Taxes on properties
Prima Casa vs. non resident
When you buy your home, you will either buy it as your ‘prima casa’ or as a non-resident.
Prima casa means your principal home. You qualify for prima casa if you take out residency at your acquired property within 18 months of the signing of the Final Contract and you must spend at least 6 months out of the year at that address. With prima casa you are given a considerable tax concession.
If, however, you are buying the property in Italy as a holiday home, and not intending to live there for at least half the year and therefore not taking out residency (or you already own a house in Italy registered as prima casa, the new property becoming your second home) then you will pay the higher tax rate.
Taxes when buying
A transaction on a property is subject to some taxes, all to be paid by the buyer, as it is the case with the notary fees.
When buying a second home from an individual or from an enterprise other then a builder, the buyer will have to pay to the notary 3 different types of taxes:
1.Stamp Duty ("Imposta di Registro"), 9%;
2.Land Registry fee, ("Imposta Ipotecaria") 50 euro;
3.Cadastral Fee ("Imposta Catastale"), 50 euro;
4.Fixed fees and stamps, approximately 450 euro;
The stamp duty stated above shall be calculated on the basis of the cadastral value ("Valore Catastale") of the property (“price-value”); the cadastral value typically falls in between 20 and 50% of the fair market value.
Each plot or real estate property is assigned a cadastral virtual income (“Rendita Catastale”), which should be the virtual annual income which can be obtained by the property; this figure has not been updated in nearly 40 years, so it is fairly low. To obtain the cadastral value (“Valore Catastale”) the cadastral virtual income shall be multiplied by 126 (second home) or 115.50 (prima casa).
A big tax reduction is granted in case you are buying your first house in Italy (“prima casa”) and you intend to obtain residency ("residenza") there within 18 months: Stamp Duty ("Imposta di Registro") is lowered to 2%. It is not possible to ask for the benefits for the first house when purchasing a luxury mansion.
When buying from a developer or a building company, stamp duty, land registry fee and cadastral fee will be applicable on a fixed total amount of Euro 600, while, on top of the property price, it shall be added a 10% VAT (4% for the first house).
Taxes on farmland total 12% of the market price (+100 euro), unless you register as a farmer. Taxes on buildable land are 9% of the market price (+100 euro).
- IMU (Council Tax on Property): possessors of a house are bound to pay the annual Council Tax on Property, with base rates that vary from 4 to 10,6 per 1000 of the updated cadastral value (rendita catastale X 168). IMU shall be paid in 2 instalments, in June and December.
- Waste Tax ("Tassa rifiuti"): to be paid annually to the Municipality where you set your residency.
- IRPEF (Income Tax): properties you own are to be inserted in the tax declaration form for individuals whose presentation is compulsory for those who produce earnings in Italy. The income tax rates increase progressively according to the total income and range from 23% to 43%. Revenues originating from properties should be inserted in a special section of the tax declaration form - revenues from houses and revenues from land. For houses, it is necessary to highlight different situations:
- if the house is rented out, you should declare the annual proceeds from the let, with a tax deduction of 15%;
- in any other case, you are supposed to fill in the cadastral virtual income ("Rendita Catastale").
Tax on capital gains from property sales
An individual who reaps a capital gain from the disposal of a building is due to report this gain in the income tax form, if the sale has happened less than 5 years from the purchase; alternatively, one can opt for a fixed taxation of 20% of the capital gain.
As an exception to this rule, no taxes are due for capital gains on houses used as the permanent residency for the greater part of the time elapsed between purchase and sale. Capital gains on properties acquired via donation or heritage are not subject to income taxes.