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Italian Luxury Property: a Legal and Fiscal Definition

If you have been looking at castles for sale in Italy with a view to purchasing, you should consider that Italian castles, and other types of property such as historic villas, mansions and palaces are defined as luxury property from legal and fiscal points of view.

Exclusive real estate properties, such as palaces and villas, are a particular category of dwelling; they are classed as luxury goods. Before you sign any paperwork, as part of your property purchase due diligence, it is crucial to check which property band your Italian real estate property falls in to. If you need advice with any aspect of due diligence, we can help.

Current Italian legislation details what specifications a property must have to be classed as luxury real estate. The law also stipulates corresponding purchase duties and annual municipal tax rates on these properties. Contrary to what many think, luxury homes are not exclusively defined as large properties in terms of square meterage. Their location and the quality of finishes also determine the classification of the property.

Being classed as a luxury property means that as a purchaser, you are excluded from certain benefits related to registration tax, and once you own the property, you will not qualify for municipal tax deductions and exemptions.

Italian law uses two sets of guidelines to determine if real estate is luxury property: cadastral criteria and Ministerial Decree 2/8/69.

Luxury properties: Ministerial Decree 1969

According to the law, in order to be defined as luxury real estate, and thereby determine whether tax benefits are applicable, a property must meet precise criteria. To be considered luxury, a property must have at least one of the characteristics set out in the Ministerial Decree 2/8/69. These include:

  1. properties built in areas which, according to town planning laws, are designated for villas or private parks;
  2. Single-family homes, in locally designated areas, on building plots of not less than 3,000 square meters. Agricultural areas are excluded from this category, even if planning has provided for the possibility of building residential properties;
  3. these are single-family homes including some kind of sports facilities, in particular, the law refers to a swimming pool with a minimum area of 80 square meters and to tennis courts on drained ground, which extends to at least 650 square meters;
  4. Single dwellings with a surface area of more than 200 square meters, excluding balconies, terraces, cellars, attics, stairs and parking spaces, and that have an open area of land more than six times the covered area.;
  5. individual real estate units with a surface area of more than 240 square meters excluding balconies, terraces, cellars, attics, stairs and parking spaces;
  6. properties on land where land value exceeds at least one and a half times that of the property alone, are classed as luxury properties;
  7. Even if the asset does not have any of the above characteristics, it is considered a luxury property if it has at least four characteristics among those included in a table attached to Ministerial Decree 2/8/69, which mainly refers to the luxury finishes of homes. Specifications are complex and we would advise that you seek independent legal advice for the avoidance of doubt.

The Ministerial Decree of 1969 is quite exhaustive in defining the characteristics of luxury homes, but important indications can also be found in cadastral classifications.

Luxury properties: cadastral criteria

As a result of art. 33 of Legislative Decree 175/2014, the cadastral classification is used almost exclusively to assess property tax regimes, especially for principal residences (prima casa). For cadastral purposes, luxury properties are those belonging to the following categories:

  • A/1: stately homes – classical buildings with above average finishes in areas considered to be of value due to the presence of parks and/or gardens;
  • A/8: dwellings in villas, that is residential properties with fine finishes set in a park or a garden;
  • A/9: castles, palaces and mansions of outstanding cultural and historical and value, mainly consisting of a single real estate unit.

All dwellings that, according to the cadastre, belong to one of these cadastral categories are to be considered as valuable properties and, therefore, cannot benefit from tax privileges and/or tax exemptions.

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