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A difficult market, tight credit, evolving accounting standards, shifting tax concerns – these are challenging times for real estate and construction companies. You need experienced professionals who understand your industry and will work hard to understand you and help you realise your objectives.
Rental income and capital gains of Italian real estate
| Taxpayer | Basis of tax | Tax levied | Tax rates (2023) |
| Resident individual | Rental income Capital gains | Individual income tax Individual income tax | Up to 43% Not applicable if > 5 years |
| Non-resident individual | Rental income Capital gains | Individual income tax Individual income tax | Up to 43% Not applicable if > 5 years |
| Resident company | Rental income Capital gains | Corporate income tax Corporate income tax | Up to 24% As business income |
| Non-Resident company | Rental income Capital gains | Corporate income tax Corporate income tax | Up to 24% As business income |
Rental Income
Individuals
Introduction
Rental income is taxed as either ordinary private income or under favourable substitute tax regime.
Liability to tax
Rental income earned by individuals forms part of the tax base on which personal income is calculated.
Basis to tax
Italian resident individuals are subject to imposta sul reddito delle persone fisiche IRPEF (and local surcharges) on their worldwide income. IRPEF is calculated through gradual rates by brackets of income, which currently range from 23% up to 43%. The highest rate applies where the amount of the aggregate taxable income exceeds €50.000. In addition to IRPEF, a regional surcharge, with a rate ranging from 1.23% to 3.33%, and a municipal surcharge, with a rate up to 0.8%, have to be paid.
Resident individuals are subject to income tax on income (not collected in the context of a business activity carried out) deriving from worldwide real estate (some exclusions may apply).
With regard to real estate properties not leased to third parties, local property tax (imposta municipale propria, IMU – see below) replaces IRPEF and local surcharges with regard to the income deriving from such properties (with some exceptions). Therefore, in this case, only IMU falls due.
Where the real estate properties are leased out to third parties, the taxable income for income tax generally corresponds to the highest amount between: (i) the cadastral income adjusted by 5% and further adjusted according to the ownership period; and (ii) the rentals accrued in the relevant tax period according to the lease agreements reduced by 5%.
However, in case of rental fees derived from the real estate, only the highest amount between the rental income previously reduced by 5% and the average cadastral increased by the 5% is liable to IRPEF. The amount of rental fees is further reduced by 35% if the properties are classified as buildings of historical interest.
For the lease of buildings for housing purposes, an alternative (and more favourable) tax regime is available. Such tax regime, so-called cedolare secca and applicable upon option of the lessor, provides for the application of a substitute tax, which replaces income taxes (IRPEF and local surcharges), registration tax and stamp duty on the lease agreement. The substitute tax applies at the rate of 21% (10% in particular circumstances) on the gross annual rental (no cost deduction is allowed). Various conditions should be met in order to opt for the cedolare secca regime, and in particular:
- The lease agreement should not be concluded within the framework of a business, art or profession by both the lessor and the lessee, if any.
- The real estate should be classified as housing residence in the Cadastral Registry and should be effectively used in this way (appurtenances also can benefit from this regime).
Income arising from properties held abroad by resident individuals is subject to taxation for IRPEF purposes in Italy, in accordance with the worldwide taxation principle, considering, alternatively, the net amount determined by the foreign State (cadastral value) and the rental fee reduced by 15%. In order to reduce the impact of the double taxation of foreign income, there will be a tax credit for income produced abroad in case taxation was carried out in the other state.
Business income
When the possession of the real estate is connected with the production of business income, such income is determined according to the same rules of the resident companies, except for the special provisions established.
Regional tax (IRAP)
If resident individuals produce business income, they are not subject to IRAP anymore starting from 2022.
Companies
Introduction
Rental income is taxed as business income.
Liability to tax
All the income from the lease of buildings related to the company contribute to form business income (through the allocation of costs and revenues in the financial statements) and are not independently taxed as category of land income. Real estate income takes part in the formation of business income according to different rules, which depend on the type of property.
Basis to tax
Resident corporate companies (ie, companies which have legal seat, place of effective management, or main business object in Italy for the most part of the tax period) are subject to corporate income tax, imposta sul reddito delle società (IRES), levied at the rate of 24%.
Pursuant to the ‘worldwide principle’ on which the Italian tax system is based, as for resident individuals, the taxable income of resident corporate entities includes their worldwide income, ie, the income also sourced outside the Italian territory (tax credit in Italy for income taxes paid abroad is provided).
Income from lands and ‘instrumental’ buildings (ie, buildings directly used solely to perform the business activity and buildings whose destination cannot be changed without a complete transformation – ie, commercial or industrial buildings, offices, etc – even if not directly used or leased to third parties) are generally determined according to the tax rules applicable to business income.
The income deriving from ‘non-instrumental’ buildings (ie, residential buildings not directly used solely for the purpose of the business activity carried out and not representing available stock) forms part of the taxable business income as follows:
- For not leased building, the cadastral income, revaluated by 5% and adjusted in consideration of the owning period incurred in the tax period, increased by one-third.
- For leased buildings, the highest amount between: (i) the cadastral income, adjusted by 5% and further adjusted according to the ownership period; and (ii) the rentals referring to the relevant tax period according to the lease agreements, reduced by a maximum 15% amount of the rentals for certain maintenance expenses actually incurred (expenses exceeding 15% of rentals are not deductible from income tax).
The buildings held for the purposes of their sale or the buildings purchased or built and held for the sale (called ‘immobili merce’) will contribute to form business income.
The ‘instrumental properties’ are classified as instrumental assets according to their own nature (properties belonging to the cadastral categories A/10, B, C, D and E even when not leased or at free disposal of the taxpayer) or according to their own aim (assets used directly and solely to the enterprise activity, independently of their belonging to cadastral categories).
Related revenues, costs and depreciations (whose annual average is equal to 3%) have to be considered on their accrual basis value as reported in the account books. Maintenance costs are deductible by 5% of their amount per tax year: surplus amount may be deducted in the following
5 years.
Interest costs are deductible up to the amount of the interest receivable. Surplus amount may be deducted within the amount of the Gross Operating Profit net of the related IRES tax changes.
Therefore, expenses and other items concerning ‘non-instrumental’ buildings are generally not deductible with the exception of interest expenses on financing for the acquisition of the buildings.
A remarkable anti-avoidance rule, which may affect corporations investing in Real Estate, has been introduced in the Italian tax system, i.e. ‘Società di comodo’ fiscal regime. Such rule concerns a company set up just for tax purposes to avoid personal income tax. Fiscal authorities may subject to an additional penalty on taxation upon business income of the year if not capable to reach an established minimum amount.
Regional tax (IRAP)
Companies are subject also to IRAP regional tax, in the amount of 3.9 % (ordinary rate may be increased in measure of 0.92% by regions) whenever existing the requirement of the ‘autonomous organisation’ established by the Decree n. 446 /1997. IRAP basis of tax is formed upon the value of the ‘produzione netta’ determined by the gross margin as reported in the financial statement, except the ones related to the employees engaged with open – ended contracts, and all the ones of financial nature.
Moreover, Italian partnerships are as well subject to IRAP, but taxable basis may in some circumstances differ according to special rules established by tax law.
Non-resident companies
Income from a real estate property situated in Italy are taxed in Italy, even in case of existence of a Double Taxation Convention.
When the non-resident company does not fulfill the requirements for a permanent establishment in Italy, the rental fees are taxed separately as real estate income with the same rules for individuals (generally taxed on 95% of the rental fees).
Non-resident entities and companies are subject to IRES and IRAP taxation upon the business income arising from a permanent establishment in the Italian jurisdiction pursuant to the provisions of art. 162 Tuir and are treated in the same manner discussed above for resident companies.
Real estate solely held as an investment asset will not qualify as a permanent establishment.
INDIRECT (SHARES) HOLDING OF REAL ESTATE
This paragraph discusses the most important tax implications of the indirect (shares) holding of real estate.
First of all is discussed the impact for resident individuals and non-resident individuals. Thereafter is discussed the impact for resident companies and non-resident companies.
Resident individuals
Personal income tax (IRPEF)
Dividends distributed by Italian entities are subject to a WHT tax of 26%.
Deductibility of costs, interest payments and depreciation
Interest costs are generally deductible solely if related to the production of the business income.
Dividend WHT at 26%, cannot be offset against the amount of the tax amount due for the year.
Losses
The loss arising from a shareholding in a transparent entity can be offset in the tax basis against the same business income. Surplus may be carried forward without temporal limits in the following years up of 80% of the income amount.
Non-resident individuals
The dividends distributed to non-resident individuals, are subject to a substitute tax at 26%, independently of the qualification of the shareholder, if not differently established by the provisions of OECD treaties to avoid double taxation.
Resident companies
Corporate income tax (IRES)
Income derived from shareholding is always qualified as business income for companies and subject to IRES at a fixed rate equal to 24%. In the case when the income is related to a participation in a partnership shall be considered integrally on accrual basis.
Deductibility of costs, interest payments and depreciation
Interest costs related to loans in order to buy a share in another company are deductible in accordance with the general provisions. Depreciation, as a decrease in value of the asset, deriving from the detention of shares cannot be deducted.
Distribution of income and gains
Dividends distributed by another company subject to the corporate tax are excluded from the tax basis for the amount of 95 %. Moreover, dividends derived from the participation in companies which are resident in a jurisdiction with privileged tax regimes, shall be considered integrally to the formation of the tax basis.
Anti-tax avoidance directive.
The anti-tax avoidance directive (ATAD) as transposed into the Italian law jurisdiction has amended partially some of the general rules concerning the interest deductibility starting from 2019. Such new provisions may in some circumstances potentially decrease the amount of the deductibility of the interest costs.
Non-resident companies
Dividends paid from an Italian company to another foreign company are subject to a substitute tax at 26%, or the lower percentage established by OECD treaties to avoid double taxation.
However, if a foreign company derives income in the Italian jurisdiction through a permanent establishment will be treated in the same manner as resident companies as described above. Otherwise, if the provisions of EU Directive 2011/96 are met, dividends will be taxed only in the country of the parent company.
Real estate solely held as an investment asset will not qualify as a permanent establishment.
Italian vat & transfer taxes
| Taxpayer | Basis of tax | Tax levied | Tax rates (2023) |
| Resident individual | Rental income Transfer of real estate services | Registration Tax Transfer Taxes | 1% -2% 2% - 9% |
| Non-resident individual | Rental income Transfer of real estate services | Registration Tax Transfer Taxes | 1% -2% 2% - 9% |
| Resident company | Rental income Transfer of real estate services | Registration Tax Transfer Taxes | 1% -2% 2% - 9% |
| Non-Resident company | Rental income Transfer of real estate services | Registration Tax Transfer Taxes | 1% -2% 2% - 9% |
Value Added Tax & Registration Tax
Individuals
Introduction
The transfer of a real estate property represents ‘transfer of goods’ for VAT purposes and it falls within the scope of VAT (with the exception of non-buildable lands, never subject to VAT) only if the vendor carries on a business or is a professional taxpayer and the real estate is included among the assets concerning the business or professional activity carried out.
The Italian VAT system provides a general VAT-exemption regime in certain instance.
When a transaction falls in the scope of VAT, it should be determined if it is subject to proportional tax or if the general VAT-exemption regime applies.
Transfers of agricultural land (ie, non-buildable lands) is always outside the scope of VAT. Transfers of other kinds of land are subject to proportional VAT.
Transfers of buildings are generally VAT-exempt, with the following exceptions:
- Transfers executed by subjects that have performed construction or restructuring works within five years from the end of such works.
- After five years, if the builder/restructurer opts to apply VAT (to be expressed in
the transfer deed). - In other cases, upon the seller’s option for the VAT application.
Liability to tax
If an individual performs commercial or professional activities in Italy, in principle it will be subject
to VAT.
Basis to tax
For real estate transfers subject to VAT, the following rates apply:
- 22% ordinary rate; and
- 4% and 10%, applicable in particular cases.
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.
Rental fees are generally VAT-out of scope or VAT-exempt, and therefore subject to Registration Tax (1% or 2% rates).
The interests related to mortgage for the acquisition/renovation of the firs house are deductible from IRPEF at 19% up to €4.000.
Non-resident individuals
Non-resident individuals are treated the same as the resident individuals.
Companies
The same rules for individuals apply.
For instrumental buildings the mortgage tax is 3% and cadastral duties are 1%.
Deductibility of costs
The amortisation for instrumental properties is deductible within ministerial limits.
For partnerships the part of interest, 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.
On the other hand, for limited companies, the interests related to loans for acquisition or building properties are deductible in each tax period up to the amount of interest incomes and similar income. The excess is deductible within the limit of 30% of the gross operating profit of the core business net of the related IRES tax changes.
In addition, the energy requalification costs, incurred directly, are deductible at 50%-65% (maximum limit of €100,000).
If the seller opts for taxability, the VAT applied on the transfer of instrumental real estate is deductible. Thereby, VAT is deductible if the sellers are constructors and renovators liable to VAT.
However, for non-instrumental real estate, the VAT is not deductible because the seller is VAT-free.
Non-resident companies
Non-resident companies are generally treated the same as resident companies. VAT obligation for the purchase could be managed by means of the VAT identification procedure (or VAT fiscal representative).
Transfer Taxes
Individuals
Introduction
A transfer tax Is a tax on the passing of real estate from one person or company to another. The rights of immovable property can qualify as real estate.
Liability to tax
Seller and buyer are jointly and severally liable for the payment of registration tax.
Basis of tax
Registration Tax is based on the revaluated cadastral value (usually lower than the market price).
For transfers of buildings that are VAT-exempt or out of VAT scope (such as, eg, transfers performed by non-VAT entities), registration tax falls due in proportional amount (with a minimum amount of €1,000). The rates generally applied are the following:
- 2% if the purchaser fulfils the requirements for the ‘first home tax benefit’.
- 9% in the other cases.
For residential buildings subject to proportional VAT, Registration Tax applies at the fixed amount of €200.
For instrumental buildings under VAT application, Registration Tax is due for the fixed amount of €200, regardless of whether they are subject to proportional VAT or VAT exempt.
Cadastral and mortgage taxes
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.
Generally, the tax base of these taxes is the same used for registration tax purposes. Cadastral and mortgage taxes apply at the fixed amount of €50 each if the transfer concerns a residential building subject to 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.
Companies
The same rules for individuals apply.
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 form 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. The dividends received by the simple companies when controlled by individuals discounted the percentages of taxability of 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 2019. However, for profits produced from 2020, a 26% WHT is applicable.
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.
Fiscal unity
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/exemption provided by the Directive n. 90/ 435/CE (Parent Subsidiary Directive). Finally, if the agreements/Convention stipulated to avoid double taxation are present, the provisions contained will be relevant.
Fiscal unity
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.
Capital gains
Individuals
Introduction
Capital gains realised on the disposal of Italian immovable property normally are taxed as miscellaneous income.
Capital gains
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 26%. The transfer of the real estate to a company leads to the same consequences.
However, if the Italian real estate property 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.
Deferral of tax
If the real estate property qualifies as trade or business, the capital gains realized by selling Italian real estate properties owned for not less than three years, may be optionally taxed in five years.
Liability to tax
The capital gains deriving from the sale of properties owned for more than five years are exempt from taxation.
Basis to tax
For properties owned for less than five years the tax base follows the ordinary rates. However, it is possible to opt for the 26% substitute tax on IRPEF.
Non-resident individual
Non-resident individuals are generally treated the same as resident individuals with few exceptions.
Companies
Capital gains realised by companies are subject to 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).
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.
Losses
If realized - 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.
Non-resident company
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.
Indirect sale
Resident individual
Capital gains
Capital gains are taxed at a fixed rate of 26%.
Deferral of tax
The capital gain must be considered realized after the transfer of the participation is completed.
The capital gain should be taxed at the moment the seller perceives the payment.
Resident company
Capital gains
Capital gains are subject to the Italian corporate income tax as business income by a tax rate of 24%. Capital gains realized on participations having the requirements for the ‘participation exemption’, are exempt from taxation for the 95% of their amount.
Deferral of tax
Capital gains realized by selling participations not respecting the requirements for the participation exemption system, may be optionally taxed in five years.
Non-resident company
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 Black list they would should 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 realized 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.
DIRECT TRANSFER INTRA CONCERN (ITALIAN REAL ESTATE TO ITALIAN COMPANY)
Besides from the sale, companies have the chance to resort to extraordinary operations made between entities, to ‘give-up’ the Real estate properties owned.
Specifically referring to the ‘Transfer’ of Real Estate properties made between companies (M&A may lead to the same conclusions), it must be underlined that this kind of operation is considered in Italy as a sale for valuable consideration and can therefore bring to the application of the abovementioned rules.
Resident Company
Capital gains
Capital gains received by companies are subject to the corporate income tax as business income with a tax rate of 24% plus a regional tax rate that can assume a value included between the 3.9% and the 4.82% (it can be different on the basis of the Italian region considered). Under some conditions there is the chance not to tax the transferred values.
VAT / Transfer tax
As a general rule, the supply and lease of immovable property is VAT exempt. However, VAT is charged if a new building is sold by the company that built the real estate property or refurbished it within five years from the conclusion of the construction or refurbishment. Thereby the transaction will be taxed at a tax rate of 22% and the transfer taxes will be due for a fixed amount.
Transfer taxes apply by the acquisition of the legal or economic ownership of Italian real estate.
Fiscal unity
Under Italian law, it’s possible to form a fiscal unity if a holding company owns more than 50% of the share capital or 50% of the balance-sheet profit of its subsidiaries. The holding company and the subsidiary must be established in Italy.
Under some circumstances, two or more Italian resident sister companies may apply the fiscal unit regime if they are controlled by a common parent company resident in an EU/SEE country.
Non-resident company
Non-resident companies are treated in a different manner than the resident ones.
Italian real estate held by a foreign company are not considered to be a permanent establishment in Italy in the absence of other evidence. In some circumstances, it is possible to form a Fiscal unity with a permanent establishment in Italy. Various detailed conditions apply.
INDIRECT TRANSFER INTRA CONCERN (ITALIAN REAL ESTATE TO ITALIAN COMPANY)
Resident company
Capital gains
Under some circumstances there can be no taxation of the capital gain realised by transferring holdings.
VAT / transfer tax
The sale of investments is VAT exempt, is subject to the registration duty for a fixed amount up to 200 Euro and to the stamp duty for a fixed amount up to €16.
Deferral of tax
Capital gain realised by transferring participations not respecting the requirements for the participation exemption system, may be optionally taxed in five years.
Losses
Losses arising on the sale of shares shall reduce the business income.
Fiscal unity
Under the Italian law, it is possible to form a fiscal unity if a holding company owns more than 50% of the share capital or 50% of the balance-sheet profit of its subsidiaries. The holding company and the subsidiary must be established in Italy.
Non-resident company
Non-resident companies are treated in a different manner than the resident ones. Italian real estate held by a foreign company are not considered to be a permanent establishment in Italy in the absence of other evidence. In some circumstances, it is possible to form a Fiscal unity with a permanent establishment in Italy. Various detailed conditions apply.
DIRECT TRANSFER INTRA CONCERN (ITALIAN REAL ESTATE TO FOREIGN COMPANY)
Resident company
Capital gains
Capital gains received by companies are subject to corporate income tax as business income.
VAT / Transfer tax
According to the VAT legislation, transfer is considered as a sale for valuable consideration and is therefore a transaction liable for VAT purposes. If the transfer concerns real estate properties that are for residential uses and VAT is charged, transfer taxes are due in a fixed amount up to €600 Euro; if VAT is not charged the registration tax is due for an amount equal to 9% of the corresponding and the Mortgage and Cadastral taxes are each-one due for a fixed amount of €50 Euro.
If the transfer concerns real estate properties that are for business uses either if VAT is charged or the transfer is VAT exempt, the Registration Tax is due in a fixed amount of €200 Euro, the Mortgage and Cadastral taxes are due for an amount equal to the 3% and the 1% of the corresponding.
Transfer taxes apply by the acquisition of the legal or economic ownership of Italian real estate.
Deferral tax
Taxation on the capital gains can be deferred. Various detailed conditions apply.
Losses
Losses may be offset against other taxable Italian income.
Fiscal unity
A Foreign company can form a Fiscal unity for Italian tax purposes, as parent company if operating a business activity in Italy with a permanent establishment and being resident in a Country which with it exists an agreement against the double taxation.
Non-resident company
Non-resident companies are treated in a different manner than the resident ones. Italian real estate held by a foreign company are not considered to be a permanent establishment in Italy in the absence of other evidence.
INDIRECT TRANSFER INTRA CONCERN (ITALIAN REAL ESTATE TO FOREIGN COMPANY)
Resident company
Capital gains
Capital gains received by companies are subject to corporate income tax as business income and the tax rate is the one referred to a point.
VAT / Transfer tax
The sale of investments is out of the scope of VAT.
Deferral tax
Taxation on the capital gains can be deferred. Various detailed conditions apply.
Losses
Losses may be offset against other taxable Italian income.
Fiscal unity
A Foreign company can form a Fiscal unity for Italian tax purposes, as parent company if operating a business activity in Italy with a permanent establishment and being resident in a Country which with it exists an agreement against the double taxation.
Non-resident company
Non-resident companies are treated in a different manner than the resident ones. Italian real estate held by a foreign company are not considered to be a permanent establishment in Italy in the absence of other evidence.
TRANSFER ITALIAN REAL ESTATE TO AN EU-COMPANY
If the transferor’s home jurisdiction is in the European Union, the liability to tax on the capital gains may be avoidable if the transfer, merger and acquisition provisions apply. Several detailed conditions apply which can be found in the art. 179 of the TUIR and in the Council Directive of 19 October 2009.
Italian local taxes
| Taxpayer | Basis of tax | Tax levied | Tax rates (2023) |
| Resident individual | rev. cadastral value | Municipal Tax | Approximately 1% - see below |
| Non-resident individual | rev. cadastral value | Municipal Tax | Approximately 1% - see below |
| Resident company | rev. cadastral value | Municipal Tax | Approximately 1% - see below |
| Non-Resident company | rev. cadastral value | Municipal Tax | Approximately 1% - see below |
* local taxes are based on the revaluated cadastral value. The cadastral value is generally an amount lower than you have paid for the house, as it's based on a valuation of the property from several years ago.
Introduction
Every municipality levies an annual municipal tax on Italian real estate.
Liability to tax
Every owner or user of residential or commercial buildings in Italy is liable to local municipal tax.
Basis of tax
Municipal Property Tax (IMU)
Real estate properties (ie, buildings, building lands) are generally subject to Municipal Property Tax (IMU) which is levied on the owner of the property right or on the holder of other real estate rights, in proportion to the months of effective possession. IMU is computed in different ways, depending on the characteristics and location of the properties.
The IMU tax rates are determined by the competent municipality, within the limits stated by the law, and may vary on the characteristics of the properties and on the status of the owner. The standard IMU rate is 0.86% for properties (excluding residential properties held by individuals as their main home). However, municipalities can increase it up to 1.14% or reset it.
IMU generally is not deductible for the purpose of income tax for individuals (IRPEF) and corporate income tax (IRES) for companies. However, in case of instrumental buildings 60% of the IMU paid is deductible for IRES purpose only.
Municipal Waste Tax (TARI)
TARI is calculated based on the tariffs established by the Municipality (derived from the floor area and the business activity carried on). Generally, the computation is made directly by the Municipality and provided to the taxpayer for relevant payment.
TARI is owed by the user of the property (owner or, where there is a lease contract, the tenant)
Italian net wealth/worth taxes
Individuals
A wealth tax is not present in Italy.
A wealth tax on real estate properties (Imposta sul valore degli immobile situati all’estero or IVIE) located outside of Italy has been introduced where an individual is resident for Italian tax purposes.
The IVIE applies on the value of the real estate (i.e. the cost of the property or the market value in force where the property is located).
Vehicles for Italian real estate
Commonly used vehicles for Italian real estate
Real Estate property
An alternative to the direct acquisition of real estate properties may be the purchase of interest in ordinary corporate companies (limited liability companies, such as the S.p.a. or S.r.l.) owning such properties. From the investors’ perspective, this route has specific features, different from those associated with the direct investment in real estate.
However, in case the real estate investment is done through a partnership the income tax still is applied directly on the investor, the vehicle being considered tax transparent.
In general, the investment through a real estate corporate company generates income having a financial nature: dividends from net profit distributions and capital gains from shareholding disposals.
For personal income tax (IRPEF) purposes, the tax for both dividends and capital gains earned by individuals is applied with a 26% rate, separately from the ordinary tax base.
For corporate income tax (IRES) purposes, as far as dividends earned by corporate companies are concerned, the dividend exemption regime applies (only an amount equal to 5% of the dividend is taxable).
Specific real estate vehicles for Italian real estate
Real estate investment funds (REIF)
The Real Estate Investment Fund is a collective investment vehicle (closed end regulated fund) without legal personality, established and managed by a management company known as an SGR (Società di Gestione del Risparmio). The REIF invests, exclusively or prevalently, in real estate properties, real estate rights and shareholdings in real estate companies.
The REIF is set up as a closed-end fund.
The Italian REIF is not subject to income taxes (Corporate Income Tax - IRES – and Regional Tax on Production - IRAP).
For income generally subject to withholding taxes (WHT), for REIFs WHT is levied as definitive taxation, apart from cases in which the law expressly excludes REIFs from WHT (for example, where interest and income derived from capital investments in foreign funds).
