Italian property taxes
As soon as you own a property in Italy, you will be liable for certain taxes. There will be further taxes when selling the property too, and if you gain an income from the property.
Here, we’ll share insight on the taxes and fiscal considerations to be aware of when you own a property in Italy.
However, please bear in mind that tax rates change frequently, and use this information only as a general guide. We cannot guarantee that specific rates apply to you or when you will be buying.
IMU (Imposta Municipale Unica):
Formerly called ICI, this is an annual municipal property tax, like Council Tax in the UK or the “millage rate” in the US. However, unlike those, it is only payable if the property is a holiday home rather than a main residence, or is classified as a “luxury home” (Abitazione di Lusso).
A luxury home would need to be an apartment of over 240 square metres or, for example, it might include a large house in a prime location and with a large swimming pool.
IMU is calculated from on the property’s cadastral value. The rate varies depending on the property type and municipality, but it typically ranges from 0.4% to 0.8%. IMU is due by September 30th each year but can be paid in up to three equal amounts through the year.
Calculating IMU can be complicated, requiring you to know the cadastral value of the property, the class of property and the multiplier for the local area. An accountant’s help may be advisable, at least in your first year.
Ongoing taxes for residents in Italy
If you plan on moving to Italy on a permanent basis, you will need to seek advice about your tax liabilities in Italy as a tax resident. Any taxes paid in your home country can potentially be offset as a credit against Italian taxes due, according to the Tax Treaty which Italy has with most European nations, and the USA.
In Italy, the tax year runs from 1 January to 31 December.
When are you considered a tax resident in Italy?
You will be considered a tax resident in Italy if:
- You live in Itay for more than 183 days per year
- Your main residence is in Italy
- Your centre of economic or family interests is in Italy
If you’re a tax resident in Italy, you will be obligated to pay:
- Income tax on worldwide earnings
- Social security tax (Differs for US buyers)
- Capital gains tax
- Wealth taxes – IVAFE (investments abroad), IVIE (real estate abroad)
- Inheritance tax
- Property taxes
Income tax (IRPEF) and social security contributions
Income tax is payable on your worldwide income. Social security is applicable on earned income for those still working. Social security contribution rates differ whether employed or self-employed up to an income limit of around €110,000.
Income tax rates in Italy are as follows:
| Taxable income (€) | Tax rate |
| 0 – 15,000 | 23% |
| 15,001 – 28,000 | 25% |
| 28,001 – 50,000 | 35% |
| 50,001+ | 43% |
Tax benefits and exemptions
7% flat tax regime in southern Italy
Certain villages in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, or Sicily offer a 7% flat tax rate if you retire there. This tax rate replies to any overseas income, including pensions, business, employment, or rental income, and will last for nine years. However, pensions paid for by a foreign government may not be covered, so it’s best to seek financial advice for your independent situation.
You may be eligible for this tax break if you:
- have been tax resident outside of Italy for at least five years prior to the tax year in which you will become an Italian tax resident,
- transfer your tax residence to one of the defined regions in southern Italy, in a municipality (comune) with a population of fewer than 20,000 inhabitants, or a municipality with fewer than 3,000 inhabitants in a defined seismic area, or
- have previously been resident in a territory with which Italy has in place arrangements for administrative co-operation — for example, sharing tax information.
Impatriati regime
Suitable for: New residents to Italy that are still working and who have not been a tax resident in Italy for the previous two years.
The Impatriati regime encourages foreigners to come to Italy for work and allows them to benefit from either 70% or 90% deduction of taxable income, depending on where you choose to settle down in Italy for the first five years.
The scheme can be renewed for another five years at a 50% deduction if you have children or purchase a property.
€100,000 flat tax regime
Suitable for: Wealthy residents in Italy
There is a €100,000 flat tax regime in Italy that acts as a substitute for all your other tax liabilities, e.g. wealth tax, income tax, etc.
The regime lasts for 15 years but does not cover income generated in Italy.
The benefits can be extended to family members for an additional €25,000.
It can be applicable in a lot more instances than immediately obvious.
For guidance on whether this could be the right route for you, speak to a financial advisor.
Flat rate “Cedolare Secca”
There is a special flat-rate tax scheme designed for landlords and was put into place to make tax-paying easier for homeowners.
Web portals that accept customer payments on behalf of hosts now take the 21% tax due and pass it on to the Italian Revenue Agency on the homeowner’s behalf. But, if the guest does not pay directly, then the responsibility to pay the taxes remains with you. As such, you will need to seek assistance from an Italian accountant. Italian income tax currently stands at 23% on earnings under €15,000 and 27% on income between €15,001 and €28,000.
Despite the new legislation, there is still wide-scale tax evasion. The Minister for Tourism is considering the introduction of identification codes for each accommodation facility. If introduced, you’ll have to display this on your advertisement, to show compliance with your legal obligations.
In short, it offers a reduced flat-tax rate of 21% for “protected tenancies” (contracts where the tenant has special legal rights under a protected tenancy) this is not usually applicable to short-term lets.
It can apply to long-term lets (30 days or more) as an alternative to normal income tax. For long-term lets, this option needs to be exercised by indication in the rental agreement itself.
“Regime Forfetario” for short-term lets
If you plan to rent out a property in Italy short term, especially if on a rental platform (like Airbnb or booking.com) you can register for VAT under the 5% flat tax regime, the regime forfetario.
This sees the landlord taxed at a flat rate of 40% of their gross income. Under the regime, landlords are also subject to Italian social security if rents exceed the relevant thresholds.
To learn more about this regime, speak to our trusted legal partners. Enquire here today.