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

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.

Suppose you are a non-resident individual who buys a real estate property in Italy. In that case, 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 varies and can be as high as 9% of the property’s value, and it is the Italian Revenue Agency (Agenzia delle Entrate) which determines it. 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.

Then there’s 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 capital gains tax of 26% on the difference between the purchase and sale prices. However, if you’ve owned the property for over five years, there’s no Italian capital gain tax to pay. It’s essential to check the taxation rules in the State of residence and the convention against double taxation between Italy and the foreign State of residence.

Suppose you decide to rent out your property in Italy. In that case, you’ll have to pay annual direct taxes (IRPEF) in Italy and submit your tax return; you also have the option of choosing the 21% or 10% fixed direct taxation (cedolare secca) if certain conditions are met. If you decide not to rent the property out, you’ll only need to pay the IMU (L’imposta municipale unica) about 1% of the tax value of the house. The second annual tax is the Tari (Tassa sui Rifiuti), or the yearly waste tax payable to the municipality.

Important to know is that, as a non-resident, you’re entitled to all the tax concessions provided for building renovations available to resident individuals.

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