Published by carratelli4 years ago

The flat-rate tax is an optional regime, which consists of the payment of a substitute tax for IRPEF and additional taxes...

What is the flat-rate tax and how does it work? 

The flat-rate tax is an optional regime, consisting of a substitute tax for income tax (IRPEF) and additional taxes. Contracts subject to the flat-rate tax do not pay:

  • -the registration tax
  • -the stamp duty

The flat-rate tax does not replace the registration tax for the transfer of a lease agreement. 

 

Who can benefit from the flat-rate tax? 

Owners of property rights or real rights of enjoyment who do not rent the property for business, professional, or other purposes may opt for the flat-rate tax regime. 

 

To which properties does it apply?

The option can be exercised for real estate units belonging to cadastral categories A1 to A11 (excluding A10) rented for residential use or under a separate lease subsequent to the lease for the residential property. This is subject to the condition that the rental agreement is between the same contractual parties and that the lease for the appurtenant unit refers to the lease for the residential property and highlights the existence of the appurtenant relationship with the previously rented residential unit. In the event of joint ownership of the property, the option must be exercised separately by each lessor. 

 

How does the substitute tax work and how much do you pay? 

The substitute tax is calculated by applying a rate of 21% to the annual rent agreed upon by the parties. A reduced rate is also applicable for agreed-upon rental agreements for properties located:

  • In municipalities with housing shortages. These include, in practice, the municipalities of Bari, Bologna, Catania, Florence, Genoa, Milan, Naples, Palermo, Rome, Turin, and Venice, as well as their neighboring municipalities, as well as other provincial capitals in municipalities with high housing tension (identified by the CIPE).

Since 2013, the rate for these contracts has been 15%, reduced to 10% from 2014 to 2017. Legislative Decree 47/2014 established that the same rate also applies to rental contracts entered into in municipalities for which a state of emergency was declared following disasters in the five years prior to the entry into force of the law converting the decree (May 28, 2014). Finally, the 2018 budget law extended the reduced rate of 10% for agreed-upon rent contracts for another two years (2018 and 2019). 

 

What are the effects of the flat-rate tax on income? 

Income subject to flat-rate tax:

  • - excluded from overall income;
  • -deductible charges and tax credits cannot be claimed on the income subject to the flat-rate tax and on the flat-rate tax itself;
  • - income subject to the flat-rate tax must be included in income for the purposes of recognizing entitlement or determining deductions, tax credits, or benefits of any kind related to meeting income requirements (determination of ISEE, determination of income to be considered dependent).
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