The change introduced by the Supreme Court is intended to facilitate rental management and reduce costs for a large number of tenants.
Rents and their taxation have always been topics of great interest to landlords and tenants. The rules that govern these issues have a significant impact on the daily and financial lives of both parties. Lately, the Court of Cassation he issued a sentence that could revolutionize the Italian fiscal landscape regarding rentals.
There dry coupona preferential tax regime for rental income, is always been subject to restrictive interpretations by the Revenue Agency. However, a new ruling from the Court of Cassation has radically changed these interpretations, bringing with it important news for all taxpayers involved in the rental market.
The new ruling from the Supreme Court introduces a big change in the rental market
The Court of Cassation, with sentence no. 12395 of 7 May 2024, expanded access to the flat rate tax also for VAT holders who rent properties for residential use. This decision contrasts with the traditional position of the Revenue Agency, which limited the use of the flat tax only to tenants who did not have a VAT number.
The flat rate tax is a tax regime that allows you to pay a substitute tax on rental income. The rates currently envisaged are:
- 21% for most rentals.
- 10% for subsidized rentals.
- 26% for short-term rentals of multiple properties.
In the past, the Revenue Agency had established that the dry tax could not be applied if the tenant was a VAT number holder, regardless of the use of the property. This restriction was based on the interpretation that the rental should be excluded from the exercise of business, arts or professions. Consequently, many rental contracts stipulated by entrepreneurs or professionals were excluded from this tax break.
The ruling of the Court of Cassation clarified that the exclusion of flat tax must only concern landlords, not tenants. This means that a VAT holder can now rent a property for residential use and benefit from preferential taxation of 21%. This decision is a radical change compared to the previous restrictive line of the Revenue Agency.
This change has important practical implications. For example, an entrepreneur who rents a property to house his employees will now be able to take advantage of the flat rate tax, reducing costs and simplifying tax management. The Supreme Court’s decision therefore eliminates one of the main restrictions that had generated numerous disputes over the years.
