Italy's Transfer Taxes When You Buy a Property
Buying and selling a property in Italy is not as complicated as you might expect. Depending on your age and location, there are numbers of incentives and encouraging reasons to take the plunge as a first time home buyer or even second time. Many individuals are relocating not just for retirement, but because they see Italy as a place to boost their quality of life, especially as working-from-home becomes more viable.
The home-buying process in Italy is similar to that of other countries, while Italian taxation can be a bit confusing. There are two main scenarios when you buy a property in Italy, the first is when you buy from a private individual and the second is when you buy from a builder or a flipping company.
Seller is a Private Individual
In the case of purchasing a home from a private individual, the sale is VAT exempt. The buyer pays the transfer tax “imposta di registro,” which is a one-time tax you pay when you buy a house. For non-residents, it’s 9% of the fiscal value. The fiscal value is based on a state-determined value of the house, which usually is almost half of the selling price, so effectively the transfer tax is more or less 5% of the selling price.
The buyer pays also some other minor local taxes, “imposta ipotecaria” and “imposta catastale” which amount to €50 each.
The good news is, if you reside in the same city where the property is located, or if you transfer your residency within 18 months, you may qualify for the so-called First Home Bonus or ”bonus prima casa,” wherein the transfer tax is only 2%. You are allowed to declare that you will be transferring your residency to take advantage of this reduced tax; however, be mindful that if you do not end up transferring your residency you will be liable to pay the difference in percentage plus a fine of 20% of the amount. The tax office has 5 years from the date of purchase to collect this payment.
For buyers who are 35 years old or younger, the transfer tax is waived until December 31, 2022. The minimal taxes on mortgage and land registry mentioned earlier are also waived. These lucky individuals will only have to pay the agency fees and the notary public.
Seller is a Builder or Construction Company
In this second common scenario of buying a home from a builder or construction company, the buyer pays VAT (in Italian “IVA”) which is 4% for residents and 10% for non-residents, or 22% if it is a so-called luxury property like a castle, palace, or large villa. Plus €920 of fixed local taxes.
Other rules apply to the purchase of land, shops, offices, and warehouses. A notary public will be able to tell you all the taxes due for your particular transaction.
Other Types of Taxes & Subsequent Perks
While the transfer tax is due upon closing, you’ll need to be mindful of paying the registration tax for your accepted offer within 20-days, or incur penalties for late-payments. Plus, your annual property taxes or “IMU” in Italian are due twice a year in June and December. If you’ve transferred your residency and make your new home your primary residence, as long as it’s not a luxury property, you don’t have to pay any property taxes! Alternatively, if you reside abroad and are retired, you can take advantage of a 50% reduction in property taxes.
When you’re ready to sell a property in Italy, click to read how you can avoid paying capital gain taxes.