Renting Out Property – the Golden Rule
The Guardia di Finanza appears to be on a crusade to haul in all those non-Italians who have been renting property out in Italy and not paying taxes on it. It’s time to get this straight. There is a Golden Rule – there are no exceptions, waivers, alternative arrangements. The Golden Rule is this:
If you rent out property in Italy, you need to declare and pay tax on the rental income in Italy.
It matters not to the GdF if you have been regularly declaring the income in the UK, the US, Australia, or wherever you generally make your tax return. If they catch you they will fine you for not making a return, for not declaring the income, for not paying tax on the income. To this they will add interest and of course the tax itself. As you have failed to produce figures they will produce their own, often based on the rates they find helpfully advertised on your own website or portal.
Methods of renting
There are a number of different methods of organizing legitimate rentals but the rules vary from region to region. As a general rule the options are:
If you simply hand over the keys to your house and offer no additional services (in some regions, not even providing bed-linen) then you can generally take advantage of renting out under a tourist contract. This needs to be a written contract which quotes the relevant legal provision and has a tax stamp (marca da bollo) showing the date. The drawback with this method is that you are allowed only a fixed rate deduction for costs, which this year decreases from 15% to 5%.
If you offer anything more than the keys to the house, such as change of linen, cleaning, gardening, swimming-pool maintenance etc then you generally fall into the category of a business. This requires you to register for IVA (VAT) in Italy and means you will need to charge IVA on your invoices. On the upside, it also means you can deduct all expenses on the usual business basis.
This is not a specific category of rental but it is fair to say that where your gross annual income from rentals does not exceed €5 - €7k, it can generally be declared as “occasional” income. However, if you are declaring casual income, you are effectively stating that the activity is not a business. This means you can only deduct costs strictly connected with providing the rental and even then no costs such as agency or advertising costs, as these are generally considered costs of a business. In any event if you are renting a villa or particularly high-quality property then it will always be difficult for the rental to be classified as a casual activity.
B&B, room rentals
There are a number of other types of rentals available, but these require the presence of the owner in the property on a full-time business and do not represent the vast majority of typical tourist arrangements.
This is a very general guide to this area – as mentioned, each region has its own rules, and many Comune have their own particular requirements. Two other important aspects to remember are:
you generally need to give some sort of notice to the Comune that you are carrying on a rental activity
you need to notify the Carabinieri of the details of the visitors to your property. Failure to do this leads to criminal liability.
This may all sound a little daunting – in fact if set up correctly from the beginning it need not be particularly problematic. The worst thing is to continue to bury your head in the sand and hope that you won’t get caught. The GdF are not a soft-hearted lot and have little sympathy for non-Italians (or Italians) who do not respect Italian law, however unwittingly. If you need help in this area, please contact us.
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