Buying Property in Italy: Understanding Taxation Rules for Non-Resident Individuals

Buying Property in Italy Taxation Non-Resident: Key Rules and Considerations. Article published in the magazine We Wealth of March 31, 2023

Italy is a popular and fantastic destination for people looking to buy property overseas. However, non-resident private individuals must understand the taxation rules and regulations for real estate purchases in Italy.

Land Registry Tax (Imposta Catastale)

If you are a non-resident individual who buys a real estate property in Italy, you will be subject to the Land Registry Tax (Imposta Catastale), also known as the registration tax. This tax is payable upon the transfer of the property’s ownership.

The registry tax can be as high as 9% of the property’s value, and it is determined by the Italian Revenue Agency (Agenzia delle Entrate). It’s worth noting that the declared value of the property may differ from the purchase price.

The land registry tax rate is only 2% if you don’t own any other properties in Italy, and the house is not considered a luxury property under Italian law.

Capital Gains Tax (Plusvalenza)

Another relevant tax is the Capital Gains Tax (plusvalenza), payable only when you sell the property and make a profit. If you’re a non-resident selling the purchased property in Italy, you’ll be subject to a 26% tax on the difference between the purchase and sale prices.

However, if you’ve owned the property for more than five years, there’s no Italian capital gain tax to pay. It’s essential to check the taxation rules in your country of residence and verify the double taxation agreements between Italy and your State.

Rental Income and Annual Taxes

If you decide to rent out your property in Italy, you must pay annual direct taxes (IRPEF) and submit your Italian tax return. You also have the option of choosing a fixed direct taxation (cedolare secca) of 21% or 10%, depending on the conditions.

If you decide not to rent out the property, you’ll only need to pay the IMU (Imposta Municipale Unica), about 1% of the property’s tax value. Another compulsory annual tax is the Tari (Tassa sui Rifiuti), or the yearly waste tax payable to the municipality.

Tax Concessions for Renovations

As a non-resident, you are entitled to all tax concessions for building renovations that are also available to resident individuals.

Practical Advice

Hiring a lawyer, notary, and real estate agent to facilitate the purchasing process in Italy is wise and strongly recommended.