“The increase in the flat-rate tax for short-term rentals included in the budget law draft is completely nonsense and ineffective. It is an attack on an increasingly regulated sector, which responds to specific needs of hospitality and valorization of real estate assets, complementary to other operators and produces wealth for a plurality of actors in the Italian economic system.” This is the statement of Donato Cella, member of the board of directors of the Pmi (Property Managers Italia) association and founder of Easylife, following the summit at Palazzo Chigi on October 30, which closed the discussion on the budget modifications, which confirmed the increase of the flat tax from 21% to 26% (starting from the second home) and provided for a national identification code (Cin) for short term rentals.
Discriminatory Provision
According to Cella, the measure is not only highly discriminatory against those who own multiple properties rented under a 4+4-year contract but is completely ineffective even if the goal was to reduce the number of properties rented on a short-term basis to meet the growing demand for long-term rentals.
“Those who opt to let their apartment under the short-term rental formula do so with the specific goal of having greater security of economic return from renting the asset, combined with flexibility in disposing of it according to their needs. As evidenced by the fact that, to date,” continued Cella, “the hypothesis of an increase has not caused any consequences for us at Easylife thus far: in fact, there have been no ‘preventive’ cancellations, but rather we have witnessed an increase in the demand of new potential clients who would like to let us manage their property for short-term rentals.”
The Purpose of the Flat Tax Agreement
“The flat tax agreement was created as a tool to incentivize those used to going behind the curtains to pay a low and simple tax. The purpose of the 21% flat tax was to allow the various state administrators to penalize defaulters based on the large amount of data in their possession,” explained Marco Celani, president of Aigab, the Italian Association of Managers of Short-Term Rents. “Increasing the flat tax for second homes online with a differentiated rate will complicate monitoring and control processes, discourage honest landlords from making further investments in income-generating housing, and will change absolutely nothing for evaders.”
The Impacts of Additional Taxes on Homes
“Any additional and complex taxation on houses will have a negative effect on the country’s GDP because it will discourage the many families who have vacant second homes from making investments to generate income,” Celani commented, recalling that real estate in Italy has a very significant weight on GDP: about 5.1% for direct expenditures on housing and about 16% for services to real estate (from renovations, to furnishings, to maintenance). In practice, “compared with European countries such as France and Germany,we are above by 21%, ” he pointed out.
Real Estate and Btp
“Let’s remember that in a time where government bonds stand at 5%, it is much easier to sell real estate and keep the money in the bank than to engage in long and expensive renovations with the hope of having an income over time. The former activity is taxed at 12.5%and doesn’t favor the GDP, the latter is now taxed at 26% and produces induced income, often in economically depressed locations,” Celani continued.
The Numbers of Short-term Rentals in Italy
According to Aigab’s data, for the state, short-term rentals are worth about 11 billion euros in terms of direct bookings, about another 44 billion in induced revenue for a total of about 57 billion of the total GDP, calculating also what is activated by renovations, furnishings and maintenance.
Consequences
“What are some of the general consequences that this increase could generate? Either that some will rent apartments irregularly or that they won’t rent them at all, and that they deplete real estate assets if they are not used,” Cella replied.
“Currently for a landlord, the net income through short-term rentals is equivalent to 35% of the proceedings, from which the flat-rate tax must be discounted (21%), utility costs (about 3 thousand between electricity, gas, wi-fi, Tari, Tasi, Imu), cleaning costs (10% ) costs of online portals (20%) – as said from Aigab – It goes without saying that by raising the flat-rate tax to 26%, the state will see as a consequence a lower revenue because the owners will agree to rent for fewer days and perhaps in the dark rather than invest in a complex management system, such as online platforms, to leave such a high percentage to the tax authorities.”
Solutions to Incentivize Long-Term Renting
“Evictions for delinquent tenants should be made easier and a public tenant rating should be provided if long-term renting is to become attractive again,” Cella commented.
Novelties in the Agreement: From the Increase in the Flat-Tax Rate to the National ID Code
The agreement includes an increase from 21% to 26% in the tax rate from the second house rented for up to 30 days. A “tweak” that thus allows the 21% rate on the first house to be maintained. Also entered into the agreement was FI’s proposal for a national identification code (Cin), to be of compulsorily use for short-term rentals and offers through IT platforms. “The inclusion of the national identification code in the budget is certainly a powerful anti-evasion tool, provided that the government is able to implement it in a timely manner and, as in Greece, not allow those who do not have Cin to go on the platforms. Under these conditions evaders will not be able to take reservations, and then the value of the underground will also be understood,” Celani said.
How Will this Additional Revenue be Allocated
There is a commitment to earmark the resulting revenue-about 1 billion euros according to estimates circulated at the Oct. 30 meeting- to reduce housing taxes.
