Before buying a house or a property in Italy, it is essential to understand the different rules and calculations regarding real estate taxes to which everyone is subject. Indeed, many expatriates buy a property unprepared and, once they own a house in Italy, receive tax notices that they had not anticipated. The rules and calculations of taxes are different depending on where you live, how many houses you own and other factors. Also, a good preparation is essential concerning the taxes of your house in Italy and this well before any decision of purchase. What are the real estate taxes in Italy? How do you calculate real estate taxes? Here’s a list of taxes in Italy, step by step.
Taxes when buying a property
VAT
When buying a house in Italy, there are some tax aspects to keep in mind. Indeed, the taxes to be paid are different depending on whether you buy a house from a real estate developer or from a private individual.
The purchase and sale of real estate through construction or renovation companies, with the exception of special cases, are subject to VAT, which is payable directly to the seller.
Also, it will be necessary to take into account whether the purchase of the property can benefit from the recognition of ‘first home’. The purchase of the first home by an individual also allows for tax benefits if the following conditions are met:
The buyer does not have any real rights (full ownership, usufruct, or bare ownership) on other real estate in the same city as the real estate intended for his or her first home;
He is not already the owner of another property in Italy purchased with the tax benefit reserved for the first home;
He/she must transfer his/her main residence to the property in question or to the city where it is located within 18 months of the purchase;
The property must not be classified in the following cadastral categories: A1, A8 and A9 (luxury homes and villas).
The VAT rate to be applied on the sale price will be:
10% in the absence of primary housing benefits;
4% in the case of a first home.
Notary fees
In the case of a purchase subject to Italian VAT, the following taxes must also be paid to the notary, who will then pay them to the Tax Agency (Agenzia delle Entrate):
Registration Fee: 200 euros;
Mortgage Tax: 200 euros;
Cadastral tax: 200 euros.
If you are buying a house directly from a private individual, the registration, mortgage and license fees are paid by the buyer to the Italian Notary, who will in turn pay them to the Tax Agency (Agenzia delle Entrate) when registering the property in the various registers.
Here are the notary fees for a property purchased directly from a private individual and in the absence of a ‘first home’ benefit:
Registration Fee: 9%;
Mortgage Tax: 50 euros;
Cadastral tax: 50 euros.
The tax rates are normally applied to the current reported sales price. In case of transfer of residential properties to natural persons, the buyer can request the payment of the registration tax on the ‘cadastral value’ of the property. The minimum amount of the tax is always €1,000.
Here are the notary fees for a property purchased directly from a private individual and in the presence of ‘first home’ benefits:
Registration Fee: 2%;
Mortgage Tax: 50 euros;
Cadastral tax: 50 euros.
The tax rates are also applied to the current reported sales price. In case of transfer of residential properties to natural persons, the buyer of the property can request the payment of the registration tax (Imposta di Registro) on the ‘cadastral value’ of the property, regardless of the actual amount of the sale price, even if it is higher than this value. The minimum amount of the tax is also €1,000.
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Real estate taxes
TASI - Municipal Tax for Indivisible Services (Tributo per i servizi indivisibili)
The TASI (Tributo per i servizi indivisibili) allows municipal administrations to take charge of the maintenance of common and public services. These services include, for example, the maintenance of green spaces, the lighting of public places and roads, the cleaning of public places and all other services that are provided equally to all citizens.
Since 2016 real estate used as a primary residence is completely exempted from the TASI regulation, with the exception, however, of luxury properties included in cadastral categories A/1, A/8, A/9. In order to calculate the TASI, various factors such as the location of the property and other coefficients must be taken into account. The advice of a specialist will be essential to calculate the total cost of this tax on indivisible services in advance.
IMU - Imposta municipale propria (Single Municipal Tax)
This tax is a bit special because it is not applied to the owner’s first property. The IMU, Unique Municipal Tax, must still be paid if the main house is considered a ‘luxury category’. This category means that the property is registered in the cadastre under one of the following cadastral categories: A/1, A/8 and A/9, respectively mansions, villas and castles.
This tax replaced the ICI (Communal Property Tax) as well as part of the IRPEF (Individual Income Tax). The different tax rates of the IMU are chosen each year independently by each Italian municipality. Of course, they must respect the limits set by the Italian national legislation. The rates are therefore different for each local authority, and special discounts and exemptions are provided. It is therefore necessary to get information on a case-by-case basis depending on the municipality in which you wish to settle and your family situation.
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CANONE RAI - Audiovisual license fee
In Italy, as in other countries, there is a visual fee to finance public television. Owning a television is taxed, and the particularity is that this tax is deducted every month from your electricity bill. The amount of this Italian audiovisual fee does not depend on the number of television sets in the household, but only on the actual presence of a set. A homeowner with multiple audiovisual devices will not see an increase in tax. The amount of this tax is 10 monthly payments of 9 euros each.
There are 2 cases of exemption from the audiovisual fee: being over 75 years old, or not owning a television. Please note that you have to apply for this, otherwise the tax will continue to be deducted.
TARI - Tax on household waste (Tassa sui rifiuti)
It is this tax that keeps the streets clean. In fact, the TARI (Tassa sui rifiuti) is a tax destined to finance the collection and recycling of household waste. This tax is managed locally, directly by the various Italian municipalities. Every owner of premises or open space for any purpose that is likely to generate municipal or similar waste and the surface area of which lies wholly or mainly within the City shall pay this fee.
Capital gains tax on a sale
The capital gain realized on the sale of a property in Italy is taxed like any other income, at the marginal tax rate. There are, however, 3 exceptions to this tax:
• Sale of primary residence;
• Sale of a property possessed for more than 5 years;
• Property received by inheritance.
There is also an alternative solution to income tax. In fact, in Italy it is possible to choose a flat tax of 20% to be paid through the notary who certifies the deed of sale of the property in question.
Rental income
As a property owner in Italy, you may be tempted to rent it out. This rental income will, of course, be taxed. This tax is called the Cedolare Secca. This is a tax regime designed for property owners in Italy that provides two types of rates. This depends on whether the owner wishes to rent out his property on the open market or with an agreed rent.
Rental annuities may be taxed as income at the marginal rate and on a taxable basis of 95% of the gross annual rental payments. It is also important to take into account the registration fees. Indeed, these fees represent a cost of 2% of the gross annual rent on the property. As for the tax on real estate capital gains, there is an alternative solution: choose a flat tax (Cedola Secca) of 21% of the gross annual rents on 100% of them. The owner who chooses this solution has no registration fee to pay.
