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Short-term rentals: the entrepreneurship threshold drops to two properties

From the 2026 tax year, the flat tax on short-term rentals stays available only up to two properties per tax year. Above that, the income becomes business income: the flat tax is lost, and platforms stop withholding tax at source. On registration duties, the picture is more open than it is often made out to be.

From the 2026 tax year, the flat tax on short-term rentals (“cedolare secca” — 21% on one property of the taxpayer’s choice, 26% on the others) remains available only if no more than two apartments are let short-term in that tax year. Beyond that threshold, the activity is presumed to be carried out as a business under Article 2082 of the Italian Civil Code: the income becomes business income, the flat tax is lost on the whole activity, and booking platforms stop withholding the 21% advance tax. This follows from Article 1, paragraph 17, of Law No. 199 of 30 December 2025 (the 2026 Budget Law).

The rule

Law No. 199 of 30 December 2025 (Official Gazette No. 301 of 30 December 2025, in force from 1 January 2026), Article 1 paragraph 17, amends paragraph 595 of Article 1 of Law No. 178 of 30 December 2020, replacing “four apartments” with “two apartments” and updating the reference year from 2021 to 2026.

Paragraph 595, as it now stands, provides that the short-term rental tax regime under Article 4, paragraphs 2 and 3, of Decree-Law No. 50/2017 is recognised only where the taxpayer lets no more than two apartments short-term per tax year, starting from the 2026 tax year. In other cases, “for the protection of consumers and competition”, the rental activity — whoever carries it out — is presumed to be conducted in business form under Article 2082 of the Civil Code. This also applies to contracts concluded through real-estate intermediaries or online platforms.

The reduced 21% rate (against the ordinary 26%) applies to a single property chosen by the taxpayer, under Article 1, paragraph 63, of Law 213/2023.

How properties are counted — and what the rule does not say

The threshold concerns apartments actually let short-term (contracts of up to thirty days, entered into outside business activity, which may include linen and cleaning services), not properties owned in general. From the third short-term property, the prevailing reading — not stated explicitly by the law itself — is that the whole activity, not just the excess, is treated as a business.

The rule contains no explicit exemption for owners of more than two properties overall: properties let under ordinary or agreed-rent contracts simply are not counted, because they fall outside the scope of Article 4 of Decree-Law 50/2017. Caution is warranted, though: should such a property end up being treated as related to the business, it would in turn lose the flat tax, which Article 3, paragraph 6, of Legislative Decree 23/2011 reserves to lettings unrelated to a business. This is not an automatic safe harbour but a condition that must be maintained and documented.

The tax consequences — solid ground

Once the threshold is exceeded, short-term rental income ceases to be property income and becomes business income under Article 55, paragraph 2, letter a), of the Income Tax Code (organised activities providing services not among the commercial activities listed in Article 2195 of the Civil Code): a VAT number is required, the flat tax is lost on the whole activity, and platforms no longer withhold the 21% advance tax — an immediate cash-flow effect, since that withholding currently counts as an advance payment. If the activity remains pure letting (no organised services), the properties remain “investment properties” under Article 90 of the Income Tax Code and related costs are non-deductible: the burdens of running a business are assumed without the benefit of itemised deductions. A genuinely hotel-like activity (services provided to guests during their stay) is a different matter, opening up other classifications, including for VAT, to be assessed separately.

On VAT, the letting generally remains exempt (Article 10, No. 8, of Presidential Decree 633/1972), with the often-overlooked consequence of a pro-rata restriction on input VAT deduction (Article 19, paragraph 5, of the same decree).

The non-tax consequences — an open question

It is often said, in simplified terms, that exceeding the threshold automatically triggers registration with the Companies Register and with INPS’s tradesmen scheme. This is not so settled. The paragraph 595 presumption is expressly framed “for the protection of consumers and competition” — a specific purpose; property letting, even if repeated, does not appear among the commercial activities listed in Article 2195 of the Civil Code, which is the ordinary basis for registering as a commercial entrepreneur. And registration with INPS’s tradesmen scheme still requires, under Article 1, paragraph 203, of Law 662/1996, factual requirements — habitual, prevailing, personal work — that a sector-specific presumption does not automatically supply.

In practice, exceeding the threshold makes the tax consequences described above solid; whether it also triggers registration and social-security duties depends on how the activity is actually organised (services provided, continuity) and on any regional rules on tourist lettings — not on an automatism. No settled practice exists on this point: caution before drawing operational conclusions.

In practice

Anyone approaching the threshold should, before the 2026 tax year begins: count precisely how many apartments are actually let short-term in that year; assess whether it is worth staying at two, moving the excess to ordinary or agreed-rent contracts — taking care to keep them genuinely unrelated to the business; or knowingly evaluate the move to business status. The flat-rate scheme (“regime forfettario”), often mentioned as a shortcut, should be checked against the actual numbers: if the activity is classified as a real-estate activity, the profitability coefficient under Annex 4 to Law 190/2014 is 86% (against 40% for genuine accommodation services), on top of the €85,000 revenue cap and the exclusion causes under Articles 55-57 of the same law — in most cases, a worse outcome than the 26% flat tax.

One last practical caution: whether the threshold has been exceeded is checked over the whole tax year. Someone who exceeds it in November risks being treated as a business from January onward, with the bookkeeping reconstruction that follows — one more reason to count properties in advance, not after the fact.

Frequently asked questions

From when does the two-property threshold apply?

From the 2026 tax year: it concerns short-term rental income from 2026 onward, not earlier tax years.

Does the third property make you lose the flat tax only on that one, or on all of them?

On the prevailing reading, on all of them: the rule does not distinguish between the first two and the excess. This is an interpretation, not an explicit textual rule.

If I own more than two properties, can I keep the flat tax on the first two?

Only if the others genuinely stay outside the business activity — ordinary or agreed-rent lettings, with no organised services and no continuity that would betray a business nature. It is not an automatism that switches on by itself: it must be built and documented.