Italy: Holiday Properties - Taxes & Inheritance: Italy

The decision to purchase a holiday home is often made on a wave of emotion, with the exuberance of great memories of a beautiful summer holiday. But however enthusiastic you are about the beauty of your home and its area, it is important to also keep an eye on the costs in order to avoid unpleasant surprises later on leading to “buyer’s remorse”. These start with the ancillary costs of the actual purchase and can continue until the inheritance tax in the case of an inheritance.

In the following article, we review the costs you need to take into account for Italy as they occur on the purchase of the property (Guideline for the Purchase of Real Estate in Italy), during its ongoing use, on its sale or transfer as a gift, or even in the event of inheritance.

Overview

What costs do you incur when purchasing a holiday home?

From the point of view of the buyer, essentially the following cost items must be taken into account:

  • Notary: The fees for the notarial deed are based on the value of the property as well as its district; as an approximate guideline, you should allow for around € 2,000 – 3,000; if the purchase price is paid via a notary’s escrow account, additional fees will also be incurred for this, which (depending on the amount involved) can range from roughly € 500 to 1,000.
  • Agent’s fees: approx. 3% of the purchase price.
  • Purchase taxes: There is the so-called registration tax which is set at 9% of the land register value.
  • Other cost items: In addition, there are various administrative fees which all taken together amount to a few hundred euro, regardless of the value.

If the final purchase contract is preceded by a preliminary contract (which may also need to be notarised), the relevant expert and/or notary fees apply, which can vary greatly from one case to another.

What operating costs need to be paid by the owner of a holiday property?

During the ongoing use of the property, in addition to the normal connections for gas, electricity and water which charge by consumption, there is a property tax, plus any regional surcharges or sometimes discounts, that must be paid. The starting point is a tax of 0.76% of the land register value, which can be adjusted up or down by up to 0.3 percentage points by each region, so that the final value ranges from 0.46% to 1.06%.

In addition, there is the municipal waste disposal tax (TARI), which is calculated based on the size of the property and not the number of people in the household.

What costs are incurred when selling a holiday home?

No specific formal costs are incurred on the sale of the property; the costs for the notarised transfer deed are normally paid by the buyer. However, any capital gains may be subject to income tax; although the question of actual taxation depends substantially on the country in which the seller is registered as a taxpayer.

What costs apply when making a lifetime gift?

A deed of gift also has to be prepared by a notary, so that in this case there are also notary fees to be paid, for the amount mentioned above under II.1. In the case of a gift between spouses or to children a gift tax of 4% is incurred on the amount that exceeds the exemption level of € 1,000,000 (based on the land register value). In the case of a gift between siblings, the tax is 6% with a tax-free amount of € 100,000, for other relatives 6% with no tax-free amount and in all other cases 8%, also with no tax-free amount. In addition, there are the so-called “mortgage fee” of 2% and the “land registry fee” of 1%.

What costs are incurred in the event of inheritance?

In the event of inheritance, the same tax rates and allowances apply as in the case of the gift. In any case, there may be aspects of international inheritance law that need to be applied to arrive at a precise determination of the rules and taxes on the inheritance.



Autor: Florian Bünger