The government seems to be focusing on providing tax incentives with the view to increasing the supply of properties for long-term rather than short-term rental.
Although relevant decisions are expected to be taken in September, the most likely proposal concerns the reduction of tax on rental income from long-term lettings and increase the corresponding rates on income from short-term lettings.
Tax rates
Different taxes apply to all property income currently. More specifically, the rate is 15% for income up to 12,000 euros , the tax rate is 35% for income from 12,001 to 35,000 euros and for income over 35,001 euros the rate amounts to 45%.
For this reason, several property owners on the three largest short-term rental platforms make sure to declare annual rental income of less than 12,000 euros so that their income is not taxed at a rate higher than 15%.
Authorities are also examining whether to increase the minimum rate to 22% for short-term leases and to maintain or reduce the rate of 15% for long-term ones. Another scenario under consideration is to deduct part of the rent received from a long-term lease from income tax.
Other interventions under consideration are:
- To prohibit short-term rentals in more than 2 properties per VAT number.
- To prohibit the lease of each property for more than 90 days. As for islands with less than 10,000 inhabitants, 60 days per calendar year. Exceeding the duration will be allowed as long as the total income of the lessor or sublessor, from all the real estate he owns, does not exceed 12,000 euros in the tax year.
- To set a maximum number of short-term rental properties per municipality. Each municipality, following a decision of the Municipal Council, will decide the maximum number of properties that can be registered in the Short-Term Rental Property Registry per municipal apartment.
