Buying property in a foreign country is an exciting endeavor, and a rewarding experience because it allows one to get to know the hidden, and often most charming and colorful, aspects and features of that nation’s character.
But a discerning investor knows that the first and paramount aspect to be aware of, so as not to run into undesired surprises, is what one’s expenses are going to be after the actual purchase is settled.
Property tax in Italy for a foreigner
There’s no doubt about it, a foreign buyer really needs to have comprehensive knowledge about local ruling as concerns taxation on property and be able to estimate the amounts that will be due well before actually going ahead with the deal. Also, those planning to rent the premises they purchase will want to have full understanding of how Italian income taxation works for property owners.
First and foremost, non-Italian nationals should be informed that charges levied on real estate ownership in Italy are municipal, not state, taxes.
Specifically, there are two types of taxes proprietors are accountable for. These are:
- the Tax on Waste called TARI, acronym of the Italian Tassa sui Rifiuti
All those who own a real estate unit, of any kind, in Italy are required to comply with this tax. The amount to be settled is set by each municipality and determined by the location (region, area, city or countryside etc.) and, mainly, the size and characterizing features of the property itself. As per payment exaction, it is handled by the municipality in charge by means of a letter posted to the owner at the address of the property in question. Although the total TARI tax is calculated, and due, once yearly, most Italian municipalities allow payment by two or three installments.
- the Sole Municipal Tax called IMU, i.e. Imposta Municipale Unica
The IMU is an actual tax on real estate ownership, requested of all those proprietors who own a property but do not choose to designate it as their principal dwelling. The underlying rule is that when you buy a house in Italy you have an 18-month period at disposal to decide, and formally declare via the required paperwork, whether it will be your main residence or not. If you do not appoint it as your primary home, i.e. if you state it is a “second” abode, seconda casa in Italian, you will be charged for IMU taxes. The same will also be demanded of owners whose properties are classified as “luxury properties” and/or of those who choose to rent the unit they possess.
The amount to be settled is defined by a complex computation that involves several different factors. Intricate, and somewhat abstruse, the calculation of IMU tax is a difficult and puzzling anagram-like exercise that even the most attentive and willing Italian proprietors have a hard time solving.
How much is property tax in Italy
Wondering how it works? Here we go with a basic explanation.
First of all, a foreigner will need to know that in Italy all real estate units are recorded within the local Land Registry Office’s database, and that the Italian term for the Land Registry Office is Catasto. Properties are cataloged according to their cadastral value, that is to say the property’s taxable value as set by the Catasto office based on surface, overall size, year of building, location and type.
The first element the IMU calculation takes into consideration is the property’s the cadastral value. This figure is multiplied, revalued by 5%, by a specific coefficient assigned according to the building’s cadastral category.
The different coefficients applied are:
- 60, applied to units comprised in cadastral group A, but not including those classified A / 10, plus those comprised in categories C / 2, C / 6 and C / 7
- 140 for those classified as cadastral group B, and categories C / 3, C / 4 and C / 5
- 80 for buildings comprised in A/10 and D/5 categories
- 60 for buildings included in cadastral group D, but not including D / 5. Note: pursuant regulations as updated 1 January 2013, the multiplier for these has been raised to 65
- 55 for buildings comprised in category C1
Clearly, calculating one’s own IMU is not exactly easy, and everyone is sure to realize that guesswork is not an option for tax appraisal. The same is certainly true for those who wish to invest in Italian real estate to rent it out. In Italy, as elsewhere, rental income must be declared and is subject to taxation. Tax returns on rentals must be filled out and submitted to the local Agenzia delle Entrate, i.e. the Revenue Agency in charge for the area the property is located in. Taxes due will be calculated based on the statement presented, and charged to the proprietor.
Again, conjectures and “hunches” are no good, especially for foreign prospective buyers wishing to invest. Before putting one’s money into a real estate venture one will want to have a close idea of what expenses it will imply in the future as per ownership tax, and a prospective landlord will need to have an accurate estimate of the income tax that will be due.
What a non-Italian future proprietor needs is competent advice and reliable straight-to-the-point insight on future levy duties.
Our services to help you deal with real estate taxes in Italy
Our team of fiscal advisors and lawyers specialized in property law and real estate management is at your service, ready to assist and provide the essential information and dexterous assistance you need to make a profitable, well-pondered, real estate investment in Italy.
Providing far-reaching expertise in all fiscal and legal aspects involved in property purchase and rental, our team offers discerning foreign investors expert local knowledge and comprehensive tax and business-related services in perfectly spoken and written English.
Specialized in fiscal consultancies, we calculate your prospective property’s IMU and TARI duties, ensuring you gain a clear vision of future expenditures, and where and when applicable, we appraise rental income tax, and leave no stone unturned to verify whether double taxation relief can be applied. Finally, our crew of highly skilled accountants provides comprehensive advice and all-round bookkeeping services, including drafting and submission of tax returns, easing foreign proprietors from the hassles of Italian bureaucracy.
Get in touch for more info about our real estate services in Italy