Dealing With Italian Property Taxes

Italian Property Tax Overview

The Italian tax authorities tax nonresident property owners on their Italian sources of income only. An individual is considered resident in Italy if s/he spends 183 days or more in any tax year (calendar year).

Non-residents are liable to Italian income, capital gains and inheritance taxes. Italy does not currently have a wealth tax system.

Non-residents have no limitations on buying property in Italy.

Codice Fiscale - Italian Tax Identification Number

If you intend to purchase or if you already own a property in Italy you are required to have an Italian tax identification number by registering with the Italian tax authorities.

The Codice Fiscale is a unique identity code devised from an individual's name, date and place of birth and is included in all correspondences with public administrations and Government agencies in Italy.

The Codice Fiscale is comparable to the Social Security Number (SSN) in the US or the National Insurance number in the UK.

The Agenzia delle Entrate of the Ministry of Economy and Finance of Italy issues the Codice Fiscale. The credit card sized ID includes a unique 16 alphanumeric digit code for an individual (or 11 numeric digit code for legal entities).

Overview of Italian Property Terms

Italian Law states that all property must have a legal or cadastral value also known as Valore Catastale. This is a statutory value placed on the property by the Government calculated as a multiple of the legal rental yield. The Cadastral Value is often considerably less than the actual market value of the property.

Italian Individual Income Tax (IRE)

Income tax or IRE is applicable to both residents and non-residents. Non-residents are subject to IRE on income generated from Italian sources only. IRE is payable on income from land and buildings.

Unoccupied building can incur a deemed imputed income based on the cadastral rent amount - Rendita Catastale - is determined by the Cadastral Value of the property.

The taxable basis for taxing rental income is the higher between the imputed cadastral income and the actual net rental income. A flat tax rate of 15% applies on gross rents after allowable deductions.

Italian income tax rates vary from 23% and 43%.

Italian Tax Filing Deadlines

Personal Italian tax returns must be submitted by the 31st of July.

A regional surcharge known as the Addizionale Regionale may also apply - ranges from 0.9% to 1.4%. This surcharge is levied under IRE depending on the level of income and region of residence together with a municipal surcharge (Addizionale Comunale) of up to 0.8% depending on the municipality.

Italian Corporate Income Tax (IRES)

Corporation tax or IRES is charged at 27,5%. An IRAP or local profit charge can also apply levied at 4.25% and is charged on the adjusted profit figure, calculated by the sales value less production costs.

The taxable bases for IRES and IRAP vary. Both taxes apply to Italian or foreign resident company’s holding property in Italy.

Local Property Taxes in Italy

Non-resident owners of real estate in Italy are obligated to pay ICI or Imposta Comunale sugli Immobili. This property tax is levied by the local administration and is calculated based on the cadastral value of the property. The tax rate varied between municipality’s and can vary from 0.4% to 0.7%.

Italian Capital Gains Tax

Italian Capital Gains Tax on property sold within five years of the purchase is subject to a capital gains tax of 20%.

Italian CGT is not applicable if you own the property for more than 5 years. For Italian residents, properties bought under the Prima Casa (main dwelling) status are also exempt from this tax.

Value Added Tax / Transfer Fees

The buyers of new properties pay VAT (IVA) at 10% (for non-luxury properties) and at 20% (on luxury homes with a rating of A1 in the property register) which is included in the price charged by the builder or developer. A lower rate of IVA (4%) applies for resident's Prima Casa (main dwelling).

If VAT is not applicable, an all purchase registration tax (Imposta di Registro 7% + Ipotecaria 2% + Catastale 1%) for house buyers of 10% applies.

Additional purchasing fees (notary fees, solicitor fees etc.) excluding the registration tax range from 1% to 2.5% of the purchase price.

Estate agent fees would typically charge 3% of the actual value of the property. Additional costs such as Surveyor reports or translation costs may apply.

Inheritance and Donations Tax

Non-residents are subject to Inheritance and Donations Tax on assets located in Italy. The applicable tax depends on the relationship between the deceased (or donor) and the beneficiary. Tax rates vary between 4% and 8%.

Property Tax International specialise in the preparation and submission of Italian tax returns for non-resident property owners in Italy.

Worldwide Income Tax

Residents are more often than not required to pay tax on their worldwide income including rental income from an overseas property investment. Italy has a double tax treaty with a substantial number of countries around the world.

Most double tax treaties provide relief for taxes paid in one country against tax due on the same income in the taxpayer’s tax resident country. You should check with your resident tax authority if a double tax treaty exists with the country where your property is located and what taxes are covered by the treaty.

While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon. The information provided above is intended as a guide only.