Last chance for the flat-rate tax on commercial rents

The enabling act for the tax reform, published in the Official Gazette exactly three years ago, on 14 August 2023, sets out in Article 5, amongst the guiding principles and criteria for the review of the personal income tax system, ‘for income from buildings, the possibility of extending the flat-rate tax scheme to lettings of properties used for purposes other than residential where the tenant carries on a business, a trade or a profession”.

In the past, a scheme such as that set out in the tax reform was introduced by the 2019 Budget Act. It provided that the rent relating to tenancy agreements entered into in 2019, concerning properties classified in cadastral category C/1 (shops), with a floor area of up to 600 square metres, and the associated appurtenances let together, could, as an alternative to the standard IRPEF regime, be subject to a flat-rate tax at a rate of 21 per cent.

The next one will, in all likelihood, be the last Budget Bill to be passed by the Government and the ruling majority, who included in the enabling act for tax reform – much of which has already been implemented – the extension of the flat tax on rents , which has been in force for residential tenancies for more than fifteen years now. This is, therefore, the last opportunity to honour a commitment made in a more than official capacity.

There is considerable anticipation of this measure both amongst property owners and amongst retailers and craftspeople. The common ground between two groups that are contractually opposed – landlords on the one hand, tenants on the other – stems from a shared awareness that the high taxation on property owners is a major obstacle to matching supply and demand for commercial premises.

It is clear, in fact, that when determining the rent, the existence of at least five taxes levied annually on the rent itself or, in any case, on the property, cannot fail to play a decisive role: personal income tax (IRPEF), the regional IRPEF surcharge, the municipal IRPEF surcharge, registration duty and the IMU. And it is equally clear that, partly due to the rigidity of the contractual rules laid down in the 1978 Act, it is impossible to agree on affordable rents that can prove sustainable for 12 or 18 years: this being the mandatory duration of the contracts, depending on the various economic activities carried out, which is then effectively made infinite due to the landlord’s obligation to pay the tenant, in the event of the tenant terminating the contract on their own initiative, as many as 18 or 21 months’ rent (as ‘compensation for loss of goodwill’, a prehistoric but still applicable provision).