The taxation system in Italy is complicated, as in most countries. However this is important information so please bear with us. We will try to keep it as simple and clear as possible. It is not complete by any means (you would need a lifetime to understand it all!) and you should check the latest laws with an accountant, notary, or other expert as they change all the time, and even from region to region.
There are two basic ways to buy a house here; as a place of permanent residence (prima casa) or as a holiday home (seconda casa). Let's deal with the permanent residence first.
If you intend to take up your permanent residency in Italy, the purchase tax is 3% on the registered value (the so-called tassa sulla prima casa). In this case you must obtain residenza (residency) within 18 months of purchase completing the forms from the post office and registering them with your comune (local town hall), otherwise you will have to pay an additional 7% plus interest and a fine. Once registered you will receive a visit from the local police to confirm that you actually live here and this usually happens within the first few weeks. You also cannot sell your house for at least 5 years, unless you buy another first house for permanent living within a year, or pay the tax difference. As a resident you should reside in the house for at least 183 days per year. As a European citizen this is quite hard for the authorities to check on as you can move freely within the EU without any border checks, but as an American, for example, your passport is stamped with the date of arrival and departure making it much more difficult.
If the house is to be a seconda casa (holiday home or second residence) you pay 10% purchase tax on the registered value.
A reasonable amount of land around a house can be classed as garden or cortile. Larger amounts are classed as farmland which is taxed at 18%. However the registered value of farmland is usually so that the tax is not too onerous. For tax purposes the minimum value that can be attached to agricultural land is 5,000 euros. If you are buying farmland then neighbouring farmers have the right to buy your property up to two years after the final contract! There is a simple way round this, which is to get them to sign an agreement, drawn up by a notary, prior to the final contract. We do this as part of our service. The neighbour must be a registered farmer, and not retired, to be able to exercise this right (diritto di prelazione).
There is currently no inheritance tax in Italy.
If you sell your house within five years you will be liable for plusvalenza (capital gains tax). This is chargeable on the difference between what you sell the property for less what you paid for it. Any restoration costs may also be deducted if you keep the receipts. However, you don't pay plusvalenza on buying and selling a prima casa.
The only other tax involved in the purchase of a property is IVA (the Italian equivalent of VAT) which is currently 20% and you will need to pay this on any fees, etc. However you pay only 10% IVA for materials to restore your house here. This is due to be reviewed. You may be also claim 36% of your restoration costs back from your income tax over 10 years but speak to a
commercialista (accountant) about that. See our page on
taxes for addresses.
So, what's all this talk about 'registered value'? Well, property values are registered with the comune (local council) on a catasto (land and buildings registry). The registered value, or valore catastale, of a property is usually quite low, but the market price of a house is normally a lot higher. You pay tax only on the registered value. However, if you are buying from a ditta (firm or business) then you will be paying 4% tax, and on the full purchase price.
To complicate matters a little further. The rendita catastale is worked out by the council as its rental value (though heaven knows how they do that!). If you are buying as a prima casa the figure is multiplied by 115,50 and if you are buying as a seconda casa by 126,00. So, as an example, a house with a rental value of 117,14 would have a valore catastale of 13.529,67 or 14.759,64 respectively. In this example you would pay 3% of 13.529,67 which is 405,89 - or 10% of 14.759,64 which is 1.475,96.
You will notice that the commas and full-stops are switched around when writing figures in Italy. It just helps to confuse you even more!