DIRECT SALE OF REAL ESTATE
If the selling occurs within five years from the purchase, capital gain is subject to the personal income tax at a progressive tax rate up to 43% or under some conditions to a substitutive tax equal to 20%. The transfer of the real estate to a company leads to the same consequences.
Though, if the Italian real estate owner does not qualify as a trade or business, individuals are not taxed on capital gains if the selling of the real estate occurs after 5 years from the purchase.
If the real estate property qualifies as a trade or business, capital gain is taxed even if the selling occurs after 5 years from the purchase.
If the real estate owner does not qualify as a trade or business, the supply of immovable property is a VAT out of scope transaction. However, if the real estate owner qualifies as a trade or business, as a general rule, VAT is charged if a new building is sold within five years from the conclusion of its construction or from the renovation carried out on it and if the seller is the constructor or the restructuring company. In such case, the applicable tax rate can be 4%, 10% or 22%. Thereby, if the sale takes place after the time period before mentioned, the supplier can opt for a VAT-able supply of the property.
Transfer taxes apply by the acquisition of the legal or economic ownership of Italian real estate properties. If the immovable property qualifies as a business property, either if the sale is VAT charged or it is not, the registration tax is always due for a fixed amount of €200, the mortgage and the cadastral taxes are equal to 1% and 3% of the consideration and the stamp duty is due for a fixed amount of €230 Euro. lf the real estate owner does not qualify as a trade or business and the building is a business property, the sale is not charged with VAT, the registration tax rate is equal to 9% of the consideration but its amount can't be lower than €1,000, mortgage and cadastral taxes are each one due for a fixed amount of €50, the land registry tax and the stamp duty are not due.
Deferral of tax
If the real estate owner qualifies as trade or business, the capital gains realised by selling Italian real estate properties owned for not less than three years, may be optionally taxed in five years.
Losses on the sale of real estate properties by individuals without a trade or business are ignored. However, if the real estate owner qualifies as a trade or business, losses may be deducted, except when deriving from the attribution of the real estate to purposes unrelated to the business.
Non-resident individuals are treated the same as resident individuals.
If capital gains are realised by the assignment to the members or to purposes unrelated to the business, capital gains on Italian real estate properties are subject to the Italian corporate income tax as business income. Business income is taxed with a tax rate of 24% (IRES - Corporate income tax) plus an additional regional tax rate included between 3.9% and 4.82% (IRAP - Corporate income tax on productive activities).
As a general rule, the supply of immovable properties is exempt from VAT. However, VAT is charged if a new building is sold by the building constructor or by the company in charge for the renovation works of the building, within five years (mandatorily) or after five years (by option) from the conclusion of the construction/renovation works or after five years (by option) by subjects different from the abovementioned ones. Thereby, the supplier can opt for a VAT-able supply of the property. The applicable VAT rate can be 4%, 10%, 22%.
Transfer taxes apply by the acquisition of the legal or economic ownership of Italian real estate. The market value of real estate will be taxed against a tax rate of 2%/9% for registration duty plus a fixed amount up to €720 for mortgage, cadastral and related special levies, if the sell is VAT exempt; If the real estate is commercial, either in the case the sale is charged with VAT or in the case the sale is VAT exempt, registration duty, stamp duty, special levies are due for a fixed amount of €520 and the market value of real estate will be taxed against a tax rate of 4% (3% + 1%) for mortgage and cadastral taxes.
Deferral of tax
If an entity sells Italian real estate properties owned for not less than three years, the company may optionally decide to tax the capital gain in five years.
If realised - as a transfer for a consideration or - as a compensation also in insurance form or - by the attribution to shareholders or to purposes unrelated to the business, losses on the sale of real estate properties are deductible from the taxable income.
Italian real estate properties held by a foreign company are not considered as a permanent establishment in Italy in the absence of other evidence. Therefore, capital gains occurred within five years from the real estate properties purchase or construction, are taxable in Italy not as ‘business income’ but as ‘different income’, income category pertaining to individuals’ taxation.
Capital gains are taxed at a fixed rate of 26% if the individual doesn’t carry out business.
VAT / Transfer Tax
The sale of investments which is VAT exempt, is subject to the registration duty for a fixed amount up to €200 and to the stamp duty for a fixed amount up to €16.
Deferral of tax
The capital gain must be considered realised after the transfer of the participation is completed.
The capital gain should be taxed at the moment the seller receives the payment.
Losses incurred by selling participations that respect the requirements for the application of the participation exemption system may only partially reduce the taxable income, for the 58.14% of
Capital gains obtained by selling non-qualified holdings in a listed company are exempt from taxation in Italy. Capital gains obtained by selling non-qualified holdings in a non-listed company are exempt from taxation in Italy if the non-resident seller has his residence in a White-list Country; if the Country belongs to the Blacklist they would be taxable in Italy even if, in most cases, they are exempt in Italy for the application of the Conventions against the double taxation. Capital gains realised by selling qualified holdings, either in a listed company or in a non-listed company, are taxable in Italy even if, in most cases, they are exempt for the application of the previously mentioned Conventions.