RSM St PLG
Languages

Acquiring Italian Real Estate

DIRECT PURCHASE OF REAL ESTATE

This section discusses the most important tax implications of direct purchase of real estate. 

First, it discusses the impact for resident individuals and non-resident individuals, thereafter, the impact for resident companies and non-resident companies. 

Resident individuals

Transfer taxes

If the transfer is not liable to VAT, the registration tax rate is 9% (or 2% if the buyer fulfils the requirements for the “first home tax benefit”).

In case of VAT application, the Registration tax is charged with the fixed amount of €200 (see page 5 for more details).

Mortgage tax and cadastral duties 

The transfer of real estate properties is subject to specific formalities accomplished by special public offices that keep and preserve public real estate registers. 

Each deed implying the transfer of real estate properties must be documented in these registers. These registrations are subject to cadastral and mortgage taxes at the following rates:

  • Mortgage tax:  up to €200 for residential buildings / 3% for instrumental buildings
  • Cadastral tax:  up to €200 for residential buildings / 1% for instrumental buildings.

In particular, cadastral and mortgage taxes apply at the fixed amount of € 50 each if the transfer concerns residential buildings subject to 2% or 9% registration tax.

In addition, cadastral and mortgage taxes are due for a fixed amount of € 200 each for transfers of buildings for housing purposes subject to proportional VAT.

The tax base of these taxes is the same used for registration tax purposes.

Value-added tax 

Generally, the sale of real estate is exempt from VAT (VAT applicable for option). 

However, the sales of new or renovated buildings by the company that has built or renovated them, are subject to VAT if the sale is done within five years from the end of working.

The relevant rates applying are the following:

  • 4 and 10% for real estate real estate classified in the cadastral categories other than “luxury houses”; 
  • 22% for the “luxury houses”.

Moreover, if the newly created building is sold later than five years after being built or after refurbishing works, VAT application is optional. 

When the VAT option is chosen by the seller and the purchaser is liable to VAT, it is applied with the Reverse Charge mechanism.

Non-resident individuals

Non-resident individuals are treated the same as resident individuals. 

Resident companies

Transfer taxes

If the transfer is liable to VAT (for option or obligation) the applicable rate of Registration Tax is of €200. Otherwise, if the transfer is not liable to VAT the Registration tax is levied at 9%, based on the revaluated cadastral value of the property, based on market value.

Mortgage tax and cadastral duties 

In case of residential real estate, mortgage and cadastral taxes are approximately €50 each, unless the sale is made by the company that built it within five years after its construction or by the same company that sell the property after five years but opting for VAT. In this event the due taxes would be in an amount equal to €200 each.

For instrumental buildings, the mortgage tax is 3% and cadastral duties are 1%.

Value-added tax 

In principal, the sale and purchase of a real estate property between two companies VAT-subjects is exempt from VAT (proportional VAT is generally applicable only for option by the seller). 

When VAT is opted, it is generally applied with the reverse charge regime. 

The same rules for individuals apply.

Deductibility of costs

The amortisation is deductible within ministerial limits for instrumental buildings, while for the residential building the amortisation isn’t deductible.

For partnerships, the part of interests paid on mortgages is deductible in the amount corresponding to the ratio between the amount of revenues and other income that contribute to the business income (or that do not compete as excluded) and the total amount of all revenues and income are deductible from taxes in case of business activities. Interests paid on mortgages related to residential buildings are not deductible if the money is borrowed for managing the property.

On the other hand, for limited companies, the interests related to loans for acquisition of building are deductible in each tax period up to the amount of interest incomes and similar ones. The excess is deductible within the limit of 30% of the gross operating profit.

In addition, the energy requalification costs, incurred directly, are deductible at 50% -65% (maximum limit of €100,000).

Non-resident companies

Non-resident companies with a PE are treated as resident companies.

INDIRECT PURCHASE OF REAL ESTATE 

This section discusses the most important tax implications of the indirect (shares) purchase of real estate. 

First, it treats the impact for resident individuals and non-resident individuals. Thereafter, it discusses the impact for resident companies and non-resident companies. 

Resident individuals

Transfer taxes

The purchase of a company participation entails the payment of transfer taxes and stamp duties.

For the purchase of shares of the limited companies, the registration tax amounts to €200 and the stamp duty to €16. For the purchase of shares of the partnerships, the registration tax amounts to €200 and the stamp duty to €156.

Personal income tax

Income derived from the capital gain for the sale of the shares is subject to a WHT of 26%.

Dividend withholding tax

Dividends from Italian corporate companies to individuals are subject to a WHT of 26%.

Non-resident individuals

Non-resident individuals are treated the same as resident individuals. 

Resident companies

Transfer taxes

The purchase of a company participation entails the payment of transfer taxes and stamp duties.

For the purchase of shares of the limited companies, the registration tax amounts to €200 and the stamp duty to €16. For the purchase of shares of the partnerships, the registration tax amounts to €200 and the stamp duty to €156.

Corporate income tax

The profits deriving from the participation in companies are subject to the IRES tax only on 5% of the profits distributed. They do not contribute to forming the income for the year in which they are received because they are excluded from the income of the company for 95% of their amount. Out of corporate income tax, referring to partnership called “società semplice” the dividends received by them (taxed directly on the quota holders) are taxed only on 40% for the profits produced up to 31 December 2007; 49.72% for profits produced up to 31 December 2016 and of  58.14% for profits produced up to 31 December 2017. However, for profits produced from 2018, the percentage subject to tax is 100%. 

Recently the rules regarding the taxation of dividends distributed to società semplice will be taxed directly on the quota holders considering their specific legal nature (i.e. company, individuals, different kind of partnerships etc.)

Losses

IRES subjects can use business losses to reduce business income and can bring the surplus limitlessly into subsequent periods, but not more than 80% of income earned, excepted for losses incurred in the first three fiscal years from their set up. In this last case the percentage of offsetting is 100%.

Fiscal unit
The tax consolidation is an opportunity for taxation methods granted to the corporate groups. The consolidation allows the creation of a single tax obligation against a multitude of IRES taxable subjects linked to each other by a control relationship

Non-resident companies

Corporate income tax

The profits received by companies residing in non-EU countries are subject to a WHT equal to 26%. Profits received by company’s resident in the European Union are subject to a tax withholding tax of 1.2%. If the requirements are met, these companies can take advantage of the facilities provided by the Directive n.90 / 435 / CE (Parent Directive). Finally, if the agreements stipulated to avoid double taxation are present, the provisions contained will be relevant.

Fiscal unit 

There is the possibility of exercising the option for the so-called ‘Consolidated World’ by the resident companies for the income earned by the non-resident subsidiaries.

 

How can we help you?

Contact RSM Studio Palea Lauri Gerla by phone at

Milano: +39 02 89095151

Torino: +39 011 561 32 82 

Roma:  +39 06 5754963 

or email your questions, comments, or proposal requests.

EMAIL US

Subscribe to receive our monthly Tax News

Email us to have you added to our Tax News contact list.