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PROPERTY

What taxes do you need to pay if you own a second home in Italy?

Owning a second home in Italy is a dream come true for many - but make sure you stay out of trouble with the Italian taxman.

Second homeowners in Italy still have taxes to pay, even if it's not their primary residence.
Second homeowners in Italy still have taxes to pay, even if it's not their primary residence. Photo by Jilbert Ebrahimi on Unsplash

If you’re planning to buy or have just bought a holiday home in Italy, getting through the purchase process is just the first step. There are some additional costs involved in maintaining a second property to be aware of.

Some of The Local’s readers have been in touch to ask how much they should plan to set aside for taxes on a second home.

The first thing to note is that taxes on second homes are inherently higher than primary residences – or at least, a main home qualifies for certain tax reliefs that second homes can’t benefit from.

EXPLAINED: Can second-home owners get an Italian residence permit?

This is due to the fact that a primary residence reflects the Italian constitutional right to a home. As such, utility bills may also be higher on holiday properties, compared to reduced tariffs for first homes.

Here’s an overview of what you need to consider, but remember to check with a professional as the fees owed may change according to personal circumstances, location and property type.

Taxes can be complex in Italy. Make sure you know what you're due to pay on your second home.
Make sure you know what you’re due to pay on your second home.  Photo: Julia Solonina/Unsplash

Working out the tax of owning a second property

Get ready for some acronyms, as you’ll need to get used to them if you have a second home in Italy.

As an owner of a second property, you’ll be liable to pay IUC ‘imposta unica comunale‘ (single municipal tax), which covers some levies called IMU and TARI.

READ ALSO: From DAD to DOP: The most common Italian acronyms explained

Before we jump into each of these and what they entail, the good news is the hardest part is over if you’ve managed to get through the buying part of the process.

“The cost of maintaining a property in Italy is much easier to calculate than the fees you need to work out for buying a property,” said tax expert Nicolò Bolla of Bolla Accounting.

Compared to the stamp duties, VAT payments and notary fees involved with buying a house, paying taxes is less involved – but still crucial to understand to avoid problems or possible fines from the Italian Revenue Agency (Agenzie delle Entrate).

IMU

‘Imposta Municipale Unica’ (Unified Municipal Tax) is basic rate of tax that has to be paid to the Italian state, based on the value of the property.

You don’t pay this if your main residence is in Italy and you live in the country more than six months a year. Otherwise, if it’s your second home, you must pay this tax.

For non-EU nationals without residency in Italy, including Americans and now Brits, they are allowed to spend 90 days out of every 180 in the EU.

This group of people with a second home in Italy would need to pay IMU.

Brexit: How Brits can properly plan their 90 out of 180 days in Italy and the Schengen zone

You’ll also need to pay IMU if you own a home in Italy classed as luxury property, even if it is your main residence. Italian luxury property in the Italian tax system is defined by its residential category.

Tax relief offered to first homes doesn’t apply to second homes. Photo: Nils Schirmer/Unsplash

In this case, the cadastral categories A1, A8 or A9, for tax purposes are all luxury dwellings (stately homes, villas and castles).

How much you pay depends on your property and the area you live in – payments are based on a percentage of the property value, collected by the municipality where your home is located, with part of the tax also going to the national government.

As a rough guide, you’ll need to take 5 percent of the property value and then multiply that number by a coefficient – a figure that changes according to property type.

READ ALSO: How can a non-EU citizen get a mortgage to buy property in Italy?

This will give you a taxable base and from there, you’ll be charged anything from 0.4 to 1.06 percent of that figure, depending on the municipality where your second home is located.

You won’t get a bill for this, just a deadline of when to pay and what coefficient your type of property is to be able to do the sums. IMU needs to be paid for each month and is due twice a year, in June and December.

You can pay this via a form called F24 through the bank or Post Office.

To know exactly what your final IMU tax will be, it’s best to consult an accountant who can arrange the transaction for you too.

TASI

Despite reports of this tax being abolished, it does in fact still exist but it has now been merged with the above IMU tax. The Tassa sui Servizi Indivisibili (Tax on Indivisible Services) covers services provided by the town hall or ‘municipio‘, such as road maintenance, public lighting and maintaining green spaces.

From January 1st 2020, however, the Italian government introduced a reform in order to simplify tax payments.

READ ALSO: Why now is the ‘best’ time to buy property in Italy

While settling this tax bill may have become more straightforward, it’s important to note its cost for second homes, as TASI is much higher than for primary residences.

As far as your checklist is concerned, you don’t need to pay another separate tax as it is now incorporated into IMU.

An accountant can assist on how this may affect your IMU costs.

Rubbish collection fees are paid by every property owner. Photo: Andreas SOLARO/AFP

TARI

Tassa sui rifiuti (waste tax) is the tax you need to pay for rubbish collection and doesn’t depend on the type of property or how long you are there for.

It’s a fee that you’ll pay after receiving a bill from your municipality and should be due only once a year. It includes a fixed fee based on the square metres of the house and the number of people living there.

When it comes to second homes, the calculation of how many people living there can sometimes create difficulties, but individual municipalities may offer reductions based on individual circumstances.

Irpef (Income tax)

This is personal income tax (L’imposta sul reddito delle persone fisiche), which might be confusing if you own a second home that you spend a few months a year in. How can it apply to you?

Well, it can, but the good news is that if you pay IMU tax, you shouldn’t have to worry about IRPEF calculations.

READ ALSO: The real cost of buying a house in Italy as a foreigner

A second home can be subject to income tax if it is rented out and generates rental income.

However, if you are using it as your second home only and don’t rent it out when you’re not in Italy, income tax is not due.

What if I want to rent out my second home?

If you’ve considered letting your property in Italy, you’ll need to complete extra paperwork as you would be earning money from your second home.

Firstly, IRPEF would be due on the income generated from rent paid by your tenants according to the established scale rates.

In Italy, income tax ranges from 23 percent on the first €15,000 gained, gradually increasing to 43 percent tax as earnings rise.

Got a property to rent out when you're not there? Check what income tax you'll need to pay on your earnings.
Got a property to rent out? Check what income tax you’ll need to pay on your earnings. Photo: Luca BravoUnsplash

There are also municipal and regional taxes to add on to this income tax too.

If you’re a US citizen, there’s an added consideration which can be “tricky”, Bolla warned.

“Americans would need to pay taxes to both America and Italy if you earn money in Italy, as their taxation principle is different,” he said.

There’s also the question of who you want to rent it out to and for how long, since renting your home as a residential property is different from using it as a holiday let, for example, with different obligations for both.

A professional could guide you on which route is right for your circumstances.

The type of property you own as a second home

There are tax exemptions and concessions for second home owners, “depending on the type of property and its conditions”, according to Bolla.

Some of these exemptions were introduced by the 2021 Budget Law (La Legge di Bilancio) and others were cancelled by the Support Decree (Decreto Sotegni).

Some new measures for 2021 where property tax is concerned include concessions for foreign national pensioners, for example.

But the variables are vast and there’s no one-size-fits-all solution to how much tax you have to pay on your second home.

“Always ask what the type of property your house is classified as and what is the most convenient use of your property, taking your situation into account,” Bolla advised.

Nicolò Bolla runs Accounting Bolla, a global tax and accountancy firm based in Italy. You can contact him further here.

Please note The Local cannot advise on specific cases. For more information on property in Italy, check our guides here.

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MONEY

How much does it cost to raise a child in Italy?

How big is the financial commitment parents have to make in Italy to pay for their offspring’s needs and expenses until they’re grown up and independent? Here's a look at the predicted costs.

How much does it cost to raise a child in Italy?

Family is the bedrock of Italian society, but it’s also an unbalanced economic crutch, propping up children who leave home much later than most of their European counterparts.

Various factors are at play, from a declining birth rate, youth unemployment, being unable to get on the property ladder to young Italians moving abroad in search of better financial opportunities.

It probably comes as little shock, then, that parents in Italy end up forking out huge sums of cash to support their offspring through childhood and early adulthood (and beyond).

Even just up to the age of 18, raising a child in Italy can cost upwards of €320,000, according to data from Italian consumer research body ONF (Osservatorio Nazionale Federconsumatori).

The average spend of raising a child from 0-18 years is €175,642, but it rises in families with high incomes, classed as over €70,000 per year.

READ ALSO: Italian class sizes set to shrink as population falls further

Researchers noted that the cost of bringing up children has jumped up following the effects of the pandemic too: compared to 2018, child-rearing expenses increased by 1.2 percent by 2020.

The decrease in expenditure related to transport due to spending more time at home, as well as those incurred for sports and leisure activities, was not enough to mitigate the increase in costs for housing and utilities, which increased by 12 percent compared to 2018.

Photo by Suzanne Emily O’Connor on Unsplash

Food prices rose by 8 percent compared to 2018 and education and care jumped by 6 percent for the same timeframe.

In fact, Italy ranks as the third most expensive country in the world for raising children, only coming behind South Korea and China, according to data from investment bank JEF.

The pandemic has contributed to extending an already growing phenomenon: the decrease in annual income of Italian households.

Household income dropped by 2.8 percent from 2019 to 2020, the report found, citing data from national statistics agency Istat. It marks a further squeeze for families, especially low-income and single-parent families.

Depending on earnings, the amount needed to bring up a child until the age of 18 varies considerably.

READ ALSO: ‘Kids are adored here’: What being a parent in Italy is really like

A two-parent family with an annual income of €22,500 spends an average of €118,234.15 to bring up a child until the age of 18; for the same type of family but with an average income of €34,000 per year, the total expenditure to bring up a child increases to €175,642.72.

For high-income families, stated as over €70,000 annually, raising a child costs €321,617.36 on average.

The figures mark an increase of around €5,000 for low- and middle-income families, and a much sharper rise of €50,000 for high-income families, compared to ten years ago.

The money gets spent on housing, food, clothing, health, education and ‘other’ categories. The report revealed that the average spend on a child aged 16 years old is almost €11,500 annually, amounting to €955.78 per month.

Almost €2,000 per year gets spent on food, €1,615 goes on transport and communication, €782 goes on clothing and €1,600 goes on education annually, the report found.

They begin small, yet the costs are anything but. (Photo by LOIC VENANCE / AFP)

For the ONF, “these data highlight how, today more than ever, having a child is becoming a luxury reserved for the few, which fewer and fewer Italians are able to afford.”

READ ALSO:

The numbers on supporting children after their 18th birthday are a little hazier, as when children eventually fly the nest varies – but figures from Eurostat show that Italy ranks third in Europe for the average oldest age at which children move out of the parental home, at 30.2 years old.

Only young people from Croatia and Slovakia wait longer to live independently, while the EU average for flying the nest is 26.4 years old.

Even then after eventually leaving home at over 30 years old, it’s not entirely clear how many Italians are fully independent once they get their own address, or whether their parents continue to bankroll their living costs.

Italy’s president Sergio Mattarella sent a message to Italy’s Birth Foundation (Fondazione per la Natalità) in May stating, “The demographic structure of the country suffers from serious imbalances that significantly affect the development of our society.”

In response to worsening economic circumstances, the Italian government has recently pledged to do more to help people have families and reverse Italy’s continuing declining birth rate.

It has introduced the Single Universal Allowance (L’assegno unico e universale), but along with it has dropped various so-called ‘baby bonuses’ that provided lump sums to new parents.

The new allowance is a monthly means-tested benefit for those who have children, or are about to have a child. It is payable from the seventh month of pregnancy until the child reaches the age of 18 or in some cases, 21. For more information on what it is and how to claim it, see here.

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