Income Tax

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ITALIAN PROPERTY RELATED TAX, RELIEFS AND DEDUCTIONS 2006
 

Imposta Comunale sugli Immobili (ICI)
 

• Payable by both residents and non-residents.

• Calculated in reference to official rental value, rendita catastale, of the property.

• The rate is decided locally, 0.4 %- 0.7% approx.

• Payable in two instalments, June and December.

Other Local Taxes

In Italy other local taxes may be raised such as rubbish collection, and charge to use a motor vehicle.

Rental income

Rental income is subject to normal Italian income tax (IRPEF). Certain expenses are deductible, and the rental income is reduced by a percentage for the purposes of calculating the tax payable.

Deemed Rental income

For any property which is not used as the main residence, and not rented out, the taxpayer is assessed to income tax on an "imaginary" rental income.

The taxable income calculated as follows:

4/3 x  rendita catastale x  105%

For a non-resident property holder with several properties:

       The 105% adjustment applies to all properties;

       The 4/3 adjustment applies to all but one of the properties.

Capital Gains Tax

There is no longer Capital Gains Tax on the sale of Italian real estate.

However, gains on the sale of property less than 5 years from the date of purchase are assessable to Italian income tax.

Wealth Tax

There is no Wealth Tax in Italy.

Taxes payable on purchase of property

Main home purchased second-hand, vendor is an individual

• Property registration tax                     3%                      Imposta di Registro

• Mortgage Tax                                        168 euro           Imposta Ipotecaria

• Cadastral tax                                        168 euro           Imposta Catastale

Subsequent properties purchased second-hand

• Property registration tax                    7%

• Mortgage Tax                                       2%

• Cadastral tax                                       1%

There are higher Property registration tax rates for:

• General Land          8%

• Agricultural Land  15%    (applies if the land will not be used for agricultural purposes)

Main home, purchased new or from property company

• Value Added Tax (IVA)                        4%

• Property registration tax                     168 euro

• Mortgage Tax                                        168 euro

• Cadastral tax                                        168 euro

Subsequent properties purchased new

• Value Added Tax (IVA)                     10%, or 20% for a luxury property

• Property registration tax                  168 euro

• Mortgage Tax                                     168 euro

• Cadastral tax                                     168 euro

Main Residence tax breaks

Tax credit for mortgage interest and associated costs

     19% tax deduction

Maximum base for deduction:

      Purchase of property-     3,615 euro        Construction/ renovation-   2,582 euro  

Reinvestment relief

If the taxpayer sells his main residence and reinvests the proceeds in a new one, a tax credit is given if certain conditions are met.

The tax credit is equal to the IVA/ property registration tax paid on the original property.

Tax credit for rented main residence

The granting of this tax credit is subject to the certain conditions, particularly regarding the type of rental contract entered into.

Tax credit for property renovation (to 31st December 2005)

36% on costs up to 48,000 euro

These notes are for information purposes only. We will be happy to provide you with professional advice at reasonable rates.

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