The tax structure for property purchase by foreign buyers in Italy is very complicated and depends on various factors: primarily, on who is buying (individual or legal entity) and from whom (from an individual, legal entity or a developer) as well as on whether the property is being acquired as a "primary residence" or a secondary one. There are many nuances in taxation when purchasing, and therefore I strongly recommend prospective buyers to use the services of an experienced professionals when house hunting. In certain cases, the taxes can vary from 2% of the cadastral value of the property, which is often significantly lower than the sale value, to 22% of the sale value of the property (the percentage may vary dramatically based on whether we are speaking about a luxury estate or about a newly built estate).

  For an American buyer, house hunting in the Italian market involves careful consideration of various taxes and costs associated with purchasing and owning a property. When budgeting, they should take into account both the taxes levied only once (such as that on the purchase) and the taxes paid periodically (such as the property tax). Below is a general overview of some key taxes and factors to consider when conducting financial modeling:

- Property Purchase Tax (Imposta di Registro): This tax is applied to the registration of certain legal documents, including property deeds, when the seller is a PRIVATE OWNER – REAL ESTATE AGENCY – DEVELOPER or RESTRUCTURING COMPANY that sells after 5 years from completion of work and opts out of the VAT regime. The rate can vary depending on whether the property is a primary residence or a second home. Rates can range from 2% to 9% of the cadastral value of the property.

o          For the purchase of a primary residence, the tax rate was typically 2% of the property's declared value.

o          For the purchase of a second home or non-primary residence, the tax rate was generally 9%.

o          For commercial properties, the tax rate could be higher, often at 9% or more.

-           Exemptions and Reductions: There are some exemptions and reductions available for specific cases, such as first-time homebuyers or those purchasing properties classified as luxury homes.

-       Payment Responsibility: Typically, the Registration Tax is paid by the buyer. However, it's essential to review the terms of the sale agreement, as sometimes the seller may agree to cover this tax as part of the negotiation.

-           Other Considerations: Registration Tax is just one component of the total property transfer taxes in Italy. Buyers should also consider other taxes such as:

-  Land registry tax: €50 (fixed rate)

-  Cadastral tax: €50 (fixed rate)

-  Mortgage and Land Registry Taxes: These taxes are associated with registering a mortgage or other financial encumbrances on the property. The rates can vary, but they are typically a percentage of the mortgage amount.

- Value Added Tax (VAT) (IVA) is typically not always applicable to the purchase of residential properties. It may apply to newly constructed properties or properties that have undergone significant renovations. The rate is 4% for "primary residence" and 10% for secondary homes and 22% for luxury properties. Make sure to check whether VAT is applicable to the property you are interested in.

VAT (Value Added Tax) ), known as "Imposta sul Valore Aggiunto" or IVA, is usually paid by the buyer. Here are the key points regarding VAT for newly constructed properties in Italy:

1.         Rate: Primary Residence: The reduced VAT rate was typically applied to the purchase of a primary residence. The reduced rate was set at 4% (compared to the standard VAT rate, which was 22% at that time). To qualify for this reduced rate, the property had to be used as the buyer's primary residence.

2.         First-Time Homebuyers: First-time homebuyers in Italy could benefit from further reductions or exemptions on VAT. These incentives were designed to encourage young individuals and families to enter the property market.

3.         Energy-Efficient Properties: Reduced VAT rates were sometimes applied to newly constructed properties that met specific energy-efficiency standards or certifications. These properties were designed to promote energy efficiency and sustainability.

  It's essential to note that tax laws and rates can change over time, and regional variations may apply. Additionally, the specific criteria for eligibility and the extent of the VAT reduction can vary. Therefore, it's highly advisable to consult with a real estate attorney, or the relevant government agency to get up-to-date information on VAT rates and incentives.

  When purchasing a newly constructed property subject to VAT, buyers should receive proper documentation, including a VAT invoice, to confirm the tax amount paid.

  Resale of Newly Constructed Properties: If you later decide to sell a newly constructed property that you purchased, you may be subject to VAT again if the property is still considered "new."

Annual Taxes on the Ownership of a Property

- Annual Property Tax (IMU) is an annual property tax

• IMU (imposta municipale): it won't be charged on primary homes unless you own a luxury home.

IMU is applied on the cadastral value of the property The result is multiplied for the cadastral coefficient. Then you must multiply the result for the tax rate, which each municipality may decide to decrease or increase by 0.3%.

• TARI (garbage tax): all home owners, both resident and non-residents, must pay for this tax which is mainly calculated from the property square metres, the number of family members residing in there, the property type, etc. You will receive the notification of the payment each year from the municipality where the property is located.

Other Taxes in Italy

There is no specific Wealth tax on real estate in Italy for foreign buyers.

- Rental Income Tax: if foreign buyers rent out their property, they will be subject to income tax on the rental income earned in Italy. Tax rates can vary depending on the amount of income as well as on the individual's fiscal status.

- Capital Gains Tax: if you sell your property, a tax on capital gains may be applied. The rate depends on the period of ownership and on whether the property has been used as a primary residence.

- Inheritance and Donation Tax are applied in Italy. These taxes can be complex and vary depending on the kinship relations between the parties and the value of the property.

Before purchasing a property in Italy, it's highly advisable to consult with a local notary, your real estate broker, or tax professional who can provide you with accurate information on the current tax rates and guide you through the process to ensure compliance with Italian tax laws. They can calculate the total tax liability associated with your specific pr