Starting on January 1st 2019 the 21% flat-rate tax was also extended to commercial real estate units owned by natural persons. In the past, this tax regime was exclusively limited to residential lease agreements, but now it is also extended to commercial lease agreements, according to article 1, paragraph 59 of the 2019 Budget Law. Thanks to the flat-rate tax regime, rental income of natural persons – if they own real estate units – can be subjected to a substitute tax of the Personal Income Tax (IRPEF), of additional regional and municipal income taxes and stamp and registry taxes to be paid when the lease agreement is registered.
VALIDITY OF THE 21% FLAT-RATE TAX FOR COMMERCIAL REAL ESTATE UNITS
The tax rates of the substitute tax are equal to 21% or 10%. This last one can be only applied to residential leasing agreements under the following conditions:
- regulated lease agreements in municipalities where there are no other residential solutions or that are highly populated,
- lease agreements for university students,
- lease agreements in municipalities where natural catastrophes occurred,
- temporary lease agreements regulated by law No. 431/1998.
As a result, the flat-rate tax regime can be exclusively applied to lease agreements of commercial real estate units with a 21% tax rate. The 2019 Budget Law also established some limits as regards the possibility to exploit this tax regime. The substitute tax can be only applied under the following conditions:
- if the lease agreement refers to real estate units whose cadastral category is C/1 (shops and workshops) and any other jointly leased secondary properties (factories are excluded– D/1);
- if the lease agreement refers to real estate units whose surface is lower than 600 square meters. When calculating the area, additional outbuildings should not be considered;
- if the lease agreement was signed in the period ranging from January 1st 2019 and December 31st 2019.
When calculating the 600 square meters area, additional outbuildings should not be considered. However, these outbuildings are subjected to the substitute tax if they are jointly leased with the main real estate.
LIMITS RELATED TO THE EXTENSION OF THE FLAT-RATE TAX TO COMMERCIAL REAL ESTATE UNITS
The flat-rate tax can be applied only to new lease agreements starting from January 1st 2019 in order to avoid any possible tax avoidance. The flat-rate tax cannot be applied to subjects that on October 15th 2018 had already signed a lease agreement for the same real estate unit and that was then interrupted before its natural expiration. As a result, it will not be possible to interrupt a lease agreement before its natural expiration in order to sign a new lease agreement in 2019 between the same parties and as regards the same real estate unit in order to benefit from this tax regime.
Moreover, this tax relief do not seem to be a standard measure, as it can be applied only to lease agreements that were signed in the period ranging from January 1st 2019 and December 31st 2019. As a result, it is not possible to know which kind of tax regime will be applied to lease agreements that will be signed after December 31st 2019.
ADVANTAGES RELATED TO THE EXTENSION OF THE FLAT-RATE TAX TO COMMERCIAL REAL ESTATE UNITS
The extension of this tax regime to lease agreements related to commercial real estate units represents an important tax relief with positive effects for:
- lessees, as they can benefit from lowered taxes,
- Public Administration, as tax avoidance due to undocumented lease agreements related to commercial real estate units will probably be reduced.
Moreover, this tax regime will probably represent a way to solve the problem of abandoned or vacant shops, as they are not very profitable for small savers that own them.
COMMERCIAL LEASE AGREEMENTS OF BUILDINGS IN 2019
Also as regards commercial lease agreements of buildings, the flat-rate tax regime is applied according to the general regulations established by article 3 of the legislative decree No. 23/2011. As a result, no changes occur:
- as regards the subjective nature of the lessor, as he/she should be a natural person with ownership right or real right to use the building that he/she does not lease to perform business activities;
- as regards the possibility to choose this tax regime, as it must be included in the lease agreement text, if you decide to exploit this tax regime since the first year. If you choose this tax regime in one of the following years, you must previously send a registered mail to the lessee. As a result, the lessor does not increase your lease for inflation according to the latest ISTAT (National Office for Statistics) data related to the Consumer Price Index during the previous year;
- as regards the payment of the substitute tax.
2019 BUDGET LAW AND 21% FLAT-RATE TAX FOR COMMERCIAL REAL ESTATE UNITS
As a result, real estate units that are leased by entrepreneurs, companies and self-employed persons in order to perform business activities cannot benefit from this tax regime. The flat-rate tax regime can be only applied to a natural person, owner of the reference real estate unit, that benefit from a rental income related to this real estate unit (who subleases the real estate unit will not benefit from this tax relief, as he/she has no real right on it). At the same time, there are no specific tax reliefs for lessees of commercial real estate units; as a result, the lessee can act as a company. The 2019 Budget Law also includes a new element as regards the flat-rate tax regime: the advanced payment amount will still be equal to 95% of the tax amount to be paid related to the previous year within 2020. The advanced payment amount to be paid will be equal to 100% in 2021. This measure does not only refer to lease agreements of commercial real estate units, but also of residential lease agreements.