Cedolare secca: how it works

In exchange you do not pay the registration tax (imposta di registro) on the contract, but the rent stays fixed for the whole term: you give up the ISTAT inflation adjustments.

What the cedolare secca is in plain terms

The cedolare secca is a substitute tax. "Substitute" means it takes the place of another tax: on the rent you do not pay IRPEF with its progressive brackets, that is the brackets that rise with your total income.

The rent is the sum the tenant pays the owner to use the home. The cedolare is calculated as a fixed percentage of the annual rent collected. One rate, one percentage, one calculation: this is why it is called a simple regime.

Who can choose it

The cedolare applies only in certain situations. The main conditions are these:

• the landlord is a natural person, not a company and not someone renting as a business;
• the property is residential, that is a home intended to be lived in;
• the contract is registered, and registration must be done within 30 days of signing.

If the property is a shop, an office or a warehouse, the cedolare does not apply. For those cases the rules are different: you will find them in the article on the registration tax on rent.

How much you pay: an example with round numbers

Let us take an invented case. You rent a home for €500 a month under an open-market lease. The annual rent is therefore €6,000.

Example with the cedolare secca:

• Annual rent: €6,000.
• Cedolare rate: 21%.
• Tax to pay: €6,000 × 21% = €1,260 a year.

Example without the cedolare, with ordinary taxation:

• Annual rent: €6,000.
• Registration tax: 2% of the annual rent = €120. The minimum is €67, so here the full 2% applies.
• The rent enters your income and is taxed with ordinary IRPEF, according to your brackets and your other income.

The comparison is not just between €1,260 and €120. Under the ordinary regime the tax on the rent depends on how much you earn in the rest of the year, so the final figure cannot be stated in the abstract. For a simulation with your own data you need an accountant or a CAF (tax assistance centre).

Open-market or agreed rent: what changes

Rental contracts for homes come in two main types:

• Open-market lease (4+4): lasts 4 years and renews for another 4, unless terminated for a valid reason. With the cedolare the rate is 21%.
• Agreed-rent lease (3+2): lasts 3 years and renews for another 2. The rent is fixed within the values of the municipality's local agreements. With the cedolare the rate is 10%, but only in the municipalities that provide for it.

Example with an agreed-rent lease: €6,000 a year, rate 10%, tax of €600.

Before choosing the agreed rent, check that your municipality is covered by the local agreements. You will find the values and zones in the agreement for your municipality, which is the source to check.

What you give up: fixed rent and registration

Choosing the cedolare has a cost, and you need to factor it in before signing.

• Fixed rent: you give up the annual rent adjustments based on the ISTAT index. If the rent is €6,000 and inflation rises, the rent stays at €6,000.
• No registration tax or stamp duty: with the cedolare you do not pay registration tax on the contract. The contract must still be registered within 30 days.

The lock applies for the whole term of the contract. Ask your landlord, or the professional advising you, to explain how the clause works in your case.

Short-term rentals: a separate case

Short-term rentals are lets lasting no more than 30 days, for example a home rented for holidays. For these too there is a cedolare secca, but with different rates:

• 21% if you let one unit in the year;
• 26% from the second to the fourth unit let in the year.

Short-term rental adverts must display the national identification code, the CIN. Municipal and condominium rules may limit short-term rentals, so check them before you start. The full picture is in the article on taxes on short-term rentals.

How and when to choose

The choice of the cedolare is linked to the registration of the contract, which must be done within 30 days of signing. You will find up-to-date instructions and references on the website of the Agenzia delle Entrate (Italian Revenue Agency).

If you have doubts about comparing the cedolare with ordinary taxation, do not decide in a hurry. To understand the difference between the two routes, read taxes on rent: IRPEF or cedolare secca.

The most common mistakes

• Thinking the cedolare applies to any property: it applies only to homes rented by natural persons.
• Forgetting that the rent is fixed: the landlord does not ask for ISTAT adjustments for the whole term.
• Choosing the agreed rent without checking that the municipality provides for it with the 10% cedolare.
• Confusing 21% with 10%: the rate depends on the type of contract and on the municipality.

In practice

• Check that the landlord is a natural person and that the property is residential.
• Check the type of contract: open-market (21%) or agreed-rent (10%, only in the municipalities that provide for it).
• Calculate the tax on the annual rent, not the monthly one: €500 a month is €6,000 a year.
• Register the contract within 30 days of signing and check on the Agenzia delle Entrate website how to exercise the choice.

Frequently asked questions

Do I still pay IRPEF with the cedolare secca?

On the rent from that contract the cedolare replaces IRPEF. The rent is not added to your other income to calculate the brackets. Your other income remains taxed in the ordinary way.

Can I change my mind after choosing the cedolare?

The choice is tied to the registered contract. To find out whether and how it can be changed in your case, ask your professional or consult the guides of the Agenzia delle Entrate.

Does the cedolare secca also apply to a home I have inherited?

The cedolare concerns a landlord who is a natural person letting a residential property under a residential contract. If the home was acquired through succession, the initial taxes follow their own rules. For the general picture read taxes on selling an inherited property.

Sources

• Agenzia delle Entrate: cedolare secca per gli affitti
• Decreto legislativo 23/2011, art. 3 (cedolare secca)
• Legge 431/1998 (locazioni abitative)