Italian politicians discuss details of applying a flat rate to rental income.

This article discusses: Italian Property, Italian Property Tax, Italian Property Rental Income.

Sponsored article by Italian property lawyer Nick Metta, partner at Italian law firm Studio Legale Metta.

After years of discussion, it seems Italian property investors might finally see the flat property income tax reform pass in 2011. The Italian government is currently reviewing the details of the so-called "cedolare secca” (lump sum dividend) bill which would give owners the opportunity to apply a flat tax rate to their rental income. The new flat rate rules would apply to private Italian property owners only.

In particular, initially the Italian government talked about a 20% flat income tax to apply. Then they talked about applying a range from 20% to 23% depending on the terms and conditions of the rental contract. Now they are proposing a range from 19% to 21% as stated in the most recent proposal amendment which was filed on 27 January 2011. The government is also discussing amendments on ancillary rental charges such as the rental contract registration fee.

The table below offers a concise look at the main aspects under discussion.

Italian Property Rental Income Tax
Current Tax Regime Compared with Proposed Flat Tax Regime
Current Rental Tax Regime
Proposed Flat Rental Tax Regime
Tax Option
Default
Elective
Property Type
All Property
Residential
Affected Taxpayers
All Property Owners
Private Property Owners
Rate
0% to 43%
19% to 21%
Deductions
15%
None
Taxable Amount
85% Rental Income (reflects 15% deduction)
100% Rental Income
Who Benefits
Taxpayers with total annual income LESS than 28,000
Taxpayers with total annual income MORE than 28,000

As a general comment on the above, it seems that the subjects who would benefit the most from this new flat rental tax rate would be private property investors whose Italian tax return reflects an aggregate taxable annual income of more than 28,000 euro. However, if some of the most recently added options pass, taxpayers with any annual income would find more convenient the new flat rental rate.

This means that Italian property owners could save more than 50% on property income tax should the bill pass as per the terms currently being discussed by the government.

For more information on this topic, please click here for further details, related material and to keep posted on the proposal amendments or approval.
--
Should you wish to discuss your specific circumstances with a lawyer of our firm, please click here.

Please check this space on the ItalyMag web site regularly as, on a bimonthly basis, we will be publishing editorials on various aspects of Italian property.

Nick Metta is a partner at the Italian law firm, Studio Legale Metta. Nick is head of the firm's international department which addresses matters of Italian law involving international parties in areas such as Italian real estate, property financing and Italian inheritance law.

The Italian law firm Studio Legale Metta is a boutique firm of Italian Attorneys handling domestic and international casework throughout Italy. For more than 120 years, Italian lawyers of Studio Legale Metta have been representing both private and public entities in the Italian legal system.

This article does not represent legal advice. Users are encouraged to seek independent counsel for advice concerning their individual needs for legal assistance.

Studio Legale Metta has paid for this article. Copyright of Studio Legale Metta, 27 January 2011.