Tax Implications for Non-Resident Property Owners in Italy

1. Property Taxes in Italy: What You Need to Know

When you buy a property in Italy, you’ll need to consider a few key taxes:

a) Purchase Taxes

The taxes you pay when buying a property depend on whether you purchase from a private seller or a developer:

• Buying from a private seller: You pay a registration tax (imposta di registro) of 9% (or 2% if it's your primary residence but this applies only to residents), plus fixed cadastral and mortgage taxes of €50 each.
• Buying from a developer: You pay VAT (IVA) at 10% (or 22% for luxury properties) instead of registration tax, plus €200 each for cadastral and mortgage taxes.

b) Annual Property Taxes

Once you own a property, you’ll be responsible for annual property taxes, including:

• IMU (Imposta Municipale Unica): This is a municipal tax applied to second homes and non-resident property owners. The rate varies between 0.4% and 1.06% of the property’s cadastral value, depending on the municipality.
• TARI (Waste Collection Tax): This is charged by local authorities based on the size of the property and the number of occupants.
• TASI (Tribute for Indivisible Services): This tax has largely been abolished, but some municipalities may still apply it.

2. Income Tax for Non-Residents Renting Out Property

If you rent out your Italian property, you’ll need to pay tax on rental income. The key points are:

• Flat Tax Option (Cedolare Secca): Non-resident landlords can opt for a 21% flat tax on rental income (or 10% in some cases for long-term rentals).
• Standard Income Tax (IRPEF): If you choose to declare rental income as part of your overall income, progressive tax rates apply (from 23% to 43%). However, some expenses can be deducted.
• Withholding Tax for Short-Term Rentals: Platforms like Airbnb apply a 21% withholding tax on short-term rental income.

3. Capital Gains Tax When Selling a Property

If you sell your property within five years of purchasing it, any capital gains are taxed at 26%. However, if you sell after five years, no capital gains tax applies. This is a great incentive for long-term investments!

4. Inheritance & Gift Tax

Italy has inheritance and gift tax, but it's quite favorable compared to other countries. For close relatives (children, spouses), the tax is 4% on assets over €1 million. For distant relatives or non-relatives, higher tax rates (6%-8%) apply with lower exemptions.

5. Double Taxation Agreements

Italy has double taxation agreements (DTAs) with many countries, meaning you won’t have to pay taxes twice on the same income. If you’re paying tax in your home country, check if your country has a treaty with Italy to avoid double taxation.

6. How to Stay Compliant & Optimize Your Taxes

To ensure you stay compliant and avoid unnecessary taxes, consider:

• Consulting a tax advisor specializing in Italian property taxes.
• Registering rental income properly to benefit from lower tax rates.
• Keeping up with local tax laws as they may change over time.

Final Thoughts: Is Buying Property in Italy Worth It?

Absolutely! Owning a home in Italy is a dream for many, and while there are taxes involved, they can be managed with proper planning. If you’re looking for mortgage advice or help navigating the Italian real estate market, feel free to reach out – we’d be happy to guide you through the process!

Thinking about buying a property in Italy? Get in touch with us for expert guidance!

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