Taxes

The fiscal system in Italy is going through some major changes at present, since the change in Government last year. The information that we are providing should be considered as general guidance, which will need to be updated prior to signing the rogito.

You will be subject to Registration Tax (‘Imposta di Registro’) and other minor charges. Altogether these taxes are calculated by applying a total rate of tax of 10% (Registration Tax 7%, Mortgage Tax (‘Imposta Ipotecaria’) 2% and Cadastral Tax (‘Imposta Catastale’) 1%) to the purchase price of the Property, as stated in the Purchase Deed.

The Registration Tax can be halved if the Buyer acquires the Property as his/her main residence (‘Prima Casa’). In this case, the Registration Tax will be 3% plus fixed Taxes, namely Mortgage Tax and Cadastral Tax, of 168,00 € each.

If you are purchasing a new building from a Developer or Builder you will have to pay 10% IVA Tax (‘Imposta sul Valore Aggiunto’’) which is equivalent to VAT in the UK. Additionally you will also have to pay Registration Tax, Mortgage Tax and Cadastral Tax each amounting to 168,00 €.

If you acquire a new building as your main residence, the IVA is 4%.

However since January 2006, in respect to dwelling houses only, the buyer (who must not be a company) has the option of choosing to pay the above taxes on the cadastral value rather than on the actual purchase price. This will allow him/her to save approximately half of the costs, previously payable.

The seller is no longer subject to INVIM tax (“Imposta Comunale sugli Incrementi di Valore”). This was a tax levied on the capital gains realised on a sale of property, up to and including the 31st December 1992. It was calculated by applying index-linked rates of tax to the capital gain realised, which normally is the difference between the purchase price and the expenses incurred in restoring or improving a property and the price collected on a sale. The actual amount of INVIM tax was calculated by the Notary and tendered immediately before completion.

In most cases, there is no Capital Gains Tax on the sale of land and buildings.

Inheritance Tax was abolished in 2001 by the Italian Government of that time and just reintroduced by the present one with the Budget Law, the “Finanziaria”, 2007.

The debate has been very harsh in the Parliament but the Italian heavy budget needs prevailed. The actual Inheritance Tax follows the usual criteria of the “capacita’ contributiva” and it is proportional to the value of the estate and the degree of relationship between heir and deceased.

For a close descendant “in linea retta”, e.g.: Father and son, but also for a spouse, the tax is of 4 percent with a threshold of 1,000,000.00 Euros.

In case of legacies to other consanguineous, e.g.: a grandchild, within the fourth degree and for relatives within the third degree, the tax will be of the six percent with no threshold.

Legacies to other heirs will be charged at a rate of 8 percent on the value.

There is a double taxation Treaty which exists between the UK and Italy, which means that tax is payable in one country and not both. Non-residents however, could be responsible for taxes on income, capital gains and inheritance tax, depending on the individual’s financial position. This will vary between individuals.

There is no longer any wealth tax payable in Italy. The Italian authorities are only concerned with Italian sourced income which includes interest on funds deposited with Italian Banks and income from letting property in Italy. In the latter case, it may be possible to offset expenses such as property repairs and management costs etc against the income. The residue income is taxed between 19 and 46% depending on the amount.

The ICI (Imposta Comunale sugli Immobili) is an annual tax of between 0.4% and 0.7% of the Cadastral value (the valuation of the property based on the Land Registry’s categories) of the property, payable in June and December in two halves. Terms of payment: The payment must be made in two installments: The first one before the 16 June and the second 20 December. The most popular method payment is at the Post Office however you are able to appoint the Amministratore di Condominio.

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