Overview

In Italy, both residents and nonresidents are subject to taxes when purchasing property, but the rates and applicable deductions can vary based on the buyer's residency status and the type of property. Nonresidents are taxed only on income and assets sourced within Italy, including rental income and capital gains from the sale of Italian property. Property purchases involve specific taxes like registration tax, cadastral tax, and mortgage tax, with reduced rates for primary residences and higher rates for second homes or luxury properties. While nonresidents can access certain deductions, they are generally not eligible for the same tax benefits as residents, such as first-home buyer incentives.

Rental Income Tax

Rental income in Italy can be taxed under a flat-rate scheme known as Cedolare Secca, which applies a 21% rate, replacing standard income tax, registration tax, and stamp duties, provided specific conditions are met (such as renting residential properties with private agreements). For properties rented out as short-term leases (less than 30 days) or for additional properties beyond the first, the rate may increase to 26%. Nonresidents are also eligible to deduct expenses directly related to the generation of rental income, such as maintenance costs, property management fees, and certain utility expenses, though they may not have access to all deductions available to residents.

<table>
    <tbody>
        <tr class="blue-row" >
            <td colspan="3"><strong>Monthly income, €</strong></td>
        </tr>
        <tr>
            <td>1500</td>
            <td>6000</td>
            <td>1200</td>
        </tr>
    </tbody>
    <tbody>
        <tr class="blue-row" >
            <td colspan="3"><strong>Tax rate, %</strong></td>
        </tr>
        <tr>
            <td>21.00</td>
            <td>21.00</td>
            <td>21.00</td>
        </tr>
    </tbody>
</table>

Corporate Taxation

Companies operating in Italy are subject to a corporate income tax (IRES) at a standard rate of 24% on their worldwide income if they are residents, while nonresident companies are taxed only on income sourced within Italy. In addition to IRES, businesses must also pay the regional tax on productive activities (IRAP), which generally ranges from 3.9% to 4.82%, depending on the region and type of business activity. Certain deductions and credits are available to reduce the taxable base, including expenses related to business operations, depreciation, and interest costs, though limits apply. Special tax regimes and incentives may be available for specific industries or for companies investing in innovation, research, and development.

Capital Gains Tax

Capital gains from the sale of real estate in Italy are subject to taxation, with the applicable rate depending on various factors such as the type of property, duration of ownership, and the seller's residency status. For individuals, capital gains from the sale of property are taxed at a flat rate of 26% if the property is sold within five years of purchase. However, if the property was used as a primary residence for the majority of the ownership period, the gain is typically exempt from taxation. For companies, capital gains are included in the taxable income and taxed under the corporate income tax (IRES) at 24%, along with the regional IRAP where applicable. Nonresidents are taxed on capital gains from the sale of Italian property, though tax treaties between Italy and other countries may reduce or eliminate double taxation.

Transaction Costs

<table>
    <tbody>
        <tr class="blue-row" >
            <td><strong>Description</strong></td>
            <td><strong>Cost Range</strong></td>
            <td><strong>Who Pays</strong></td>
        </tr>
        <tr>
            <td>Property Transfer Tax</td>
            <td>2%-9%</td>
            <td>Buyer</td>
        </tr>
        <tr>
            <td>Legal Fees</td>
            <td>1%</td>
            <td>Buyer</td>
        </tr>
        <tr>
            <td>Real Estate Agent Fee</td>
            <td>3%</td>
            <td>Buyer/Seller</td>
        </tr>
        <tr>
            <td>Notary Fee</td>
            <td>1%-2%</td>
            <td>Buyer</td>
        </tr>
    </tbody>
</table>

Imposta Municipale Unica (IMU) – Municipal Property Tax

Overview: IMU is a municipal property tax levied on real estate assets in Italy, primarily affecting second homes, luxury residences, and certain commercial properties. Primary residences are generally exempt, except for those classified as luxury properties.

Calculation:

Tax Base: The tax is calculated based on the cadastral value of the property, which is re-evaluated by increasing it by 5% and then multiplying by a specific coefficient that varies depending on the property type.
Tax Rate: The standard IMU rate is 0.86%, but municipalities have the authority to adjust this rate, typically ranging from 0.4% to 1.06%.

Exemptions and Reductions:

Primary Residences: Generally exempt, unless classified under luxury categories (e.g., A/1, A/8, A/9).
Historical or Artistic Properties: May qualify for a 50% reduction in the taxable base.

Payment Schedule: IMU is typically paid in two installments: the first by June 16 and the second by December 16 of each year.

Tributo per i Servizi Indivisibili (TASI) – Tax for Indivisible Services

Overview: TASI was a tax aimed at covering the costs of indivisible municipal services, such as street lighting and road maintenance. However, as part of the 2020 Budget Law, TASI was abolished and its functions were incorporated into the IMU.

Tassa sui Rifiuti (TARI) – Waste Collection Tax

Overview: TARI is a municipal tax dedicated to covering the costs of waste collection and disposal services. It is payable by the occupant of the property, whether they are the owner or a tenant.

Calculation:

Tax Base: The tax is calculated based on the property's size (in square meters) and the number of occupants.
Rate Determination: Rates are set annually by each municipality and can vary significantly across different regions.

Payment Schedule: TARI is usually paid annually, with specific payment dates determined by local municipal regulations.

Note: Tax regulations can change, and rates may vary by municipality. Property owners are advised to consult local tax authorities or a tax professional for the most current information regarding their specific obligations.

Property Taxes in Italy

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