The flat rate tax is a tax regime applicable to property rentals and with precise characteristics. How does it work and what changes are expected from January 1, 2024?
Let's see it together in the following paragraphs to understand when it is really worth choosing the flat rate tax instead of the IRPEF.
What is the flat rate tax?
This is a facilitated rental tax regime divided into three different rates:
- substitute tax of 21%;
- reduced rate of 10%;
- 26% rate on short-term rentals.
In concrete terms, the flat rate tax is the rental tax regime replacing IRPEF, applicable for i contracts attributable to properties for residential purposes. For most rentals the tax rate is equal to 21%but based on certain requirements it is applicable to an even more favorable extent than 10%.
This is a tax expected to replace the IRPEF which has various advantages, also in terms of stamp duty and registration.
From 1 January 2024, in addition to the already envisaged rates of 21% and 10%, taxation equal to 26% for short-term rentals. The new rate is only foreseen in the case of short-term rentals of more than one property during the year.
How does it work
The most applied one is certainly the flat rate tax 21%, as no particular limits are established for its application. This rate can be chosen by natural persons who hold ownership rights and enjoyment of real estate, but do not fall within the scope of the exercise of business activities, professions and arts.
The properties affected by the application of this taxation must be for residential use and belong to the cadastral categories from A1 to A11.
The coupon is also applicable to appliances, while it is not possible to access it for commercial contracts. The 21% dry coupon could be advantageous because it has a lower tax rate than the IRPEF, it is applicable in place of the regional and municipal surcharges and, at the time of registration of the contracts, registration and stamp duty are not due.
Even more favorable is the10% rate, established for so-called agreed-fee contracts. The flat rate tax rate of 10% is applicable in the following cases:
- in highly populated municipalities or without housing solutions;
- to rental contracts aimed at university students;
- in municipalities affected by natural disasters;
- to transitional rentals regulated by Law 431/98.
The constraints to access the 10% taxation are therefore much more restrictive which, initially, can only be exercised in the case of rental contracts with a fair rent.
As mentioned above, from 1 January 2024 the coupon equal to 26% applicable on short-term rentals, up to 31 December 2023 equal to 21%. An increase in the rate foreseen with the latest Budget Law. In particular, the flat rate tax rate of 26% is applicable to short-term rentals lasting a maximum of thirty days.
However, this tax, more burdensome than the others, is aimed only at those who rent multiple properties for a short time during the reference year.
Deposit and balance payment deadlines
The payment of the flat tax follows the same deadlines established for the IRPEF. With the exception of the first year, for which it is not possible to define the tax base, the system of payment of the advance and the balance is applicable for the subsequent years.
The deposit must be paid according to the following deadlines:
- in a single solution, by November 30thwhen the sum to be paid is less than €257.52;
- in 2 installments when the sum to be paid is greater than €257.52. In these cases the first instalment, of 40%, must be paid by June 30th while the second, of 60%, is to be paid by November 30th.
The balance must be paid by the deadline of 30 June of the year following the reference year.
Evaluations to make: what should you choose?
Concretely, there are careful assessments to be made to ascertain the real convenience of the flat tax rate. In this regard, the calculation of the tax is first of all fundamental: if it is higher than the personal income tax, it is naturally not advantageous to opt for flat rate taxation.
From a tax point of view, it is then essential to consider that rental income with flat rate tax is excluded from overall income and it is not possible to claim deductions and deductible charges on them.
The dry coupon formula is especially advantageous when 10% taxation is applicable, in other circumstances there are various assessments to be made, starting with the taxpayers' incomes. Below a certain limit (€8,125), in fact, no taxes are due. Therefore, in such cases, it is appropriate to evaluate the possibility of remaining in the IRPEF regime.
Similar speech for taxpayers falling within the “no tax area” (incomes up to €8,174 per year), who are not required to pay taxes.
Those with the highest incomes, on the other hand, certainly have an interest in applying the flat rate tax so as not to exceed an IRPEF bracket, which is possible with the accumulation of income from work and land income.
Ultimately, the calculation of the tax is fundamental because the IRPEF rates of 23% and 43% could also be advantageous compared to the flat tax due to the deductions and deductions. The important thing therefore, before making any decision regarding the choice of tax regime, is to carefully evaluate the subjective situations.
