Dry rent coupon is a tax option introduced by the Italian government to incentivize rent-sharing and encourage investment in residential properties. This is a flat rate of 21 percent that replaces the registration tax, stamp duty and VAT on free or agreed rentals.
But when is it better to opt for dry coupon and when is it better to opt for ordinary rental tax? Here are some points to consider to make the right choice.
Dry coupon: rent
If the property is rented out on a rent-free basis, then the dry coupon only pays off if the rent is more than 7,500 euros per year. In this case, in fact, the flat rate of 21% will be lower than the ordinary taxes the owner would have to pay.
If the property is rented out on an agreed rent basis, the dry coupon always pays off, regardless of the amount of the rent.
Dry rent: expenses incurred in the management of the property
Another aspect to consider is the possibility of deducting expenses incurred in managing the property. With dry coupon, in fact, this option is not provided. This means that you cannot deduct from your total income expenses for property maintenance, payment of utility bills or any other expenses incurred in operating the property.
If the expenses incurred in managing the property are high, it may be more convenient to opt for ordinary tax and deduct them from the total income.
Dry coupon: rent revaluation
Another aspect to consider is the possibility of revaluing the rent according to inflation. With dry coupon, this option is not available. This means that the rent cannot be updated as prices rise.
If prices are expected to rise over time, it may be more convenient to choose the ordinary tax and update the rent accordingly.
Dry rent: tax benefits
Another advantage of dry couponing is that it allows you to take advantage of certain tax benefits. Such as the 50 percent deduction of expenses incurred for the purchase of furniture and large household appliances of class no less than A+ (A for ovens), aimed at furnishing the leased property. This deduction is valid only for contracts entered into on or after January 1, 2016 and for which the dry coupon has been chosen.
Dry coupon: lease agreement
Finally, it is important to consider the terms of the lease. In fact, with dry coupon, the contract must be registered within 30 days of its conclusion. Must provide for a duration of not less than 6 years. In addition, the contract cannot be terminated before its expiration unless there are serious reasons. (e.g., the owner of the property needs to use it for himself or his family members).
If the lease is for a term of less than 6 years or includes the option of early termination, you cannot opt for dry coupon. In such cases, the property owner will have to opt for the ordinary tax and pay the registration tax, stamp duty and VAT required by law.
Dry rent: other aspects to consider
In addition to the points listed above, there are a few other aspects to consider when choosing between dry coupon and ordinary tax. For example:
- If the property owner has a high total income. It may be more convenient to choose ordinary tax to benefit from progressive taxation.
- If the property is rented to a relative or a person with whom there is a relationship of kinship or affinity. It is possible to choose the ordinary tax and apply a reduced rate of 2%.
- If the property was purchased with a mortgage, it is possible to deduct the mortgage payments and expenses incurred in establishing the mortgage from total income. In this case, it may be more convenient to opt for the ordinary tax.
- If the property was purchased with a capital gain (i.e., if it was sold at a higher price than what was paid to purchase it), you may qualify for preferential taxation on the capital gain.
In this case, it may be more convenient to choose the ordinary tax and benefit from the preferential taxation on the capital gain.
Dry coupon: final choice
Ultimately, the choice between dry coupon and ordinary tax depends on the specific needs of the property owner and the characteristics of the rental contract. Before opting for one or the other solution, it is always advisable to carefully consider which one is the most advantageous according to one’s personal situation and the conditions of the housing market.
Also, it is important to note that dry coupon is an optional option. The property owner can choose whether to apply it or not. If he decides to opt for the ordinary tax, he will have to pay the statutory registration tax, stamp duty and VAT. If, on the other hand, he chooses dry coupon, he will have to pay the 21 percent rate in lieu of all other taxes.
In any case, it is advisable to contact a professional or tax assistance center for personalized advice. A tax advisor will be able to assess the specific situation of the property owner and direct him or her to the most advantageous choice, taking into account his or her goals and possibilities.
Important to remember that dry rent is an option valid only for free or agreed rentals. For transient rentals, such as tourist or short term rentals, it is always mandatory to pay ordinary tax.
In conclusion, dry coupon on rentals is an attractive solution for property owners who wish to put them to income by renting them out. However, it is important to carefully weigh the pros and cons of this option and consider the specific needs of your case. With the support of a professional or a tax assistance center, it will be possible to make the most advantageous choice and get the maximum tax benefit.
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