What taxes are paid when buying a house in Italy?
It’s important to know how to calculate the taxes and costs when buying a property in Italy so that you don’t come across any nasty surprises. In general, the taxes for buying a house in Italy in 2022/2023 are as follows:
- Registration tax
- Land registry tax
- Mortgage tax
- Stamp duty
However, in order to determine the exact taxes payable on the purchase of a property in Italy, it is necessary to analyse whether it is a main residence or second home and whether it is purchased as a private individual or from a company.
Property registration tax and VAT in Italy
The taxes for the purchase of a property include the payment of a registration tax of 9% of the cadastral value of the property, i.e. the monetary value the authorities give each property (plus a cadastral tax and a mortgage tax, both of 50 euros each). However, in some cases, instead of the registration tax, VAT will have to be paid if the company that built the property completed the works less than 5 years ago.
And not only that, VAT will also be payable on the purchase of a property if it is classified as social housing (10% calculated on the final price of the property). Also in these cases, cadastral, mortgage and registry taxes will have to be paid for a total of 600 euros.
Another case is when the property purchased is considered a luxury property, in which case the purchase tax will be 22% VAT. And there will be a mortgage tax of 90 euros and stamp duty of 230 euros.
Taxes for the purchase of a main residence in Italy
Taxes for the purchase of a main residence in Italy have different benefits, thanks to the so-called first home concessions. In order to qualify, certain requirements must be met:
- the property to be purchased belongs to certain cadastral categories (A/2, A/3, A/4, A/5, A/6, A/7, A/11);
- the property is located in the municipality where the buyer has (or intends to establish) his residence or work;
- the buyer does not own any other property.
Taxes on the purchase of a first home from a private seller
The taxes on the purchase of a first home, if the seller is a private advertiser, that have to be paid are:
- Registration tax proportional to 2% (instead of 9%);
- Fixed mortgage tax of 50 euros
- Fixed cadastral tax of 50 euros.
Taxes for the purchase of a first home from a company
The taxes on the purchase of a first home, if the seller is a company with a sale subject to VAT, to be paid are:
- VAT, which is reduced to 4%
- a fixed registration tax of 200 euros
- fixed mortgage tax of 200 euros
- fixed cadastral tax of 200 euros.
Taxes on the purchase of a second home in Italy
In the case of the purchase of a second home, in addition to the taxes that the buyer of the property must pay (registration tax, mortgage tax, cadastral tax), there is an additional tax for the maintenance of the property, known as IMU Municipal property tax in Italy.
The price-value system in Italy
For purchases and sales of residential real estate in Italy, under certain conditions and in case of certain subjective and objective requirements, the law foresees that – in order to determine the taxable base for registration, mortgage and cadastral taxes – the price-value system is used.
The price-value system, introduced in 2006, ensures, on the one hand, transparency in the purchase and sale of real estate and, on the other hand, guarantees fairness in the corresponding taxation.
The price-value system, in fact, allows the purchase of homes to be taxed according to the cadastral value of the property, regardless of the agreed consideration indicated in the deed. Not only that, it also protects the buyer by limiting the power of the tax authorities to assess value.
Price-value: when it applies
In particular, the price-value system applies when the purchase of the property is subject to proportional registration tax and when the buyer is a natural person (not acting in the exercise of commercial, artistic or professional activities).
Do home buyers in Italy have to pay VAT?
In summary, you only have to pay VAT when buying a house in Italy if you buy it from a construction company or from a company that is principally engaged in the purchase and sale of real estate. In this case, the total VAT payable is calculated on the value declared in the title deed, irrespective of the cadastral value.
When is VAT not payable on the purchase of a property in Italy?
VAT is not payable (but registration tax is payable) when buying a house from a private individual or from a company selling a newly built house with VAT exemption.