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PROPERTY

What taxes do you need to pay on 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.

Published: 26 October 2021 17:43 CEST
Updated: 21 April 2023 15:53 CEST
Second homeowners in Italy still have taxes to pay, even if it's not their primary residence.
Contemplating buying a place in Italy? Remember you'll need to budget for taxes, too. Photo by La So 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.

Owners should also plan to set aside for taxes on a second home – but how much should you expect these to come to, when are they due, and how are they paid?

READ ALSO: Everything you need to know about having a second home in Italy

Here’s a quick guide to what you’ll need to be aware of.

Working out the tax on owning a second property

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.

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.

The good news is the hardest part is over if you’ve managed to get through the buying part of the process.

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

“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 Accounting Bolla.

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).

What are the taxes you’ll pay?

Get ready for some acronyms, as you’ll need to get used to them if you pay tax in Italy.

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

IMU

Imposta Municipale Unica (‘Unified Municipal Tax’). This is the 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 for more than six months a year. But if it’s your second home, you must pay this tax.

Non-EU nationals without residency in Italy, including Americans and now Brits are allowed to spend 90 days out of every 180 in the EU. Anyone in this category with a second home in Italy would need to pay IMU.

The popularity of one euro home schemes may be on the decline.

Italy is known for having a large number of cheap properties for sale, but taxes are another cost to consider. Photo by TIZIANA FABI / AFP.

You’ll also need to pay IMU if you own a home in Italy classed as ‘luxury’ property under the Italian tax system, even if it’s your main residence.

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’s class 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.

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

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

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 in which 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.

For this and other tax payments in Italy, it’s always advisable to consult an accountant who can ensure the correct amount is paid and arrange the transaction for you too.

TASI

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.

Despite reports of this tax being abolished, it does still exist but has now been merged with the above IMU tax. So as far as your checklist is concerned, you don’t need to pay another separate tax as it is now incorporated into IMU.

READ ALSO: Should you hire a renovation agency for your Italian home?

It’s important to note its cost for second homes, as TASI is much higher than for primary residences.

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

Customer speaking with employee in a tax office in Italy

Photo by Andreas SOLARO

TARI

Tassa sui rifiuti (‘refuse tax’) is paid to cover rubbish collection, and this 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.

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’re considering letting your property in Italy, be aware that there will be extra taxation and bureaucracy involved.

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.

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

EXPLAINED: What are Italy’s rules and taxes for Airbnb rentals?

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.

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.

For further information on the taxes you will need to pay in Italy, check with a professional as the amounts owed may change depending on personal circumstances, property location and type.

Please note The Local cannot advise on specific cases. Read more in our Italian property section here.

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PROPERTY

Five pitfalls to watch out for when buying an old house in Italy

Tempted to snap up a little slice of Italy at a bargain price? The older the house, the more potential issues you'll need to be aware of.

Published: 29 March 2024 10:17 CET
Updated: 29 March 2024 12:03 CET
Five pitfalls to watch out for when buying an old house in Italy

Italians themselves may have very little interest in buying or fixing up Italy’s many unwanted old houses, but international visitors are often swept away by the charm of these rustic buildings in romantic settings.

It’s easy to see why. The quirky structures, period details, and picturesque surroundings – not to mention low asking prices – inspire countless people worldwide every year to investigate buying an Italian home of their own, often as an investment or retirement property.

MAP: Where in Italy can you buy homes for one euro?

International interest in cheap Italian property has only intensified in recent years, with dozens of idyllic villages advertising ‘one euro’ homes and other low-cost property offers aimed specifically at foreigners.

Savvy buyers are aware that non è tutto oro quel che luccica (all that glitters is not gold), and quickly realise that these long-neglected buildings really cost somewhat more than one euro to buy and renovate. Still, some of The Local’s readers tell us these offers are worth taking advantage of.

But whether you’re looking at spending a couple of thousand euros or much more on your dream Italian property, there’s always a lot to consider – including some issues that you’re unlikely to experience when buying a home in your home country.

These unexpected issues can turn the Italian dream into a bit of a nightmare, and sometimes lead to buyers having to abandon a purchase, losing money in the process.

But if you’re aware of potential pitfalls in advance, you’re far more likely to be able to complete the purchase process with no major problems at all.

Property taxes and fees

Of course you’ll be expecting tax as part of the property purchase process, but Italian property taxes are particularly steep.

Experts say the total cost of buying in Italy will add approximately ten percent to the purchase price, and advise prospective buyers to budget accordingly.

There’s stamp duty, which is between two and nine percent of the cadastral value (valore catastale) of the property, with a minimum threshold of €1,000 even on the cheapest homes. Plus VAT at four or ten percent, land registry tax, and, if applicable, mortgage tax.

You can also expect to pay between one and five percent of the purchase price as a fee to the estate agent. In Italy agents work for both the buyer and seller – and collect compensation from both parties once the deal is done.

Then you’ll likely need a couple of thousand euros for the notary, plus a similar fee for any other agents you use, such as a mortgage broker, plus legal fees if a lawyer is involved.

See more about the ‘hidden’ costs of buying property as a foreigner in Italy.

Bickering relatives

It may sound unbelievable to non-Italians, but it’s not unusual to find that even the smallest old properties, or parts of them, are legally divided up between dozens of family members due to Italy’s inheritance rules.

One buyer The Local spoke to found herself having to deal with 22 people, all relatives, who each turned out to own a share of a small property she was buying in Mussomeli, Sicily; one of the first places in the country to sell off old properties for a euro.

Toti Nigrelli, the mayor of Mussomeli, said “having to negotiate the sale with multiple owners” was normal.

While this buyer impressively managed to negotiate the deal with all 22 parties, in many cases similar sales fall through because relatives – distant cousins, great-aunts, long-lost nephews – are often not on good terms, disagree over the sale, or can’t be traced.

At the very least, you will need to check the property’s records carefully to make sure there are no surprises in store – such as long-lost relatives who might turn up to claim the property back after you’ve bought it.

A trullo house before renovation in Cisternino, Puglia. AFP PHOTO / GIUSEPPE CACACE

Illegal builds

Another thing that often astounds foreigners who buy property in Italy is the enormous number of illegal builds – homes that were built entirely without permits – on the market as well as the even greater number of houses featuring modifications which were never officially approved or recorded.

Illegal housebuilding in Italy is often thought of as a decades-old issue, but recent data shows that, in 2021, 15 houses were built illegally for ever 100 authorised. Illegal building is twice as common in the south of the country as in the north, and thousands of cases are detected every year – though few people are ever prosecuted.

If you buy a house with undeclared modifications, the buyer is usually held responsible for paying to regularise the paperwork with the town hall. If you catch this issue early enough – and not all sellers or estate agents will inform you about them – you may be able to negotiate for the seller to cover these costs before you make an agreement.

If however you end up unknowingly buying a house built without the correct permissions, or if you never regularise any unauthorised changes, the property will likely prove very difficult to sell on.

This is one of many reasons why buyers need to carefully check the catasto (land registry or cadastral records) of a property themselves, and have a notary check everything is in order.

Conservation rules

When you initially view and fall in love with that charming stone house in the historic centre of a gorgeous Italian hilltop town, rules and regulations are probably not the first thing on your mind.

But it pays to know that old homes featuring frescoes, loggias or ancient stone cellars, as appealing as they are, are often protected by Italy’s cultural heritage authority – meaning more red tape for their owners.

One reader was forced to give up her dream of buying a portion of a two-floor 1700s building in the village of Civita Castellana, Lazio, because it needed renovation work to make it livable – but the frescoed walls, decorated fireplaces and elegant stonework entrance were vincolati (under restrictions) due to Italy’s historic conservation rules.

READ ALSO: Tuscany or Basilicata? How Italy’s international property market is changing

In many cases, this means renovation work can’t be carried out at all, or will be subject to reams of paperwork and close monitoring from authorities known as the sovraintendenza belle arti. To make things trickier, rules can also vary by local authority.

If you think a property you’re interested in might be subject to these rules, it’s always wise to consult the local sovraintendenza at an early stage. And of course, you’ll want to get hold of the records of the property from the catasto (land registry).

Resale prices

The high taxes and costs involved in buying and selling a property in Italy are often said to be one reason why, for most Italians, the concept of climbing the property ladder doesn’t really exist in the way it does in some countries.

Italy’s property market is unusual in Europe in that house prices on average are relatively stagnant. With the exception of some types of property – such as new-build apartments and luxury homes – overall prices have risen little over the past decade.

This is partly because the Italian market is weighed down by a large volume of old, neglected properties in need of major work – hence schemes like the one-euro sales and the (formerly popular but now-unavailable) 110 percent ‘superbonus’ for renovations.

But overall, if your main motivation for buying an old Italian home and renovating it is profit, you’ll need to consider that the resale potential may not be what you’d hope. The exceptions to this are at the pricier end of the market, in most major city centres, and in tourist hotspots.

See more in The Local’s Italian property section.

Do you have any more tips on buying a property in Italy? We’d love to hear from you in the comments section below.

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