Italian Budget Law 2023. Property-Related Measures.

Italian Budget Law 2023

The Italian Senate approved Italian Budget Law 2023 on 29th December, 2022. The Budget Law came into effect on 1st January, 2023.

In this article, we outline the main budget and bonus measures pertaining to Italian property.

Superbonus: anti-seismic renovations and energy efficiency improvements

During the COVID pandemic in 2020, the Italian government launched its Decreto Rilancio. This decree introduced the Superbonus 110%. It aimed to kick-start the Italian economy by incentivising property owners, tenants, those with usufruct or comodato d’uso to carry out anti-seismic renovations and energy efficiency improvements on Italian properties. Examples of work that qualify for the Superbonus include installation of photovoltaic systems and electric vehicle charging stations inside a property.

Qualifying renovation work attracts a tax credit of up to 110% of installation expenses. You can offset this tax credit against your tax liability in 5 equal instalments, or pass on the costs to the contractor or, alternatively, you can sell the costs to a financial institution.

Legislative Decree Aiuti quater, which will soon become law, reduces the Superbonus for 2023 from 110% to 90% and extends the possibility of applying the discount to invoices or assigning the tax credit – in 10 instalments instead of 5.

In addition, the Legislative Decree Aiuti quater also sees the Superbonus continuing into 2024 and 2025. However, tax credits will decrease from 90% to 75% for 2024 and then to 65% in 2025.

That said, Italian Budget Law 2023 grants the possibility to remain at the full 110% version of the Superbonus for condominiums which submitted a CILA (Comunicazione di Inizio Asseverata) before 31st December 2022. The full 110% Superbonus also remains available for single-family properties provided at least 30% of renovation work was completed by 30th September, 2022 and that all work is finished by 31st March 2023.

Green Home Bonus for New Property Purchases from Builders

Italian Budget Law 2023 provides for a deduction of 50% on VAT for purchases of energy-efficient homes (Class A and B).

Purchases must be made by Dec. 31, 2023 – directly from the builder.

Italian Budget Law 2023. First Time Buyer Bonus

 All deeds of sale signed in 2023 for first homes purchased by those aged under 36 can benefit from tax relief.

– Those property purchases not subject to VAT, are exempt from registration, mortgage and land registry taxes.

– For property purchases subject to VAT, in addition to exemptions from registration, mortgage and land registry taxes, a tax credit of the amount equal to VAT paid to the vendor is also available. 

Mortgage Rate Switches

Italian Budget Law 2023 reintroduces a measure relating to mortgages. This allows people to switch from a variable to fixed rate mortgage. This is particularly relevant given current increases in interest rates.

Borrowers who have a variable rate mortgage of less than €200.000 (threshold amount) and a current ISEE[1] not exceeding €35.000 can renegotiate their mortgage terms from variable to fixed.

This facility also extends to the previously mentioned first time buyers under the age of 36.

Furniture Bonus for Property Renovations

Italian Budget Law 2023 sees an extension to the furniture bonus. This provides a 50% deduction on purchases of furniture and household appliances, provided purchases are in the context of a general renovation of a property.

The minimum expenditure for furniture and appliances in order to claim the bonus is €8,000. To qualify, the furniture must be new, not second hand. Furniture that qualifies for relief includes cabinets, chests of drawers, desks, bookcases, chairs, sofas, armchairs. However, curtains, doors and any flooring work are excluded.

The bonus is also available for the purchase of appliances such as refrigerators, freezers, washing machines, electric heating appliances, etc., provided the appliances meet basic energy-saving requirements. Class A for ovens, Class E for washing machines, dryers and dishwashers, Class F for refrigerators and freezers.

Architectural Barriers – Accessibility And Mobility Bonus

Italian Budget Law 2023 also confirms the extension of the accessibility bonus until 2025. This measure consists of a 75% tax deduction for work to remove obstacles to mobility. The bonus is applicable for any work that makes a property accessible and usable to people with disabilities or reduced mobility. All eligible work must be documented. You can choose to offset this tax credit against your tax liability in 5 equal instalments, or, alternatively, you can sell the costs to a financial institution.

Italian Budget Law 2023. IMU Exemptions 2023

The Single Municipal Tax (IMU – Imposta Municipale Unica) is a compulsory tax on Italian property. The 2023 Budget Law continues to exempt properties used as primary residences from IMU, provided they are classed as NON-luxury in the land registry category. That is, properties other than those in categories A/1, A/8 and A/9. Also exempted are their outbuildings, up to a maximum of three, each belonging to cadastral category C/2, C/6 and C/7.

As of January 1st 2023, properties that are squatted are exempt from paying IMU. This exemption is only valid for the months of the year in which the building is squatted, and the exemption is not automatic. You must first make a report to the competent judicial authority, following which, you can make an application for exemption to the municipality in which the squatted property is located.

Simplified tax liabilty settlements and waivers

The Italian Budget Law 2023 introduces a simplified settlement on tax demands, assessment notices and pending tax disputes. It also provides for a so-called ‘special’ regularisation for formal breaches and other irregularities concerning certain tax periods.

In addition, Italian Budget Law 2023 makes provision for tax liability waivers. These write-offs are valid on amounts of up to €1,000, subject to specific conditions. Under other circumstances, there is provision for facilitated settlement of tax liabilities for certain tax periods. This aims to reduce penalty and interest payments as well as provide the taxpayer with the option to pay tax liabilities in instalments.

Finally …

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice throughout Italy. We are specialists in cross border property, inheritance and family law.

If you would like further information about Italian property and tax matters, we are here to help. For more in-depth information about anything mentioned in this article, please get in touch with us.

You may also be interested in Buying property in Italy. You may also like to watch some of our info videos on Italian property, succession and family law.

[1] The ISEE, or Indicator of Equivalent Economic Situation, is the main tool for accessing certain bonuses or subsidised social benefits. It is basically the economic “identity card” of the household, i.e., of all the people reported on the so-called “family status” who are found to be cohabiting at a given dwelling.

 

Resident in Italy for tax purposes?

One or more of the following conditions makes you resident in Italy for tax purposes

According to the provisions of Article 2 (2) of the Italian tax code, Testo Unico delle Imposte sui Redditi (TUIR), if you spend more than 183 days per fiscal year in Italy, the Italian tax authorities will consider you resident in Italy for tax purposes.

If you meet one of the following conditions, you qualify as a resident for Italian tax purposes:

– you have registered at your local town hall’s (comune) registry office;

– you have your domicile in Italy, i.e. your principal centre of business, economic and social interests, e.g. your family, as defined by paragraph 1 of Art. 43 of the Civil Code;

– you have your residence in Italy, i.e. your habitual abode, as defined by the paragraph 2 of Art. 43 of the Civil Code.

The requirements indicated by TUIR are stand-alone: the occurrence of one of the above conditions is sufficient for the Italian tax authorities to consider you resident in Italy for tax purposes.

Registration at your local comune confirms your residence for tax purposes in Italy

If you spend more than 3 months in Italy you must register at your local comune.

Your registration with a comune presumes your residence in Italy for tax purposes.

At the end of your stay in Italy, you should de-register from your comune.

Double Taxation Agreements for residents of two countries

Double taxation agreements (DTA) protect a government’s rights to collect tax and protect against attempts to avoid or evade tax. DTA contain provisions for the exchange of information between national taxation authorities. There are more than 3,000 DTA world-wide.

If you can prove you are resident in two countries, you may have recourse to the application of Article 4 of the relevant DTA in order to resolve any conflict of dual residence for tax purposes. You can find more information about DTA here.

The onus is on the taxpayer to provide documented evidence of tax residence outside Italy

You will need to request a certificate of tax residence under the relevant DTA. It is also important to keep records such as travel documents and receipts. These help evidence how long you were physically present in Italy in any given fiscal year.

Finally …

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice. If you need support with your Italian and cross border tax matters, we are here to help.

You may also be interested in Elective residence Visa Italy: general information

Italian Inheritance Tax

Do beneficiaries need to pay tax on Italian inheritance?

This is a question we are often asked at De Tullio Law Firm. The answer is yes. Beneficiaries need to pay Italian inheritance tax.

Who calculates Italian inheritance tax?

When you become the beneficiary of an inheritance you may have to submit a statement of succession, “Dichiarazione di successione”  to the Italian tax authorities, “Agenzia delle Entrate”.

Firstly a succession procedure needs to be opened. Once this has happened, you can file the statement of succession. Although it is not always the case, the opening of a succession procedure usually coincides with a testator’s death. Your filing with the tax authorities should take place within 12 months of the succession procedure opening.

Once they receive the statement of succession, the tax authorities will calculate the amount of tax due on your inheritance.

It is worth noting however, that there is no obligation to file a statement of succession if the estate does not comprise any real estate. Likewise, if assets are valued at less than Euro 100,000 and the beneficiaries are a spouse, children and/or other direct heirs.

What is taxable?

In effect, Italian inheritance tax applies to the entire net value of the deceased’s estate. This therefore includes both movable and immovable assets.

Immovable assets include houses, shops, buildings, agricultural or building land.

Movable assets could for example include, boats, jewellery, works of art, bank and post office current accounts, money, investments such as shares, bonds, trust funds.

In addition, companies and shareholdings in companies are taxable. However, there are exceptions to this which would exempt heirs from inheritance tax.

How is Italian inheritance tax calculated?

Basic inheritance tax in Italy, “Imposta sulle Successioni” equates to 8% of the estate.

However, rates depend on the relationship of the beneficiary to the deceased.

The Italian inheritance tax rate drops to 6% between siblings, relatives up to the fourth degree cousins and relatives up to the third degree. This might for instance, be a spouse’s uncle. In the case of direct heirs such as the deceased’s children, spouse or registered partner, the applicable tax rate is 4%.

Summary of Italian inheritance tax rates

Heir Rate (Aliquota) Exemption up to
Spouse, relatives in the direct line of descent  (parents, grandparents, children, children’s children…) 4% 1.000.000 euro
Brothers and sisters 6% 100.000 euro
Other relatives up to grade 4, related in the direct line of descent, related in a collateral line up to grade 3 6% No exemption
Other subjects 8% No exemption

Finally …

Because Italian inheritance can be a complex matter and each case is different, we recommend that you seek expert support and advice.

If you wish to discuss your case with us or you are feeling unsure about anything related to Italian inheritance, do not hesitate to contact us for a free preliminary consultation.

You may also be interested In Planning for the future: your Italian holiday home.

You may also like to watch our info videos on the subject of Italian inheritance law.

Budget Law 2020 – Imposta Municipale Unica (IMU)

Budget Law 2020 merges former Italian property taxes to create a 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.

Budget Law 2020: 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.

Budget Law 2020: 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 is the new IMU payable?

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.

Italian Income Tax – New Measures from 2020

Italian Income Tax Relief

In order to foster economic growth, as part of the Italian budget law, art. 5 of, “Decreto Crescita” came into effect in December 2019. Legislation provides for significant changes to the Italian 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 Italian income tax measures introduced in the 2020 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 Italian income 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?

Flat Tax Scheme in Italy

The Italian Budget Law for 2019 introduced a flat tax regime

Set at 7%, the Italian flat tax scheme aims to attract foreign and Italian nationals living abroad.

Individuals with an income from a foreign pension, or other source from abroad, can benefit from the scheme. In order to take advantage of the flat tax rate, individuals must transfer their tax residence to certain  municipalities. The municipalities have fewer than 20, 000 inhabitants. They are located in the Italian regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily.

In addition, certain municipalities with fewer than 3,000 inhabitants are part of the scheme. These municipalities are in Italian regions impacted by the earthquakes in 2016.

Individuals who opt for the flat tax regime will be exempt from tax on the value of both financial assets (Imposta sul valore delle attività finanziarie detenute all’estero (Ivafe)) and real estate property (Imposta sul valore degli immobili situati all’estero (Ivie)) which they own abroad.

They will also be exempt from completing annual, “Quadro RW” filings. The Italian tax authority uses Quadro RW filings to monitor individuals resident in Italy with foreign investments and financial assets abroad.

Who can benefit from flat tax rate scheme?

Individuals from countries that have tax cooperation arrangements with Italy. Namely, Tax Information Exchange Agreements (TIES), Double Taxation Agreements (DTA) and Foreign Account Tax Compliance Agreements (FATCA).

Individuals who have not been an Italian tax resident for 5 years prior to the period for which their option is valid.

Do you have to apply to be part of the flat tax regime?

If you meet the criteria outlined above, you can adopt the new flat tax regime when you file your tax return related to the fiscal period in which you moved your tax residency to Italy.

You will need to indicate the jurisdiction/s in which you had your previous tax residence. The Italian tax authority will then forward this information, through the appropriate administrative cooperation instruments, to the tax authorities of the indicated jurisdiction/s.

It is possible to carve out income produced in one or more foreign countries or territories. You may, for example, decide that for income in a certain country or territory, the ordinary Italian tax rules should be applied. In principle, this allows you to benefit from foreign tax credits based on applicable tax treaty protections and relief on taxes you have paid abroad. You must specifically indicate this intention when you exercise your option to take up the flat tax regime.

How long is the option valid?

The flat tax regime is effective for nine years from exercising your option to adopt it. You may withdraw from the regime at any time. This will not prejudice the effect of previous fiscal years. However, withdrawal from the regime precludes you from exercising a new option to join the flat-rate tax regime.

The Italian tax authority may revoke your rights to the flat-rate regime by challenging your legal entitlement to it.

You must pay your 7% tax as a lump sum each year. The Italian tax authority sets the payment deadline for payments. Failure to pay in full ends your right to the flat tax regime.

Finally …

For more information, or to discuss what would best suit your personal situation, feel free to contact us.

Alternatively, seek advice from a qualified accountant registered with the ODCEC, the Italian professional accounting association of certified public accountants, auditors and advisors.

 

You may also be interested in The Principle of Tax Residence under Italian Law.

You may also like to watch our info videos.

Italian Estate Tax

Italian estate tax (imposta di successione)

Although the government abolished Italian estate tax in 2001, it subsequently reintroduced it in 2006.

Italian estate tax is therefore applicable to succession cases prior to October 25, 2001 and those from October 3, 2006 onwards.

In order to comply with the fiscal rules of inheritance law, heirs need, in the first instance, to file a statement of succession with the Italian tax authorities.

Who is liable for Italian estate tax?

If the deceased was resident in Italy at the time of death, Italian Inheritance Tax applies to the deceased’s worldwide assets. However, if the deceased lived outside Italy, Italian estate tax is only payable on assets located in Italy.

Of course, in order to prevent issues with double taxation, Italy has a number of cross border taxation arrangements in place, including with the UK and the USA.

Unity of inheritance

Italian inheritance law is based on the principle of ‘unity of inheritance’. To clarify this, the law of the country of last domicile deals with any movable assets. Movable assets could, for instance be furniture, cars, jewellery, works of art, bank and post office current accounts, money, investments such as shares, bonds, trust and managed funds. For immovable assets the law of the country where they are located is applicable. Examples of immovable assets include houses, shops, buildings, agricultural or building land.

How does Italian estate tax work?

In terms of payments, Italian estate tax appears less onerous compared to some other EU Member States. It is nevertheless complex.

In effect, Italian estate tax applies to the net value of the deceased’s estate. This therefore, includes not only movable but also immovable assets.

In addition, equity in non-family businesses and shareholdings in companies are taxable. However, there are exceptions to this.

Indeed, because the range of taxable assets is so broad, it is important to review the balance of ownership of your assets in the above mentioned categories. Above all, if you have children or you stand to inherit assets from an Italian estate.

It may moreover, also be worthwhile considering property ownership changes to protect your assets. In addition, some careful estate planning for the transfer of assets within the family is crucial.

Italian estate Tax on property

As far as a property is concerned, it is important to bear in mind the income value of Italian real estate property. This is calculated on the capitalised cadastral annuity.

In order to ascertain the cadastral value of a property, re-evaluation coefficients are as follows.

– Agricultural land: €112,50

– Buildings – Cat. C/1 and E: € 42,84

– Buildings – Cat. A/10 and D: €63,00

– Buildings – Cat. B: €147,00

– Other buildings: €126,00

– Habitable buildings, primary residences and relative appurtenances: €115,50

Depending on the relationship to the deceased and the category of assets, tax is applied proportionally to individual heirs or legatees.

The table below summarises quotas and exemptions from inheritance tax relating to Italian real estate property.

BENEFICIARY INHERITANCE TAX ASSET CATEGORY REGISTRATION TAX CADASTRAL TAX
Spouse, civil partner and/or Children Value of assets & rights: 4%

Below €1 million value, tax-exempt.

Primary Residence

Other property

Other assets

€200

2%

€ 168

1%

Siblings Value of assets & rights: 6%

Below €1 million value, tax-exempt.

Primary Residence

Other property

Other assets

€200

2%

€ 168

1%

4th Degree Relative Value of assets & rights: 6% Primary Residence

Other property

Other assets

€200

2%

€ 168

1%

Other Value of assets & rights: 8% Primary Residence

Other property

Other assets

€200

2%

€ 168

1%

Furthermore, in accordance with the Italian Disabilities Act, the threshold from which disabled beneficiaries are liable for inheritance tax is €1.5 million.

Furthermore, quotas mentioned in the table above also apply to lifetime use (usufruct) of a property title deed.

Are there any exclusions from Italian inheritance tax?

As previously mentioned, according to Italian inheritance tax law, certain categories of assets are exempt from Italian inheritance tax. These include government bonds and unit linked whole of life insurance policies. Additionally, shareholdings in family businesses and certain charitable donations are exempt.

EU regulations 

Choice of law

In addition to Italian inheritance law, it is also worth mentioning EU succession regulations introduced in 2015.  In brief, these regulations provide testators with an opportunity to mitigate the Italian principle of unity of inheritance.

As a result of EU succession regulations, non-Italians who are resident in Italy can make a choice of law in their will. In other words, a testator can stipulate that they want the law of their own country, or nationality, to govern their Italian-based assets.

Furthermore, EU regulations do not restrict the choice of law to EU nationals resident in Italy. For example, a US national could nominate US law to apply to the succession of their property in Italy.

It should however be mentioned, that nominating a country law needs careful consideration. It would be prudent to seek advice before taking action. A testator needs to take in to account certain matters. These include foreign matrimonial regimes, usufruct, tax consequences, joint ownership structures and other foreign proprietary rights with respect to an estate.

European Certificate of Succession

In order to facilitate cross border successions, an additional benefit of the EU succession regulations is the European Certificate of Succession. While this document is issued by the relevant authority dealing with the succession, heirs, legatees, executors and administrators of an estate can use it to prove their status and thereby exercise their rights or powers in other EU Member States.

Finally …

As can be seen, Italian inheritance is a complex matter. While there are actions that you can take to mitigate the impact of Italian inheritance tax law on estates, because each case is different, you should seek professional support and advice.

At De Tullio Law Firm, we have over 55 years of expertise managing cross border succession and estate planning matters throughout Italy. Our firm is also a full member of STEP, the world’s leading association for trust and estate practitioners.

Please contact us if you have any estate tax questions or if would like to discuss your situation.

You may also be interested in Inheritance Law and Taxes

 

 

Italian Tax. Buying A House in Italy

Local property and service taxes


This article aims to provide an overview of rules pertaining to Italian property tax and legislation. We outline aspects of legislation and certain taxes which are part of the Italian Stability Law. These measures aim to lower tax burdens and bolster the Italian property market. 

While the government has announced the elimination of the local property and service taxes on principal residences in Italy and added the elimination of property and regional taxes on production and fixed machinery in the agricultural sector, those who own second and or holiday homes and real estate in Italy, will still pay local property and service taxes.

We recommend that you check your Italian property tax liabilities. If you need any assistance with your particular case, our legal and tax team are here to help. 

Italian Tax on Property

Currently, cadastral values of Italian properties are still much lower than market values; appraisals in use date back some years. The declared cadastral value of a property on the deed of sale (Rogito) determines the calculation (base imponibile) of Stamp Duty, Land Registry and Cadastral taxes. VAT will apply to the property purchase price if you buy a property from a developer or a renovation company within 4 years following the end of building or renovation work.

Principal residences

Other than a luxury home or castle, if you purchase an Italian property to use as your principal residence:

– from a private seller or an entity that is not VAT registered and,

– you obtain Italian residency at the property within 18 months of signing the deed of sale and,

– you subsequently spend more than 6 months a year at that address,

stamp duty is 2% of the value of the property with € 1,000 as the minimum payment due. Land registry and Cadastral Taxes are €50 each.

If you buy your Italian property from a VAT Registered company, VAT is 4% of the declared property price. Stamp Duty, Land Registry and Cadastral Taxes are €200 each.

Second homes

If you buy a second home from a private owner or a company that is not VAT registered, Stamp duty will amount to 9% of the property purchase price, with €1,000 as a minimum payment. Land Registry and Cadastral taxes are €50 each.

If you purchase a second home from a VAT registered entity, VAT is set at a standard rate of 10% (22% for properties classed as luxury homes or castles) of the purchase price, and you will pay €200 each for Stamp Duty, Land Registry and Cadastral taxes.

To summarise Italian property taxes:

Italian Capital Gains Tax

There is no Capital Gains Tax liability if you purchased the property more than 5 years prior to resale.

Finally …

Italian property and related tax is quite complex. For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice. We offer services in all the major fields of Italian law with particular expertise in real estate, inheritance and family law matters. If you would like further clarifications regarding your situation, please contact us for a free consultation. We are here to help.

You may also like to watch our info videos about Italian property law.

Estate Planning And Tax. Buying An Italian Property

Tax and estate planning matters. Think long term when buying property in Italy


Owning a second home in your home country presents administrative and logistical challenges. However, at least that second home is within linguistic, tax and legal frameworks that are familiar to you. 
The challenges escalate with a foreign property. Italy is a popular choice for second home ownership. In recent years foreign ownership of Italian property has increased as people take advantage of favourable property prices.  If you are considering buying a property in Italy, you should carefully think through Italian estate planning aspects. In particular tax and succession matters.

You should always seek independent tax and estate planning advice, from experts in Italy as well and at home.

There are a number of tax issues to consider in Italy and in your home country. Any of the following may trigger a tax event in either or both your home country and Italy:

– Disposal of property or investments to fund the purchase of an Italian property.

– Transferring money to Italy.

– Associated property purchase tax (local equivalent of closing costs / stamp duty).

– Local service taxes on the running of the property.

– Income tax from letting the property.

– Estate and transfer taxes on the death of an owner.

– Capital Gains Tax on the transfer or sale of the property.

Income Tax

If you are resident outside of Italy, you may be liable to pay income tax on all income, regardless of where this arises.  For example, UK residents who generate an income by letting an Italian property will be subject to UK income tax on the rental income. There will also be a liability to pay tax in Italy. There may be some double taxation relief available. However, it is essential that prior to purchasing a second home and commencing any rental activity that you seek advice both at home and in Italy.

Capital Gains Tax

Foreign nationals who own a property in Italy may be subject to Capital Gains Tax at home. If the Italian property is not the owner’s main residence, when the owner sells or transfers the property title, there may be a tax payment on any profit. There will also be a liability in Italy.

Inheritance Tax

Individuals who are domiciled, for example, in the UK are subject to UK Inheritance Tax (“IHT”) on their worldwide assets in the event of their death. UK IHT does not therefore just apply in respect of assets physically located in the UK if an individual is domiciled in the UK. In addition, Italian Estate Tax will apply to the entire net value of the decedent’s estate, including movable and immovable assets in Italy.

Italian estate tax rates depend on the relationship of the beneficiary with the deceased. Spouse and children: 4% of the estate value, with an exemption of EUR 1 million for each beneficiary. Siblings and close relatives (up to fourth degree of kinship): 6%. Each sibling is entitled to an allowance of EUR 100,000. Any other beneficiary: 8%, with no allowances.

There may be some double taxation relief available. Because each case is different, it is crucial to take advice before purchasing a property in Italy.

Estate planning. Make an Italian will

It is essential to take advice on the succession implications of owning a property in Italy at an early stage. Buyers should consult an Italian solicitor and a solicitor in their home country. A specialist estate planning lawyer will have experience of managing all aspects which arise with cross-border assets or estates.

Generally, succession to a property is subject to the law of the country where that property is physically situated. However, a 2015 EU Regulation known as, “Brussels IV”, makes it possible to nominate a jurisdiction to rule your succession. Even if your home country is not part of the EU, Brussels IV is still applicable to non-EU nationals who own assets in Italy.

It is wise to make a separate will in Italian, to ensure that your property passes to your chosen beneficiaries after your death in the most tax efficient way.

Based on Roman law, Italy has, “Forced Heirship” rules. These govern what portion close family members must receive from an Italian estate. Seeking professional advice is therefore essential to understand how these rules apply to your specific circumstances.

Even though having an Italian will is not a legal requirement, it can save costs, time and misunderstandings for those you leave behind. In addition, your local solicitor will wish to confirm that your home country will takes precedence in Italy. 

Finally …

People put off estate planning because they think they do not own enough, they are not old enough, it will be costly or confusing, they will have plenty of time to do it later, they do not know where to begin or who can help them, or they just do not want to think about it.

Estate planning should be an ongoing process, not a one-time event. You should review and update your plan as your family and circumstances change. This would include when you make an international investment.

At De Tullio Law Firm, we have over 55 years of expertise managing cross border succession and estate planning matters. We operate throughout Italy. Our firm is a full member of STEP, the world’s leading association for trust and estate practitioners.

Please contact us if you are buying or already own an Italian property and have any questions about your estate planning.

 

For more in depth information about Italian succession, you might find our Succession Guide useful.

 

High Net Worth Individual Tax Regime in Italy

What is Italy’s high net worth individual tax regime? 


On 9th March, 2017, Italy introduced a high net worth individual tax system. 

Pursuant to article 24 bis of Italy’s Budget Bill, a codicil introduced an annual fixed €100 thousand forfeiture substitutive tax rate for foreigners. The tax regime also applies to EU citizens, who decide to move their residence to Italy.

There is no fixed level of income attached to this tax regime. Individuals must be resident in Italy and tax is payable on worldwide income. However, tax will not be due on the value of real estate and financial investments located outside of Italy.

Individuals need to apply for the high net worth individual tax regime

According to the bill, uptake of the high net worth individual tax regime is neither an automatic right nor an obligation – it is a choice.

Individuals electing to take advantage of this fixed tax rate option, will have to file an advance application with the Italian tax authorities. The Agenzia delle Entrate then decides whether or not to grant the forfeiture substitutive tax rate to individuals. The Italian tax authorities will base their decisions on investigations with tax authorities in the individual’s country of origin. They will also check that an individual has not previously been tax resident in Italy.

The option extends to the individual’s family members provided they also meet the conditions of no previous tax residency in Italy. Each family member included in the option is also subject to an annual forfeiture substitutive tax on non-Italian sourced income. This is a lower fixed amount of 25,000 Euros.

If the Agenzia delle Entrate accepts an individual’s application, the option expires after 15 years. It is revocable at any time but in revoking the option, an individual loses the right to restore it.

After the 15 year residence period, the fixed tax rate will no longer be applicable. The individual will thereafter need to decide whether to continue to be resident in Italy. Should an individual continue to reside in Italy, standard tax rates apply.

Italian visa for investors

The Budget Bill also introduces a “visa for investors”. This means that any foreign national bringing a capital of at least €1 billion into Italy, and investing it within three months of arrival, automatically gains entitlement to a two-year residence permit.

Finally …

Should you need help to understand your personal tax situation, please get in touch or seek advice from a qualified accountant registered with the ODCEC, the Italian professional accounting association of certified public accountants, auditors and advisors.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.