Short-Term Rentals: Italy’s New VAT Rules & Local Restrictions

Italy is poised to reshape its approach to short-term rental taxation, with changes taking effect from January 1, 2026. The revisions, stemming from the 2026 Budget Law, aim to address the growing market for platforms like Airbnb and Booking, while also considering the distinct economic realities of urban centers versus smaller, inland communities.

The core of the changes revolves around two key areas: flat tax rates and the threshold for triggering a presumption of business activity, which subsequently mandates VAT registration. Currently, the flat tax regime (cedolare secca) allows landlords to pay a fixed rate on rental income. From 2026, this will remain at 21% for the first property used for short-term rentals, but will increase to 26% for each additional property. This tiered system is designed to target those operating multiple listings.

Lowering the Threshold for Business Activity

Perhaps the most significant shift concerns the threshold at which rental activity is automatically classified as a business. Previously set at five properties, the threshold is being lowered to three. Once a landlord owns or manages three or more apartments used for short-term rentals, the activity is presumed to be a business, regardless of rental duration or income generated. This has substantial implications for tax obligations.

Exceeding this threshold triggers a cascade of changes. VAT registration (Partita IVA) becomes mandatory, the flat tax regime is no longer available, and income is classified as business income, subjecting landlords to all associated tax and accounting requirements. This transition, as noted by sources, requires careful assessment, as it’s a legal presumption, not a matter of taxpayer choice.

Implications for Smaller Communities and the Regime Forfettario

The changes aren’t being viewed uniformly across Italy. Concerns are being raised that the new rules may disproportionately impact smaller, inland communities where short-term rentals are often used to revitalize local economies. “Talking about short-term rentals without differentiating territories is misleading,” observes Nicolas Verderosa, CEO of Ruralis, a company focused on tourism development in Italian villages. “The same decisions that protect an urban center can hinder an inland area trying to reactivate its economy.”

For operators in these smaller centers, the potential need to open a Partita IVA could be particularly burdensome. Preliminary analysis suggests that the regime forfettario – a simplified tax regime for small businesses – might even prove more advantageous than the cedolare secca for those exceeding the three-property threshold. This regime offers a flat tax rate of either 15% or 5% applied to 40% of rental income (under the appropriate ATECO code 55.20.42 for furnished accommodation). However, the costs and administrative burdens associated with VAT registration and ongoing compliance must also be factored into the equation.

Urban Centers and Local Regulations

In larger cities, the stricter VAT requirements are expected to prompt landlords to reassess the profitability of short-term rentals. Some may find that the financial benefits no longer outweigh the administrative and tax complexities. Local regulations are poised to play an increasingly decisive role.

Cities like Bologna and Florence have already begun implementing measures to address concerns about the impact of short-term rentals on housing availability and local communities, focusing on issues such as permitted land use and minimum property sizes. Rome is currently developing its own regulations, aiming to limit short-term rentals in areas already saturated with tourist accommodations. These local initiatives are occurring in anticipation of broader regulations from the European Commission, outlined in the Brussels’ Housing Plan, expected by the end of 2026.

The EU’s proposed regulations could introduce further constraints, potentially including limits on the number of nights a property can be rented out or restrictions on the areas where short-term rentals are permitted. This layered approach – national tax changes combined with local regulations and potential EU directives – creates a complex landscape for short-term rental operators in Italy.

The changes represent a significant shift in Italy’s approach to regulating the short-term rental market. While the government aims to strike a balance between supporting tourism and protecting local communities, the practical implications for landlords, particularly those operating in smaller towns, remain to be seen. Careful planning and professional tax advice will be crucial for navigating this evolving regulatory environment.