from being taxed twice. In practice, taxes paid in Italy may be credited abroad, depending on local rules.

The ownership structure can also influence taxation. Owners with multiple rental properties may consider holding them through an Italian company for operational or planning purposes.

Other strategies include leasing the property to a management company, allowing taxes to apply to net profit rather than gross rent.

Where the property is used for both personal stays and rentals, income tax is due only on the portion of the year it is rented. Accurate records are essential.

How Non-Residents File Rental Income Taxes in Italy

Non-resident owners report rental income through Italy’s annual tax return system using the Modello Redditi PF.

Key deadlines generally include:

• advance tax payments: June and November
• final balance payment: following June
• annual return submission: typically late October or November

Failure to file or pay on time may result in penalties.

Other Taxes Affecting Rental Properties in Italy

In addition to income tax, rental properties may be subject to:

• IMU: municipal property tax
• TARI: waste collection tax
• Tourist Tax: applied to guest stays and paid to local municipalities

Responsibility for TARI may depend on rental duration and whether the property is rented long-term or short-term.

Penalties for Non-Compliance

Late filing or non-declaration can lead to penalties, which may increase over time. While reduced penalties are available for prompt correction, prolonged non-compliance can result in liabilities exceeding the original tax due.

Timely compliance is highly recommended to preserve investment value.

Final Thoughts

Italy offers attractive rental opportunities for overseas owners, but understanding the tax system is essential for maximising returns and avoiding unexpected costs. With the correct tax regime, proper filings, and professional guidance, non-resident investors can navigate the process smoothly and focus on long-term value creation in one of Europe’s most appealing real estate markets.

About ItalianTaxes.com

ItalianTaxes.com is a digital platform designed to simplify Italian tax compliance for expatriates, non-residents, and returning Italians. Combining technology with licensed professional support, the platform assists users in navigating filings, optimising tax outcomes, and maintaining full confidence when owning property in Italy.

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