Also known as government purchase tax, the amount depends on whether you are buying urban or rural property and how you intend to use the property. If the urban property you purchase is to be your main place of residence (i.e., you will live in your property for more than six months and one day per year), government purchase tax (imposta) is 3% plus IVA (sales tax) if buying from a private individual, and 4% plus IVA if buying from a company/agency. If you purchase the property as a second or vacation home, purchase tax is 10% plus IVA. This figure is based on the “declared price” of the property. To qualify for reduced registration tax, you should become a resident before purchasing a home in Italy. If the agricultural property will be your permanent place of residence and your principle activity is agricultural, then purchase tax is levied at 11%. If the property will become your second home, the tax is 18%.
If it is not already included in the purchase price, VAT may be payable on new properties—9% for “non-luxury property” and 19% for “luxury property.”
Italy developed a unique variant of inheritance tax. Not content with taxing the estate of the deceased ( imposta sul morto or “dead man’s tax”), it also taxed each individual beneficiary on the legacy received ( imposta individuale or “beneficiary’s tax”). Until Oct. 25, 2001, that is. The new law has abolished the inheritance and gift tax ( imposta sulle donazioni e successioni). As a consequence, no inheritance or gift tax is payable on legacies or gifts paid to spouses, children, or other relatives up to the fourth degree. Furthermore, it is not payable on any legacy or gift of up to $168,000, paid to any unrelated person or body. Legacies or gifts above $168,000, paid to unrelated persons or bodies, attract other taxes. In the case of real estate assets, this is the property registration tax ( imposta di registro).
Income earned from renting a property is taxed as ordinary personal income (IRPEF). After allowances have been taken into account, rates are on a sliding scale: 18.5% for amounts up to approximately $11,000; 25.5% for the next band up to $15,500; 33.5% for amounts between $15,500 and $31,000; 39.5% for amounts between $31,000 and $70,000; and 45.5% for amounts over $70,000.
Unoccupied real estate is taxed based on an imputed income. Cadastral tax ( rendita catastrale) is a small tax, equivalent to the imputed income a property owner could receive from his property. Regardless of whether an Italian property owner receives rental income, cadastral tax of 0.4% to 0.7% of imputed income is still payable. However, if the property is of very low value, is not rented out, and is kept for the exclusive use of a foreign owner, the tax does not apply—as long as the owner does not earn any of his income in Italy.
The main property tax in Italy is ICI, which is calculated on a property’s declared value. Set by local municipalities, the rate varies from 0.4% to 0.7%. In Milan, for example, it is 0.5%. ICI is payable in two installments, due in June and December.
The seller must pay INVIM, a capital gains tax, which fluctuates in accordance with the length of time the property is held. The amount varies from 5% to 30%. There is a reduction for first-time buyers. Since Jan. 1, 1993, this tax has been replaced with an annual tax on property, called ICI ( imposta comunale sugli immobili), but must still be paid for property held up to that date. ICI amounts to between 0.4% and 0.6% on the cadastral value, and varies from town to town.