Understanding Italian Property Taxes

Which taxes and fees are due at the completion of the property purchase?
At the moment of the Final Deed of Sale the buyer is liable to pay taxes and also Notary fees which are dependant on:

1. The purchase price;
2. Whether the house is considered as first or second home; and
3. Whether the house is purchased from a building company or a private individual.

Every time the freehold of a property is transferred there is a tax liability which arises from the act of transfer. In the case of the purchase of a property the liability lies on the buyer. The due taxes are the following:

- VAT(Known as IVA in Italy) form 10% to 20 depending on the type of the property and buyer;
- Imposta di registro (registration tax)
- Imposta ipotecaria (mortgage tax)
- Imposta catastale (cadastral tax)

The mortgage tax is payable regardless of whether you take out a mortgage.
The gains on which the taxes should be paid in case of resale is the difference between the purchase price declared in the deed and the resale price. The price-value rule applies only if the buyer is acting in the purchase as an individual, and not even if the buyer is a company. If the deed is subject to IVA this rule does not apply and the buyer must pay the taxes on the purchase price and not on the cadastral value. In the case of off-plan purchases, the price-value rule does not apply because this is subject to IVA.

Is there a capital gains tax?
It is not possible to provide a standard and substantive response to this question without analysing each individual's own circumstances. Generally, the domicile of the buyer determines the legislation applicable to the discipline of capital gains tax. Therefore, if you are domiciled in the United Kingdom, the rules of capital gains tax are set by the Inland Revenue in the United Kingdom. As general guidance, under Italian law, in cases of resale of the house within five years from the purchase date the seller is liable for capital gains tax. This is a progressive tax and the percentage due at the present time is 20% of the gains. The gains are calculated by deducting the price of the purchase from the price of resale. It is possible to add to the deducting sums also the sums paid and directly related to the first purchase (not sure): notary fees, taxes, agent commission; and also the sums paid in case of renovation of the house. Legal costs and costs for ordinary maintenance cannot be deducted. After five years time there is no liability for capital gains tax. We strongly advise you to seek legal advice if you are considering selling the property within the next five years and obtaining a legal opinion of advice in relation to how to minimise your tax liability for capital gains.

How does Inheritance tax work in Italy?
On the 3 October 2006 the inheritance tax was reintroduced by the Italian government. The budget law 2006 provides disposition on the Inheritance tax. For direct heirs, i.e. spouse and children the tax due is 4% of the value of the estate provided that the value of the assets transferred to each of the beneficiaries does not exceed 1 million of Euro. The value of the real estate property is calculated on the cadastral value. The indirect heirs, i.e. sisters and brothers, until the fourth degree of relationship are liable to pay the inheritance tax on estates at 6% of the value of the estate. Other relatives or not relatives are liable for a percentage of 8% and in this latter case no threshold are provided.