The laws on the taxes you will have to pay if you buy and own a property in Italy have changed greatly in the past few years.
In the good old tax-evading days, buyers and sellers routinely declared a lower sales price on the rogito or sales deed, which is sworn before a notary, so that they could pay less tax. This is much less likely to happen nowadays, when people often need to take out mortgages and the full amount must be declared.
As an Italian homeowner, you will be subject to two types of taxes:
- One-off taxes associated with property purchase
You will need to pay registration, mortgage, cadastral and VAT taxes. The first three taxes are applied on the valore catastale (cadastral value) of the property declared on the deed of sale. VAT, on the other hand, is applied to the purchase price, but not payable unless you buy your home from a developer of property renovation company within four years of completion of the work. The cadastral value of a property is generally much lower than the market price, as the most recent valuations are usually greatly out of date.
The house you buy will be your main residence (prima casa) in Italy if you take out residenza at the property within 18 months of signing the deed of sale and spend more than six months a year at the address (unless it is a luxury property). If you buy it from a private seller or a company that is not VAT registered, the registration tax (imposta di registro) will drop from 3% to 2% (with € 1,000 as the minimum payment due) of the declared value of the property while the imposta ipotecaria and imposta catastale) ( mortgage and cadastral taxes) will decrease from € 168 to € 50 each.
If you buy your house from a VAT-registered construction company, the declared property price will be subject to 4% VAT (at the time of writing, i.e. August 2015), and the above three taxes will increase from € 168 to € 200 each.
If the house you are buying in Italy will be your second home, you currently have to pay a registration tax of 9%, a mortgage tax of €50 and a cadastral tax of €50. If you buy from a developer, the VAT increases to 10% on the purchase price and the three taxes mentioned above rise to €200 each.
- Local taxes payable annually once you have bought your property
Once you are the proud owner of your new home, whether or not you have residenza in Italy, you will have to pay taxes on the property. As of 2014, these come under a new umbrella known as the IUC (imposta comunale unica). This includes a former tax known as IMU (equivalents to UK Council Tax), taxes on waste collection (TARI) and local service taxes (TASI).
The IUC is divided into three instalments, payable in April, August and December.
Prima casa owners do not have to pay IMU if their houses are not luxury homes, but they will pay TARI based on property area in square metres, and TASI with 1/1000 of the cadastral value as the minimum rate up to a maximum of 2.5/1000 of the cadastral value, unless the property is located in a municipality that is eligible for government subsidies.
The tax burden of living in Italy is therefore much lower if you take out residenza and try to spend around half the year in your Italian home.