Rental Income Taxation in Italy: How Cedolare Secca Works for Foreign Owners

By Arch. Fabio Costanzo, Studio 4e · Updated: March 2026

Italy's cedolare secca is one of the genuinely useful simplifications in Italian tax law: a flat 21% (or 10% for social-rate contracts) on gross rental income, replacing IRPEF, regional and municipal surtaxes, and registration tax on the lease. For foreign owners with Sicilian properties, it reduces Italian tax complexity significantly — but it must be elected correctly and it interacts with your home-country tax obligations in ways most estate agents do not explain.

What cedolare secca actually replaces

Without cedolare secca, a non-resident owner renting a property in Sicily pays:

• IRPEF on 95% of the annual rent (the 5% deduction for maintenance costs is standard), at marginal rates of 23–43%
• Regional surtax (addizionale regionale) — approximately 1.73% of taxable income in Sicily
• Municipal surtax (addizionale comunale) — varies by municipality, typically 0.5–0.8%
• Registration tax (imposta di registro) on the lease itself — 2% of annual rent × years
• Stamp duty (imposta di bollo) — €16 per 4 pages of the lease

Cedolare secca replaces all of the above with a single flat rate: 21% on the agreed annual rent for free-market contracts (contratti a canone libero) and 10% for agreed-rate contracts (contratti a canone concordato) in designated municipalities where housing supply is tight. Under cedolare secca, the registration tax and stamp duty on the lease are also suspended.

For a non-resident in the 43% IRPEF bracket with a free-market rental generating €24,000/year, the comparison: IRPEF+surtaxes on €22,800 taxable (at marginal rates) ≈ €9,800. Cedolare secca: €24,000 × 21% = €5,040. The saving is significant for higher-income owners.

Who can use cedolare secca and who cannot

Cedolare secca is available to natural persons (individuals) who own the property in their private capacity. It is not available to:

• Corporate entities (Italian SRL, UK Ltd, US LLC) — these pay IRES corporation tax on rental income
• Properties rented for commercial use (affitto d'azienda, commercial leases)
• Short-term rentals where the landlord also provides additional services classified as hotel-like (if the Agenzia delle Entrate reclassifies the activity as business rather than passive rental — relevant for some Airbnb superhosts operating at scale)

Foreign individual owners can use cedolare secca regardless of their residency status. The election is made when the lease is registered with the Agenzia delle Entrate, or within a specified term after the lease is signed. Italian non-residents must file an Italian tax return (Modello Redditi Persone Fisiche) to declare and pay the cedolare secca — it is not automatically withheld.

Short-term rentals and the new 2024 rules

Italy changed the cedolare secca rules for short-term rentals (locazioni brevi — defined as residential rentals of up to 30 days) in 2024 via the 2024 budget law. The key changes:

• For owners with a single short-term rental property: cedolare secca rate remains 21%
• For owners with 2–4 short-term rental properties: cedolare secca rate is now 26% for the second, third and fourth property
• For owners with 5+ short-term rental properties: the rental activity is automatically classified as business (impresa) and cedolare secca is not available; IRES or IRPEF with business deductions applies instead

The definition of "property" for this count includes all short-term rental properties across Italy owned by the same individual, not just in Sicily. An owner with one apartment in Palermo and one villa in Taormina rented short-term has two properties for this count, so the second property pays 26% cedolare secca.

Airbnb, Booking.com and Vrbo are required by Italian law (since 2017, confirmed in 2024 regulations) to withhold 21% cedolare secca on payments to non-resident owners who have not registered a partita IVA. This withholding is credited against your Italian tax liability. If you are a non-resident receiving payments through these platforms, check whether the platform is correctly applying the withholding — some foreign owners receive gross payments without withholding and then face unexpected Italian tax bills at filing time.

How to elect cedolare secca: the registration procedure

To elect cedolare secca for a long-term rental (contratto di locazione standard), register the lease online via the Agenzia delle Entrate's SIRIA service or in person at any Agenzia delle Entrate office within 30 days of the lease start date. Submit form RLI with the cedolare secca election box ticked.

If the lease is already registered without cedolare secca, you can switch at the annual renewal date by submitting a new RLI election. You cannot switch mid-year.

For non-resident owners with no Italian tax code (codice fiscale), the codice fiscale must be obtained first — from the Agenzia delle Entrate via the local Italian consulate or in person at any Italian Agenzia delle Entrate office. This is a simple procedure taking 15 minutes in person or 2–4 weeks by post through the consulate. Without a codice fiscale, no Italian tax registration of any kind is possible.

Annual Italian tax filing for non-residents: what you actually submit

Non-resident owners using cedolare secca must file the Modello Redditi Persone Fisiche (previously called Modello Unico) by 30 November of the following year (for income earned in the preceding calendar year). The relevant section is Quadro RB (rental income from property).

You can file electronically via the Agenzia delle Entrate's website (Fiscoonline) or through an Italian CAF (tax assistance centre) or commercialista. For non-residents, online filing requires an Italian digital identity credential (SPID or CIE) which is difficult to obtain from abroad — in practice, most foreign owners file through an Italian commercialista at a cost of €150–400 per year for a straightforward rental declaration.

The cedolare secca payment itself is made via the F24 payment form: the first instalment (40% if above €257, otherwise 100%) is due by 30 June and the balance by 30 November. F24 payments can be made online through an Italian current account or via an authorised intermediary — for non-residents without an Italian bank account, the commercialista typically handles payment administration.

Interaction with UK and US home-country tax

UK: Italian rental income is reportable on UK Self Assessment as foreign income. The Italian cedolare secca paid is eligible as a foreign tax credit under the Italy-UK double tax treaty art.6 (income from immovable property: Italy has primary taxing rights, UK gives credit). UK basic rate taxpayers (20%) receive full credit for the 21% Italian cedolare secca — no additional UK tax. Higher-rate UK taxpayers (40%) pay the difference (19%) to HMRC.

US: Italian rental income is reportable on Form 1040, Schedule E. The cedolare secca may qualify as a foreign income tax for Form 1116 Foreign Tax Credit purposes, but the IRS requires that the tax be "creditable" — certain flat-rate taxes on gross income (rather than net income) have been challenged by the IRS as not creditable. The 2022 IRS regulations under section 901 created uncertainty for some Italian taxes. US owners should verify with a dual-qualified US/Italian CPA. Some US clients prefer to deduct the Italian tax on Schedule E (rather than claiming the FTC) which is simpler and not subject to the creditability debate.

Germany: Italy-Germany treaty art.6 similarly gives Italy primary taxing rights. German Finanzamt gives a Freistellungsmethode (exemption) for Italian rental income in most cases — the income is exempt from German tax but is counted in the German Progressionsvorbehalt calculation (raises the tax rate applied to other German income). Confirm with your German Steuerberater.

The AIRE registration question for long-term owners

AIRE (Anagrafe degli Italiani Residenti all'Estero) registration is for Italian citizens living abroad, not for foreign nationals. However, a related question arises: if you spend more than 183 days per year in Italy, the Agenzia delle Entrate may classify you as Italian tax resident under Italian domestic rules, triggering full Italian tax residency and worldwide income taxation. This is unlikely to affect most Sicilian property owners who visit seasonally, but relevant for those who use a Sicilian property as a primary base for part of the year.