Trying to understand the Italian tax system can be rather daunting, so we have written a simple guide, to outline the basics.
Explaining the VALORE CATASTALE and RENDITA CATASTALE
Both of these are tax values that are given to property and land. They are very closely linked and are used to calculate the taxes, both when you buy a property and also when you pay the annual council tax. The ‘Rendita Catastale’ is a figure given to property, calculated using various factors, such as the size of the property, the materials used, the year it was built, etc. If you buy a property and then carry out a renovation project, the rendita catastale will change once the project has been completed. From this figure, it is possible to find out the ‘Valore Catastale’, which is used to calculate purchase taxes. Usually the valore catastale of a property is around 50% - 75% of the market value of the property, or even less.
NB. The rendita catastale is fixed for each property, but the equation to find the valore catastale changes slightly depending on whether the property will be bought as a primary residence or second home.
BUYING A PROPERTY AS YOUR MAIN RESIDENCE (when the seller is a private individual)
If you are buying a property in Italy with the intention of applying for residency within 18 months of purchase, you are entitled to a tax incentive, paying 2%, instead of the usual 9%, of the valore catastale (unless the property is classified as a luxury property and in this case the tax is 9%) This tax is called the ‘Imposta di Registro’, or registration tax. In addition, there are 2 small taxes of 50 euros each to pay – imposte ipotecarie and catastali – which are a mortgage tax and stamp duty.
BUYING A PROPERTY AS A SECOND HOME OR HOLIDAY HOME (when the seller is a private individual)
If you are buying a property, but will not be making it your main residence within 18 months, you will pay the 9% tax rate on the valore catastale. In addition, you will pay the 2 small taxes of 50 euros, for stamp duty and mortgage tax.
NB. If you declare that you will become resident within 18 months of the purchase, but don’t do so, you will be liable to pay the difference in the 2% and 9% tax, plus a fine of 20% of this amount. The tax office has 5 years in which to ask for this money, from the date of the purchase.
BUYING A PROPERTY FROM A DEVELOPER OR CONSTRUCTOR (when the property has been completed within 5 years of the purchase)
As your main residence – you pay 4% of the purchase price, plus 200 euros registration tax, 200 euros mortgage tax and 200 euros stamp duty.
As a second home – you pay 10% of the purchase price (unless the property is classified as a luxury property, in which case you pay 22% of the purchase price). Plus, you pay 200 euros registration tax, 200 euros mortgage tax and 200 euros stamp duty.
If you buy a property from a developer or constructor, but the property has been completed more than 5 years ago, the taxes are calculated in the same way as for a private individual.
The tax for agricultural land is 12% of the declared value of the land. However, if the land surrounds the property, it is possible to pay the tax on the tax value of the land, in the same way as the house.
A NOTE FROM US – as soon as you have decided on the property that you wish to buy, we will obtain a quote for you from the notary, including all the taxes.
ANNUAL PROPERTY TAXES
IMU (previously known as ICI)
IMU is the annual council tax, which is payable in June and December. You pay for the previous months, so in June, you are paying for January to June, and in December you are paying for July – December. The IMU tax is calculated, using the Rendita Catastale of the property. The rate used for the calculation is higher for non-residents than residents. In fact, residents are currently exempt from paying the tax (as long as all of their property is classed as their main residence). The rate can vary from year to year, and each comune decides on the rate it will use (within perimeters set by the government).
NB. Your comune will not send you out a bill for the tax. They will inform you (by way of posters at the comune, if not by personal letter) of the deadline to pay and, also, of the rates that are to be used to calculate the tax. However, you can go along to the comune yourself and ask someone to calculate the tax for you.
A NOTE FROM US – If you are unable to be here, or just don’t want the trouble of dealing with it, this is one of the services that we offer our clients. We can calculate the taxes, complete the forms and pay the bills for you.
TARI (previously known as TARES, TARSU and TIA)
TARI is the rubbish collection tax. It is calculated based on the size of your property and the number of inhabitants. There is a discount for non-residents. The tax is calculated by the comune and bills will be sent out to each property.
TASI is a new tax that was introduced in 2014, and is payable in June and December, in the same way as IMU tax, using the rendita catastale. It was introduced to cover ‘indivisible services’, which means services used by all citizens, such as street lighting and road maintenance (as opposed to services such as school transport, which are only used by certain people). From 2016, properties registered as a main residence are exempt from this tax. Again, bills are not sent out to individual homes and it is each person’s responsibility to pay the bill on time, and correctly. Along with the IMU tax, we can help you with these taxes.
TAXES WHEN SELLING A PROPERTY IN ITALY
If you are selling a property in Italy, there are 2 taxes which you may be liable to pay, if you have owned the property for less than 5 years.
If you are selling within 5 years of having purchased a property where you have had residency, you should re-purchase another property in Italy within 1 year of the sale, otherwise you will lose the tax benefits of the original purchase.
If you are selling within 5 years of having purchased a property, and you sell for a higher price than the purchase price, you may have to pay capital gains tax (but, any costs for renovation and improvements to the property can be used to offset the tax, as long as there are invoices for the work). If the property was a second home, then you pay capital gains tax. If you had residency at the house for more than 50% of the time that you owned it, then you don't have to pay capital gains tax.