Taxation on property is very favourable in Italy compared to many other countries. There are no restrictions on foreign ownership. Real estate in Italy has two completely independent value measurements. The “fiscal value” (also known as “cadastral value”) is the value recorded in the land registry, which is usually significantly lower than the “transaction value”, the value recorded in the purchase deed.
For residential properties, the value on which to apply the tax rates hereafter can either be the transaction value (TV) or the cadastral value (CV). CV is generally much lower than TV. For commercial and land, tax rates always apply to TV. Notary fees depend on a number of parameters, including the transaction value.
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Taxation Upon Purchase
- A non-resident private individual purchasing a newly built/an existing/an off plan property from a private individual pays 9% of fiscal value. Other rules apply to the purchase of land and whenever a company is involved.
- Notary and legal fees depend on several parameters, including the location, quality and value of the property. The combined amount usually varies between 2% and 4% of transaction value.
- Annual Taxation
- Property tax ranges from 0.4% to 0.7% of fiscal value, depending on location and property type. There is no wealth tax in Italy.
- Capital Gains Tax
- Individuals are exempt of capital gains tax five years after the purchase. If the property is sold within five years capital gains are taxed at 20%.
- In the case of companies or trusts, capital gains form part of the company’s income and are taxed at the applicable rate.
- The fiscal value of each inherited property proton is tax exempt up to 1 million € for the direct line of the deceased, and up to € 100,000 for brothers and sisters.
- Beyond the exemption threshold, tax rates are 4% for the direct line, 6% up to the fourth degree of kinship, 8% for all others.
- Overall taxation depends on a number of factors, including property location and acquisition structuring. Italy Sotheby’s International Realty arranges for buyers to receive tax advisory of the highest standard.
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Buying a property? Read these useful tips
- Wait to sign an offer and pay a deposit until you are confident you understand the purchase details and do need to make any extra changes. Negotiate with your real estate agent when their commission should be paid (at completion is better).
- Go over a current title record to know who owns the property. More than one owner means all these individuals need to give their permission to sell the property.
- Check if the property plan (location, layout, use of rooms) meets building compliance. Otherwise it will be your responsibility to meet compliance. Hiring a local surveyor might be a good idea.
- Avoid taking on previous lease agreements by making sure the land, apartment or house you are buying are not occupied by tenants.
- Sometimes owners remove everything from a property leaving only bare walls. If you expect something to be included with the purchase, make sure that it is!
- When purchasing an apartment in a block of flats, make sure the previous owner is up to date with all building fees.
- Purchase price isn’t the only cost you will face – remember to include taxes, notary fees, and real estate agent’s commission, among other costs.
- The property you are buying might have a mortgage – usually it is easy for the buyer to take over the loan unless you are paying cash.
- An escrow account or currency exchange account will help you avoid setting up a separate bank account for the purchase.
- Hire a lawyer to go over your contracts, advise you on tax options and estate planning.