Real estates taxes in Italy: a quick guide

In this guide, we delve into the main regulatory aspects related to property taxation in Italy, borne by the owner or user of the property. What are IMU, TARI, and TASI, and who is required to pay them? Real estates in Italy is particularly convenient, but often they is burdensome for bureaucracy and taxes

House taxes represent an important part of state and local government tax revenues. Historically, housing has always represented a form of secure employment for families, a safe haven asset to which to divert savings that, unlike other forms of investment, cannot be subject to concealment or transfer abroad. In addition, real estate has an immediate ease of ascertainment, as property records are kept constantly updated, thanks to computerization and digitization efforts, as well as building amnesties that over the years have helped bring ghost properties to light. Let us now go on to analyze how the Italian tax system is structured in the real estate sector and what taxes and fees are levied on housing. Broadly speaking, it is possible to fall back on housing taxes in three macro-areas:

• taxes of an income nature: Irpef, Ires, cedolare secca;
• taxes of a patrimonial nature: imu and Tari;
• transfer taxes: registry,
• mortgage, and cadastral taxes for purchases, inheritances, and donations. We will therefore go on below to deal with them analytically, mentioning separately VAT, which applies only in cases of purchases from businesses or in commercial purchases and sales.

Taxes on income coming from real restaurants

These are all those income tax systems based on the assumption that being the owner of real estate generates taxable income, for example, from rent. These are:

• IRPEF stands for Income Tax on Physical Persons. It is payable by citizens resident and non-resident in the territory of the state due to the fact that they are recipients of income derived from the ownership of houses, buildings, or land—so-called land income—from the use of capital, from employment, self-employment, the operation of a business, or from other sources such as capital gains realized from real estate, financial, and commercial purchases and sales, winnings, the exploitation of patents and copyrights, rents, income from professional and amateur sports activities, and pensions.
• IRES stands for corporate income tax. Currently, the IRES rate is 24 percent. It is payable by joint stock and limited partnership companies, limited liability companies, cooperative and mutual insurance companies, public and private entities resident in Italy, including consortia, collective investment schemes, nonprofit organizations, and in any case by all companies and entities of all kinds, including trusts.
• “Cedolare secca” “Dry coupon” is an alternative way of acquitting the tax on real estate leased for residential use compared to the normal application of IRPEF, which property owners can also exercise for short leases. The dry coupon has an ordinary rate of 21 percent on the rent and is levied when the contract is registered. The advantages of the dry coupon are: a reduction in the ordinary rate on rent; exemption from registration tax and stamp duty; and exclusion from total income for the calculation of IRPEF. By opting for the “coupon tax” regime, the landlord waives any rent increases during the rental period, even if such adjustments are provided for in the contract, among them the change ascertained by Istat in the national consumer price index for blue- and white-collar households for the previous year.

Taxes on pure real estate value

These are all those taxation systems based on the assumption that the fact of being the owner of real estate (excluding the principal residence) results in the payment of tax. The sector has undergone numerous reforms over the years that have simplified the matter, eliminating several historical acronyms, such as Tasi, Tarsu, ICI, and ICU taxes. Currently, we can include the following taxes in this category:

• IMU: Municipal Property Tax. This is the tax payable for the ownership of buildings, luxury homes, villas, castles, mansions, building areas, and agricultural land, excluding principal dwellings. It is payable by the owner or holder of other real rights (usufruct, use, dwelling, emphyteusis, surface), the concessionaire in the case of state-owned areas, and the lessee in the case of leasing. The standard rate is set by law, and municipalities can change it up or down within the limits provided by the government. The calculation of the tax base is given by the cadastral income revalued by 5 percent, to which multipliers are applied depending on the cadastral category.
• TARI: Waste Tax. It is based on the assumption that the possession or holding in any capacity of premises or areas likely to produce urban waste determines the taxation. It is therefore worth the condition of use of the property to apply the tax, the presence of furnishings or connected utilities being enough to demand the tax. It is calculated with a fixed fee determined on the basis of the area of the property and a variable fee calculated instead based on the number of people living in the house.

Transfer Taxes

Pertain in all situations in which real estate is the subject of a transfer of ownership or possession, such as in cases of sale, lease, usufruct, inheritance, and gift. In this regard, there are taxes to be applied to the deed, the economic transaction, and charges related to the transcriptions in the real estate registers of the transactions resulting from the transfer. We will thus have:

• Registration tax: this is the fee to be paid to the state for the registration of a deed of incorporation or transfer of real estate in order to keep track of it and give it legal certainty. It is regulated by the Testo Unico dell’Imposta di Registro DPR No. 131 of 1986 and is an alternative tax to VAT; in fact, deeds subject to VAT do not discount the registration tax.
• Mortgage tax: this is the tax to be paid whenever a property changes ownership or is subject to a lien, such as a mortgage, for the formalities of transcription, registration, renewal and annotation in the conservatory of public real estate registers;
  Land registry tax: this is the amount to be paid for the transfer to the land registry in the case of the purchase, sale, donation, or inheritance of real estate.
  In the case of the purchase of real estate, the registration, mortgage, and cadastral taxes are paid by the notary when the deed is registered. Mortgage and cadastral taxes are due in the amount of 50 euros each if you take advantage of the first home benefits as a percentage of the value and with a minimum payment of 200 euros for second homes

The Italian VAT regime in real estate purchases

VAT, or value-added tax, is an indirect tax that is charged when goods or services are produced and exchanged. Remember that if VAT is paid, no registration tax is due. In the case of housing transfers, it must be applied differently depending on whether the seller or the person transferring the property is a private individual or a business. Let’s see the details:

Purchase from a private individual: if the purchase and sale are not the subject of a commercial activity, as in the case of private individuals, the buyer does not pay VAT on the economic transaction and can ask the notary to apply the calculation of the registration tax to the cadastral value.

Purchase from a business: purchases where the seller is a business are subject to VAT if the house is completed within 5 years or if the seller chooses to sell it with VAT and requires it to be reported in the deed, even if it is a sale of social housing.
The tax system provides for VAT with a full taxation, an ordinary taxation, and a concessional taxation with reduced rates, following the logic of encouraging access to property by citizens. The rates that are applied depend on the nature of the seller, the characteristics of the home, and the purpose of the purchase, so we will have 3 tax brackets:

• 22%: applies for property falling into the cadastral categories A1 stately homes, A8 dwellings in villas and A9 castles and eminent buildings;
• 10%: is the rate applicable if you do not meet the requirements to take advantage of the first home benefits?
• 4% is the rate that applies for the purchase of the first home if you meet the requirements.