Italy May End Tax Relief on Rental Income: What It Means for Landlords and Investors

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The Italian government has proposed increasing taxes on income from short-term property rentals. According to the draft 2026–2028 national budget, the existing preferential 21% flat rate (cedolare secca) would be replaced by a unified 26% tax, reports Rental Scale-Up. The initiative has sparked heated debate in parliament and even within the ruling coalition.

A Unified Rate for All

The change is part of an €18 billion budget package now under review by both chambers. If approved, starting January 2026, the 21% flat rate for the first rented property would be abolished. All income from short-term rentals would be taxed at 26%, and digital platforms like Airbnb and Booking.com would have to withhold and remit taxes directly to the state.

Officials argue that the reform simplifies taxation and promotes “fairness among taxpayers.” Yet for private owners, it means higher costs and possibly reconsidering participation in the rental market. Analysts estimate the reform could add about €1,300 per year to an average landlord’s tax burden. Larger property managers, already paying higher rates, would feel less impact due to professional administrative support.

Italy has already tightened oversight: a national registration code (CIN) for all properties, a centralized accommodation database (BDSR), and mandatory guest reporting. Owners must also pay income tax, IMU property tax, tourism levies, and insurance contributions.

The legal environment adds friction: under Italian law, long-term tenants enjoy strong protection, and evictions for non-payment can take months or even years. Meanwhile, several cities are exploring short-term rental caps, following Barcelona and Lisbon, where local authorities have already curbed tourist housing. Rome and Florence are considering similar steps.

In addition, owners of historic properties face steep maintenance costs — façade restorations, energy-efficiency upgrades, and new environmental certifications that reduce profitability. Late 2024 saw an attempt to ban self check-in, requiring hosts to verify guest IDs in person. Though overturned in mid-2025, it revealed how quickly regulation can freeze parts of the market.

Impact on the Market

The reform divided even the ruling bloc. Forza Italia — part of Prime Minister Giorgia Meloni’s coalition — publicly opposed the plan, calling it “a mistake that can still be corrected.” Deputy PM Antonio Tajani warned that the move “would hit small landlords, slow rural tourism, and hurt local economies.”

League leader Matteo Salvini said the measure “will not pass in its current form.” The opposition Democratic Party called the draft “a budget without authorship,” while the Five Star Movement described it as “unacceptable,” accusing the government of “filling the treasury at homeowners’ expense.”

For tourism, the effects could be tangible — reducing short-term supply and driving up prices, especially where housing is already scarce. Rising taxes and stricter reporting requirements make the short-term rental business increasingly unprofitable for individuals. Even with steady occupancy, net returns shrink as operational costs rise.

According to Global Property Guide, average gross rental yields in Q3 2025 were 7.27% nationwide — 7.05% in Rome, 5.32% in Milan, 6.24% in Florence, 8.51% in Palermo, and 9.19% in Catania. After deductions, net profit rarely exceeds 4–5% annually. In southern regions, higher yields are offset by longer vacancy periods and lower liquidity.

Rising utilities and taxes erode margins, pushing investors toward safer, fixed-income options with transparent management structures.

A Shift in Investment Strategy

Facing fiscal pressure and higher costs, investors are turning toward institutional hospitality formats. Private rentals are giving way to professionally managed hotel-apartment complexes under international operators. Such assets deliver stable dollar-denominated returns while shielding owners from operational risk.

This shift marks a transition from “own & manage” to “own & earn” — where marketing, bookings, and operations are handled by the management company.

One standout example is the Black Sea coast of Georgia, where internationally branded complexes show strong occupancy and stable yields.

Flagship Example: Wyndham Grand Batumi Gonio

The Wyndham Grand Batumi Gonio belongs to the luxury segment and is managed by Aimbridge Hospitality, one of the world’s largest operators, managing over 1,500 properties in 60 countries. Investors receive a fixed income of up to 10% USD annually, with potential growth to 17% when performance KPIs are met.

The model is based on trust management: owners receive income in USD without engaging in operations. Aimbridge handles marketing, pricing, occupancy, and service quality. Thanks to steady year-round tourism and growing business travel, the hotel maintains 75–80% annual occupancy.

Project Sustainability Factors:
– Limited supply of high-quality accommodation on Georgia’s Black Sea coast;
– Rising inbound tourism to Batumi, including business and MICE segments;
– Fast property registration via Public Service Hall (within days);
– Visa-free stays up to one year for citizens of Russia and CIS;
– Transparent contracts and guarantees from an international operator.

This structure allows investors to protect capital from tax pressure, lock in returns in USD, and grow asset value amid global real-estate volatility.