A massively transformed system for the taxation of income on rented properties has been given the green light in Italy, and looks likely to be in place for early 2011. Documents have not yet been released, and early discussion was based on two new proposed rates (according to type of rental contract) of 20 and 25 percent – it now looks likely, however, that the ‘cedolare secca’ will be a flat tax rate of 20% as opposed to the current rate of 40%.
This clearly has an enormous impact on the domestic rental market and is yet another step along the road towards shrinking Italy’s black (cash) economy, but it will also, if approved (and again, this looks likely), make purchasing a second home here far more attractive as an investment opportunity. Italy would have pretty much the lowest rate in Europe on property rental income.
The 20% tax rate would be applied to 100% of the property rental income – the current situation is far more complex, with 15% of income being treated differently, hand-in-hand with other fixed costs. Again, there is no official documentation as yet, let alone anything in English, but should you wish to read up (in Italian), here is a link to a piece in Il Sole24ore, Italy’s leading financial newspaper.
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