A hotel in Italy pays tax at three levels. On revenue it applies 10 per cent reduced VAT on overnight stays; on profit it pays 24 per cent IRES if it’s a limited company, or progressive-bracket IRPEF if it’s a sole trader or partnership, plus IRAP at around 3.9 per cent with regional variations. On top of these come local property and waste taxes and social security contributions.
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VAT on hotel services
Services provided by accommodation businesses are subject to the reduced 10 per cent rate, set out in the table attached to the VAT decree. The relief covers the overnight stay and the services that naturally complete it, so breakfast included, room cleaning, linen changes.
The tricky point concerns services the hotel sells in addition to the stay. When the service can’t be traced back to the accommodation but stands on its own, the standard 22 per cent rate applies again. The most debated case is wellness services sold separately from the overnight stay, where practice isn’t always consistent. The practical rule that reduces the risk is documentary consistency: if a service is included in the package and can’t be broken out of the price, it follows the treatment of the stay; if it has its own price list and is bought separately, it needs to be assessed on its own terms.
Several VAT rates often sit on the same invoice, which is why the front office management software needs to be configured carefully from the very first day of opening. A mistake in setting up VAT codes goes unnoticed for months and then multiplies across thousands of documents.
One item that never appears on the invoice as revenue is the tourist tax. The tourist tax is a municipal duty that the hotelier collects from the guest and passes on to the municipality: it isn’t revenue for the business, doesn’t form part of the VAT taxable base and needs to be shown separately, outside the taxable total.
Income taxes
IRES and IRPEF
A limited company running a hotel pays IRES at the standard rate of 24 per cent on taxable income, meaning the accounting profit adjusted by tax variations. A sole trader or partnership, by contrast, attributes the income to individuals, who tax it under progressive IRPEF brackets: the actual burden depends on the taxpayer’s other income and can turn out lighter than IRES on small volumes and considerably heavier as profit grows.
Smaller businesses also have access to the flat-rate scheme, available below an annual revenue threshold and with a profitability coefficient set at 40 per cent for accommodation and catering activities. That means the substitute tax is calculated on 40 per cent of revenue regardless of the costs actually incurred: it suits businesses with a light cost structure and penalises those who have just made a major investment in furnishings and systems, because those costs aren’t deductible.
IRAP
The regional tax on productive activities hits net production value, an aggregate that doesn’t allow most permanent staff costs to be deducted but has its own logic all the same. The standard base rate is 3.9 per cent, but regions can adjust it within set limits, so the actual figure varies from area to area. Sole traders without an autonomous organisation are exempt, and case law on this point is extensive: it needs checking on a case by case basis.
Local taxes
IMU. The property where the business operates, if owned, is subject to IMU at a rate set by the municipality within legal limits. As it’s a business-use property, the tax paid is deductible from business income. Many tourist-oriented municipalities apply differentiated rates to hotel cadastral categories, so the amount always needs checking against the annual resolution.
TARI. The waste tax for accommodation businesses is calculated on floor area and presumed waste-production coefficients by category. It’s one of the heaviest local tax items for a hotel, because the hotel category carries high coefficients. In seasonal properties many municipal regulations allow reductions proportional to the months of opening, but they almost always need to be applied for explicitly: it’s money that stays in the till only for those who submit the request.
Canone unico patrimoniale. This has absorbed the old duties on public land occupation and advertising. It covers outdoor seating areas, decking, outdoor tables and signs above certain sizes.
Other recurring charges. The television licence fee for professional use, fees for playing music in communal areas, consortium or destination contributions required in some areas.
Social security contributions
The owner of a sole trader business and partners who work in the business pay contributions to INPS’s gestione commercianti, with a fixed annual amount due regardless of income and a percentage on income above the minimum threshold. In limited companies, directors contribute through specific arrangements, while employees generate contributions payable by the business at a significant rate, which under the tourism sector contract works out at roughly a third of gross pay.
Staff costs are the largest line on a hotel’s profit and loss account and always need to be read together with the contribution burden: thinking in terms of net pay leads to underestimating the real cost by a good third. It’s one of the reasons why the analysis of a hotel’s annual running costs needs to be built on total employer cost, not on the pay slip.
Summary table
| Item | What it covers | Indicative rate | Paid to | Note |
|---|---|---|---|---|
| VAT on hotel services | Overnight stay and related services | 10 per cent | Tax authority | Sector reduced rate |
| VAT on standalone services | Services not linked to accommodation | 22 per cent | Tax authority | Assessed case by case |
| IRES | Profit of a limited company | 24 per cent | Tax authority | On taxable income |
| IRPEF | Income of a sole trader or partners | Progressive brackets | Tax authority | Depends on other income |
| IRAP | Net production value | 3.9 per cent base | Region | Rate adjustable by regions |
| IMU | Owned business-use property | Municipal rate | Municipality | Deductible from business income |
| TARI | Floor area and waste category | Municipal tariff | Municipality | Possible reductions for seasonality |
| Canone unico patrimoniale | Outdoor seating, signs, public land | Municipal tariff | Municipality | Replaces old land and advertising duties |
| Gestione commercianti contributions | Income of owner and partners | Fixed amount plus percentage | INPS | Due even at a loss, for the fixed part |
| Employee contributions | Gross pay | Around a third of gross | INPS and INAIL | Varies by classification |
| Tourist tax | Guest overnight stays | 1-10 euros a night | Municipality | Pass-through item, not revenue |
Figures are indicative and refer to the Italian framework for 2026. Local rates, thresholds and schemes change over time and from area to area: actual decisions should always be assessed with your accountant, the only person able to look at legal form, financial position and the owner’s objectives together.
Furnishings and their tax treatment
A hotel’s furnishings are business assets: they aren’t deducted in the year of purchase but spread across the asset’s useful life. For the group covering hotels, restaurants and similar activities, the ministerial coefficient for furniture and furnishings is 10 per cent, equivalent to ten years of depreciation, halved in the first year under the general rule. Depreciation of hotel furniture therefore follows a slower rhythm than the one most properties actually use to renew their rooms, and that gap needs to be kept in mind when planning a refurbishment.
There have been various measures over the years that temporarily boost the deduction for investment in business assets, with requirements and time windows that have changed repeatedly: before planning a major purchase it’s worth checking which are active in the current tax year and under what conditions, because they often require steps to be taken in advance.
An alternative to buying is operating leasing. Leasing or operating rental of hotel furnishings turns an investment into a periodic payment charged entirely to the profit and loss account, with different effects on debt and liquidity. It isn’t always more advantageous in absolute terms, but it changes the financial profile of the operation, and during an opening or repositioning phase that profile matters as much as the headline cost.
On this ground, how the furnishings are purchased affects the financial result as much as how they’re designed. We work as a contract partner: the project is developed in-house and built through a supply chain of selected Italian workshops, with a single point of contact from survey to handover, and this makes it possible to hand the accountant a clear breakdown of items, between depreciable assets and building works, instead of a single invoice that’s difficult to reclassify.
How much tax really weighs on the profit and loss account
The question that matters isn’t how many taxes exist but how much of the margin they absorb. In a well run business, income taxes, IRAP and local taxes together typically account for 30 to 40 per cent of pre-tax profit, with wide variation depending on legal form, whether or not the property is owned, and location.
The reasoning changes radically depending on whether the property is owned or rented: in the first case IMU weighs on the business but not rent, in the second rent is a deductible cost but erodes the margin far more than the property tax would. This is the variable that explains most of the difference when comparing how much a hotel owner earns with the result of an operator working on someone else’s property.
For those who combine hotel activity with units run as short-term lets, the comparison between the business tax regime and substitute taxation deserves a dedicated calculation, because the rules on flat-rate tax for short-term lets follow a different logic from business income, and which works out better shifts quickly as the number of units managed grows. Anyone still setting up the business will find the starting administrative picture in the steps needed to open a hotel, where the choice of legal form comes first and shapes everything that follows.
Frequently asked questions
Which tax regime suits a hotel best?
It depends on turnover and cost structure. Below the revenue threshold for the flat-rate scheme, with contained costs, the substitute tax calculated on 40 per cent of revenue can prove advantageous. When profit grows or the investment in furnishings and systems is significant, a limited company with 24 per cent IRES and full cost deductibility becomes almost always more efficient. The choice should be made with an accountant on the actual figures.
How much VAT is charged on hotel rooms?
Hotel services are subject to the reduced rate of 10 per cent, which covers the overnight stay and the services that naturally complete it, breakfast included. Services sold separately and not linked to the accommodation can instead attract the standard 22 per cent rate, so invoicing needs to be set up distinguishing the different items.
Are hotel furnishings tax deductible?
Yes, but not in the year of purchase: they’re business assets and are deducted through depreciation. For the hotel, restaurant and related activities group, the ministerial coefficient for furniture and furnishings is 10 per cent a year, halved in the first year. VAT on the purchases is deductible under the business’s ordinary rules.
What is IMU for an accommodation business?
It’s the municipal property tax, due from the owner at a rate set by the municipality within limits fixed by law. Many tourist municipalities set specific rates for hotel cadastral categories. Because the property is used for the business, the IMU paid is deductible from business income, unlike what happens with non-business properties.
