Who wouldn’t want to live in Italy? You might be drawn to the beautiful countryside or the vibrant, historic cities, but wherever you go, the country is sure to capture your imagination.
Italy isn’t all sunshine and pasta, though. If you’re thinking about buying property in Italy, or if you’re in the process of doing so, you’ll need to wrap your head around Italian property taxes. Whether you’re already an Italian citizen, you’re considering becoming an expat, or if you’re buying a holiday home - there will be a number of bills to pay the government. Here’s a guide to what you’ll need to pay in 2018.
Generally speaking, property tax is any tax paid on real estate. It can be split into two broad categories: sales taxes, which are paid when a property changes hands, and maintenance taxes, which are paid regularly by the owner or occupier. Italy has its fair share of both sales and property taxes.
As well as taxes, there are always many other fees that come into play when buying or selling property - Italy’s no exception to this, either.
Buyers pay the majority of sales taxes in Italy, although sellers may have to pay capital gains tax as well as VAT on some fees. Maintenance taxes are generally in the hands of the owner.
Tax rates are sometimes different depending on whether or not you live in the municipality your property is located in, whether or not you’re an Italian resident, and what type of property you’re purchasing, but that doesn’t affect who pays the bill.
Taxes form a substantial part - though not the entirety - of costs associated with buying and maintaining a property. These are the property taxes you’ll face in Italy.
The main sales taxes in Italy are as follows:
- Registration tax (imposta di registro)
- Land registry tax (imposta ipotecaria)
- Mortgage tax (imposta ipotecaria)
- VAT (IVA)
- Capital gains tax
And the maintenance taxes are:
- Property ownership tax (IMU)
- Services tax (TASI)
- Waste collection tax (TARI)
All these taxes are explained in detail below.
Before looking at the taxes, it’s important to familiarise yourself with the concept of ‘cadastral value’ (valore catastale): this is the figure from which many of the taxes are calculated.
Every property is given an official valore catastale based on a valuation. This will factor in size, location and quality, and will also vary according to whether the property is used as a main residence or second home. It usually works out lower than the real sale price - it can even be lower than half of this.
A majority of the sales taxes are the responsibility of the buyer, along with various other fees such as the notary’s fee. But the seller may be charged VAT on various costs and may have to pay capital gains tax too. Here’s a guide to each of the taxes.
What tends to be called stamp duty in English is imposta di registro in Italian - a tax on registering a property.
- This tax is paid by the buyer.
- If you’re buying from a private seller, it’s calculated according to the property’s cadastral value - see above to find out how that works.
- The rate varies according to several factors:
- If it’s going to be your primary property (prima casa) within 18 months of signing the contract - and if you spend more than half the year there - you can pay a reduced rate of tax.
- But the figures also vary depending on whether you buy from a private seller or a VAT-registered company. If you buy from a company, you pay a fixed fee for stamp duty and a percentage fee of VAT. This is likely to work out as more.
- See the table below for a full breakdown of these costs.
|Buying from private seller||Buying from private seller||Buying from VAT-registered company||Buying from VAT-registered company||Buying from VAT-registered company|
|TAX||Primary property||Second property||Primary property||Second property||Luxury property|
|Stamp duty||2% of cadastral value(min fee €1,000)||9% of cadastral value(min fee €1,000)||€200||€200||€200|
|VAT||none||none||4% of sale price||10% of sale price||22% of sale price|
- The imposta catastale (cadastral tax) is a small fixed fee
- From a private seller, it’s currently fixed at €50
- From a VAT-registered company, it’s €200
- The imposta ipotecaria is another small fixed fee
- It’s currently the same amount as the land registry tax: €50 or €200 depending on the seller
Known as IVA in Italian, value-added tax is payable on some of the fees involved with property sales.
- As shown in the table above, you have to pay VAT on the property’s purchase price, if you’re buying from a VAT-registered company.
- If you’re buying from a private individual, there’s no VAT on the sale price - instead, you pay stamp duty.
- You’ll also have to pay VAT on agency fees - this might apply to both buyer and seller.
The Italian plusvalenza tax is equivalent to capital gains tax on property sales. It’s a tax paid on large profits made from selling a property.
- In Italy, you never have to pay capital gains tax if you’ve owned the place for more than 5 years.
- If you’ve owned it for less than that, you have to pay 20% on your net profit - that’s your profit minus tax and other fees, including agency fees and building works.
- If you’re not an Italian resident, be prepared - you might have to pay capital gains tax in your country of residence, even if you don’t have to pay it in Italy.
|Buying from private seller||Buying from company||Buyer||Seller||Notes|
|Stamp duty||✓ 2% or 9% of cadastral value||✓ €200||✓||✗||See table above|
|Land registry tax||✓ €50||✓ €200||✓||✗|
|Mortgage tax||✓ €50||✓ €200||✓||✗|
|VAT||✗||✓ 4%, 10% or ~22% of sale price||✓||✗||See table above. VAT may also be payable on other fees|
|Capital gains tax||✓ 20% of profit||✓ 20% of profit||✗||✓||Only if property has been owned for less than 5 years|
The three principal maintenance taxes in Italy are known as IUC or Imposta unica comunale. Here are a few more details on each of them.
The IMU is the regular Italian property tax. Before 2012 the equivalent tax was the ICI.
- IMU is a property ownership tax, so it’s the owner’s responsibility (unlike, for example, UK council tax).
- If the property is your main residence, you don’t have to pay IMU. This was a new rule introduced in 2016.
- The exception to this is if the property is a luxury residence - then, you still have to pay.
- The rate is determined by the cadastral value of the property.
- First, the cadastral value is adjusted, depending on the type of property it is.
- The IMU rate is approximately 0.4- 0.76% of this new figure, although the exact percentage can be set by the local municipality.
- It’s payable twice a year - in June and December. The authorities don’t tend to send bills, so you need to keep on top of this one.
TASI is a tax paid on ‘indivisible services’ for the local area: costs such as street lighting and maintaining roads and green spaces. Like the IMU, it’s relatively new.
- If the property is rented out, TASI is shared between landlord and tenant, with the landlord contributing 70-90% and the tenant paying the rest.
- The exact rate is set by the municipality.
- It’s payable twice a year, and you probably won’t get a bill, so mark your diary (or get an accountant).
TARI is another Italian maintenance tax, this time for waste collection.
- Unlike the maintenance taxes above, this one is the responsibility of the occupier rather than the owner - unless a tenant is there for less than 6 months.
- The rate is set by the municipality and depends on the size of the property, as well as the number of people living there.
- You should get a bill for this one.
|Primary residence||Not primary residence||Owner pays||Occupant pays|
|TASI||✓||✓ (70-90% if rented out)||✓ (10-30% if renting)|
This is just a selection of the other fees you’ll face when buying, selling or maintaining a property in Italy. The whole set of fees will vary from case to case.
The notary (notaio) is a crucial figure in Italian property transactions, facilitating the entire sale and working with both buyer and seller. They take a fee of around 1%.
(Source 1 17 Dec 2017)
Both the buyer and the seller generally have to pay the agent. The fees for both are around 3% plus VAT in most cases.
You may face a range of other fees, especially at the buying stage: technical reports, surveys, additional registration fees and maybe even more. You’ll also have to pay for a translator if your Italian isn’t good enough to understand your deed.
Here are a few cases where you might be able to pay less tax:
- As explained above, buying from a private seller rather than a company means not having to pay VAT on the sale price. You pay an increased rate of stamp duty instead, but it doesn’t amount to as much.
- You don’t have to pay plusvalenza (capital gains tax) on a sale if you’ve owned the property for more than 5 years when the sale is completed.
- If you do have to pay plusvalenza, be sure to include your expenses in the calculation: you only pay it on the profit you make, factoring in costs associated with selling the property.
- If you’re going to be a resident in the property, you’ll pay lower tax rates when buying.
- And you’ll also have to pay a lot less maintenance taxes if the property is your primary residence.
The notary is the person to talk to about sales fees: they should be able to give you a schedule.
For maintenance fees, mostly they're due twice a year, in June and December. Confirm with your local council, and mark your diary - you might not get a reminder through the post.
Some regular bills in Italy are most often paid through the post office, and this includes the maintenance taxes on your property. Check with your local branch to see if online payments or direct debits are possible.
The notary should be able to talk you through paying other fees.
(Source 1 February 2018)
For some of the fees you’ll face when paying for your Italian property, you’ll probably be able to make online payments. You’ll need to check, however, whether you can pay from an international account or if you’ll need to make the payment from an Italian bank account.
Either way, you’re likely to need to move a substantial amount of your money into Italy, whether it initially goes into an account of yours, or straight to the government or an estate agent. When this happens, be sure to check you’re getting the best possible rate on the transfer.
Many banks and traditional money transfer services mark up the currency exchange rate by as much as 4-5%, meaning that less of your money makes it to its destination. But TransferWise always gives you the mid-market rate - the only fair exchange rate there is - and only charges a small fee, always stated clearly upfront.
So you’ll know the precise cost of your transfer - and it will probably work out a lot better value than other methods. Check out how TransferWise compares to a bank transfer and see if you could save money.
A borderless multi-currency account from TransferWise makes things even easier, allowing you to hold money in up to 28 different currencies, including euros. It also gives you local account details in euros, pounds and US and Australian dollars - so you can send and receive money without having to worry about the exchange rate at all.
Taxes are always complicated, whether you’re buying a house or getting a job - and if you’re operating internationally, things can get very complex. That’s why it’s important to know what you have to pay, and when - and how to make the payments in the most efficient way.
Good luck navigating the world of Italian property tax.
|This publication is provided for general information purposes only and is not intended to cover every aspect of the topics which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content is the publication is accurate, complete or up to date.|
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