Laws, taxes, residency rules, regulations. How does it work ?
The government in the buying process.
The government is represented in every purchase and sale transaction by the Notaio, or Notary.
The Notary’s job is to ensure all of Italy’s property transfer regulations are adhered to through the sale process, and the law requires that a notary takes part in every property title transfer to ensure this is the case, and to finalise each transaction.
The notarial deed (Atto Notarile) prepared by the Notary before the close or settlement, is designed to evidence the fact that the buyer and seller actually appeared before the notary to finalise the sale, and have entered into a binding contract, and have actually made the declarations indicated in the deed and have finally signed the contract of sale.
Purchase Taxes
When you buy property in Italy there is a purchase tax or Land Registry Fee (Imposta di Registro) payable. The amount depends on whether the seller is private of a company. If there is an individual or family selling, and the purchase is a first home for the buyer in Italy, where the buyer intends to live, the rate of the tax is 2% of the council or cadastral value.
Where the property is for investment purposes, or is a second home in Italy, the tax rate is 9% of the cadastral (or comune) value. This value is not equal to the market value but much lower. You will understand the cadastral value when the property is purchased.
Impact of residency on purchase tax and future income taxes
It’s important to note that :
(1) If you are buying a property as a holiday home for temporary stays in Italy, or for investment, you will pay the Imposto di registro tax at the rate of 9%
(2) If you declare the property as your home, where you intend to live, the Imposta di Registro tax is 2%. In this case you will need to move into the property within 18 months of purchase.
And when you move in, as an Italian permanent resident, you will become taxable in Italy on all your worldwide income (unless you qualify for a special tax regime, like the New tax resident scheme for high income earners, created recently in Italy).
Taxes on rental income
Regardless of tax residency in Italy, owners of property need to pay taxes in Italy on rental income.
The tax rate is dependent upon the owner’s total taxable income in Italy as the progressive tax rate scale will apply (higher rate for higher total incomes). The lowest rate of tax is 23%.
For short-term rental income (less than 30 days), the owner has the option to pay a 21% flat tax rate on gross rental income. This tax on short-term rental needs to be deducted directly from received rent by any letting agency or intermediary that collects rent on behalf of the owner. It’s not required to be deducted immediately if the tenant pays the owner directly.
Annual local tax on property
The IMU and TASI taxes are Italian local or Municipal Property Taxes to pay for local Comune services – but they are not payable if you live in the home as a primary residence (note there are exceptions where your property is classified as luxury property).
The IMU basic rate is 0.76% of the cadastral value (or council value, if you like).
The Tasi or tari taxes for local services like rubbish collection, on average cost around €40 per property.
Note that the local region can increase or decrease these taxes, so they do vary from region to region.
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