Capital gain from the sale of a property in Italy by a non resident

The Italian Revenue Agency has clarified that the capital gain obtained from the sale of a property in Italy by a resident of Spain may be subject to taxation in Spain. The case addressed in an interpellation (110/23) concerned a Spanish resident who had sold a property in Italy purchased in 2006 and wanted to know if the capital gain generated from the sale would be taxed in Italy or Spain, based on the double taxation convention signed by the two countries.
The Agency confirmed that, as provided by Italian law, the capital gain is not considered taxable in Italy if the property was sold after five years from the purchase, but based on the double taxation convention, Spain has the right to tax the capital gain under its own tax system. This is possible because, in double taxation treaties, taxation can be carried out by both countries if the word “only” is not used to indicate that the income is taxable in only one country.

Answer No. 110/2023

SUBJECT: Tax treatment of income from the disposal of real estate located in Italy by a non-resident.

With the interpellation request specified in the subject

the following question was raised:

The declarant states that she moved to Spain in XXXX where she is currently a resident.
The declarant points out that he sold a property in Italy on XX/YY/2021, which had been purchased in 2006. In this regard, the declarant asks the undersigned which state, between the state of residence and the state where the property was located, has taxing power over the income in question in light of the provisions contained in the Convention between Italy and Spain to avoid double taxation, signed in Rome on September 8, 1977 and ratified by law 29 September 1980, no. 663 (hereinafter the Convention or the international treaty).


The declarant believes that the capital gain arising from the sale of the real property on a taxable basis is subject to the provisions of Article 6 (real estate income), paragraphs 1 and 3, of the aforementioned Convention.
Therefore, the income in question is subject to the legislation of the contracting state in which such property is located, i.e. the legislation of our country. In the taxpayer’s opinion, the fact that – in accordance with Italian law – no taxable capital gain has been generated (given the five-year period between the purchase and sale of the property), cannot result in the subjection of the same sale to taxation by the Spanish tax administration.


Initially, it should be noted that this opinion is provided on the assumption (assumed without criticism here) of the taxpayer’s tax residency in Spain, since this is the situation represented in the application. In terms of the treaty legislation, the capital gain resulting from the sale of a property falls within the scope of Article 13 (capital gains) of the aforementioned Treaty. In particular, paragraph 1 establishes that “profits from the sale of real property (…) are taxable in the Contracting State where such property is located”. It should be noted that the aforementioned treaty provision does not imply, however, the attribution of exclusive taxing power on the income in question to Italy, as the source state. In the context of the Double Taxation Conventions, in fact, the taxing power is considered exclusive, that is, it belongs solely to the country of the income source or to the country of residence of the taxpayer, when the phrase “are taxable only” is used in relation to the considered income in a particular country. Conversely, if the expression “are taxable” – and therefore the word “only” is omitted – such incomes are subject to taxation in both Contracting States of the international Treaty. For mere completeness, it should be noted that the same interpretation would also apply in cases of application of Article 6, paragraph 1, of the Treaty, mistakenly referred to by the Applicant. Consequently, under the aforementioned Article 13, paragraph 1, of the Treaty, the capital gain in question falls under the concurrent taxing power of Italy and Spain, which can exercise it according to the respective internal regulations of the two countries. With regard to Italy, it should be remembered that Article 67, paragraph 1, letter b), of the TUIR limits the tax relevance to capital gains only if they are realized through the sale of real property and if such property has been acquired or built less than five years ago. It is confirmed, therefore, that the capital gain realized by the taxpayer, as a result of the sale of the property owned on a taxable basis more than five years after the purchase, does not constitute taxable income in our country. In conclusion, for the reasons outlined above and on the assumption of the veracity and completeness of the elements described by the Applicant, the undersigned considers that, based on the current Treaty with Italy, Spain has taxing power over the capital gain in question, to be exercised as provided for by the internal legislation of that state.