Budget Law 2020 – New IMU

Budget Law 2020 – New IMUBudget Law 2020 – New IMU

Italy’s 2020 Budget Law (art. 95) has seen the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

However, tax payments for garbage collection and disposal, known as TARI (Tassa Rifiuti), remain separate.

By switching to a new version of IMU, the Italian government aims to afford more autonomy to local municipalities (comune) in setting their IMU rates.

In addition, the government is looking to shore up tax evasion. Annual differences between expected property tax revenue and what actually lands in the state coffers runs at about EUR 5 billion.

The 2020 Budget Law also allows for reduced penalties if property owners the opportunity to make voluntary corrections to remedy delays or omissions for past IMU.  This opportunity also extends to non-Italian nationals, who may not be aware that they have Italian tax liabilities and payment deadlines.

Overall, the new version of IMU facilitates the application of what was previously a cumbersome system. Moreover, from 2021, the government has started making pre-filled tax return forms available to taxpayers.

Who pays the new IMU?

Because IMU is a tax on second homes, principal residences are exempt – unless they are luxury properties categorised as A1, A8 or A9 in the land registry.

For legal purposes a principal residence is the property in which the owner and/or members of the family habitually live and have their registered residence. If however, members of the same family have their habitual residence and registered residence in more than one property located in the same municipality, the new IMU payment exemption will only apply to one of those properties.

Property owners, or those with rights to use the property pay IMU. There are some exceptions to this and if you need any advice or guidance related to the new IMU, we are here to help.

How is the new IMU calculated?

IMU is a municipal tax. Although rates are capped, each local municipality sets its own rates on an annual basis.

In order to calculate your IMU payments, you need to consult property records to ascertain its tax value category. Additionally, you will also need to know the tax value of any outbuildings on your property. Check the property records at your municipal land registry or, in some municipalities, you can retrieve property information online.

Depending on the land registry category, the following coefficient multipliers apply to a revalued taxable annuity of 5%:

Land Registry Category Coefficient
Group A (excluding A/10) and cadastral categories C/2, C/6 and C/7 160
Group E and cadastral categories C/3, C/4 and C/5 140
Group D5 80
Group A/10 80
Group D, except buildings in cadastral category D/5 65
Group C/1 55

To demonstrate how to calculate the new IMU, let’s take a practical example:

a second home in category A/3 with a property tax value of €600:

Property tax value €600 + 5% revalued annuity = €630

€630 x 160 (coefficient for category A/3) = €100,800

€100,800 divided by 1000 by 10.6 = €1068.48 (we applied an IMU rate of 10.6 set by the municipality)

€1068.48 is thus the new IMU amount payable in two equal instalments.

You may be able to benefit from a 50% IMU reduction for buildings of historic or cultural interest, buildings registered as uninhabitable and/or uninhabitable and unused. Likewise a reduction is available for properties on loan between parents and children, so long as they are used as a principal residence.

When do you pay the new IMU?

In the same way as the old system, the new IMU tax is payable in two instalments. Payment deadlines are mid June and mid December every year. In other words, each June, taxpayers must pay half of the annual total of IMU due, applying the rate and making any applicable deductions from the previous year.

The balance of the new IMU tax is due each December, calculated on the rates approved by local municipalities, which issue their local rates by the end of October each year.

How do you pay the new IMU?

There are several options for payments of the new IMU tax. Either you can fill in an F24 form online at your Italian bank’s website or you can print off a filled-in F24 form and pay at a post office or bank counter. On the other hand, you can use a payment slip at the counter of an Italian post office or use the Italian post office website.

Although they are not yet widespread,  local municipalities have started introducing their own public administration digital payment platforms.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 


You may also like to read about tax measures in the 2020 Italian Budget Law.

Budget Law 2020 – Tax Measures

Income Tax ReliefBudget Law 2020 – Tax Measures

In order to foster economic growth, art. 5 of, “Decreto Crescita” came into effect in December 2019.

Legislation provides for significant changes to the income tax system for anyone who transfers their tax residence to Italy from 2020.

The law is retrospectively applicable to anyone who transferred their tax residence to Italy from 30th April 2019.

Who can benefit from tax measures in the Italian budget law?

Legislation on income tax now extends to foreign football players and other professional sportsmen and women. The law establishes a 50% reduction on income tax. It applies for 5 years provided the sports professional maintains their tax residence in Italy for at least two years. For those not from the sports arena, tax relief of 70% is also available. If for example you generate an income in Italy through employment, self-employment or from business start-up activities.

Income tax relief of up to 90% is available for those who transfer their residence to one of the following regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily.

In order to take advantage of tax benefits, certain conditions apply. You can transfer your tax residence so long as you were not resident in Italy for the previous 2 tax years. You must undertake to reside in Italy for at least 2 years and, your work-related activity should mainly be in Italy.

There is no requirement for Italian citizens returning to Italy as tax residents from 1st January 2020 to have previously been registered with AIRE (the Registry Office for Italian Citizens Residing Abroad).

Tax relief is applicable for 5 tax years. However, a 50% income tax reduction is available on income you generate in Italy for a further five tax years if you have at least one minor or dependent child. This also applies if the child is in pre-adoptive foster care.

In addition, you must become the owner of at least one residential property in Italy. Your property purchase can take place either following your transfer to Italy or in the twelve months preceding your transfer. You can purchase property in your name, a spouse or partner’s name, in your children’s name or in co-ownership.

High net worth individual tax system

The 2017 Stability Law remains in force regarding foreign income from real estate investments, dividends, capital gains and other income.

This high net worth individual tax regime  is available if you have not been a tax resident in Italy for the nine (out of ten) years prior to transferring to Italy. The advantage consists in paying a substitute tax of € 100,000 on all income derived from abroad. Sports professionals (football players, basketball players, etc.) can benefit from this tax system.

Flat Tax

The Stability Law of 2019 includes a flat tax regime. This regime is aimed at individuals with a pension or another source of income from outside Italy. You can transfer residence to certain municipalities in the south of Italy and, provided you were not resident in Italy in the five previous tax years, you can opt to pay a flat-rate tax of 7% on your income from abroad.

Building-related taxes

Deductions for energy re-qualification (65%), building renovation (50%) and furniture and household appliance bonuses (50%) concerning the purchase of new furniture for renovated buildings are available.

A new “Facade Bonus” allows for 90% deductions on documented expenses relating to refurbishing or restoring external facades of buildings. As any work to facades must comply with technical regulations, work needs prior assessment and permission.

Capital Gains

The budget law also introduces changes to real estate capital gains. A substitute tax is available if a principal residence or a second home sale meets certain conditions. The substitute tax starts at a rate of 20% on sales of properties that took place until 31 December 2019. It rises to 26% for property sales from 1 January 2020. The application of this regime is optional and should be requested by the notary on the date set for the completion of the sale.

Company shares

The budget law offers terms for recalculating the value of investments in unlisted companies up to January 1, 2020. The drafting and certification of the appraisal, as well as the payment of the substitute tax is due by 30 June 2020.

These terms only apply to private individuals with equity investments unrelated to business operations. In particular, the aforementioned legislation allows the revaluation of equity investments held in companies not listed on regulated markets. Individuals must hold investments at 1 January 2020 and require a sworn appraisal report by 30 June 2020 when the substitute tax of 11% is payable.

Company assets

The budget law allows the revaluation of company-owned assets. Based on 2019 financial statements, the law introduces reduced substitute tax rates:

– from 16 to 12 per cent for depreciable assets;

– from 12 to 10 percent for non-depreciable assets.

In addition, a new provision allows companies to release credit balances recorded in their accounts against the recognition of higher values ​​at a rate equal to 10%.

This option does not concern IRPEF entities with simplified accounts.

New IMU

The budget law introduces a new version of IMU. It sees the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 

 

You may also be interested in Do beneficiaries have to pay taxes on inheritance?