Selling and Transferring Italian Real Estate

DIRECT SALE OF REAL ESTATE 

RESIDENT INDIVIDUAL

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.

VAT / transfer tax

If the real estate property does not qualify as a trade or business, the supply of immovable property is exempt from VAT. However, if the real estate property 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, 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, 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 land registry taxes are equal to 1% and 3% of the consideration and the stamp duty is due for a fixed amount of €230 Euro. If the real estate property 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 corresponding but its amount can’t exceed €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 property 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

Losses on the sale of real estate properties by individuals without a trade or business are ignored. However, if the real estate property 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 individual

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

Resident company

Capital gains

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).

VAT/transfer taxes

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 by subjects different from the abovementioned ones (by option). 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.

Losses

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.

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%.

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 perceive the payment.

Losses

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
their amount.

Non-resident individual

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 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.

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 realised on participations having the requirements for the ‘participation exemption’, are exempt from taxation for the 95% of their amount.

VAT / Transfer Tax

The sale of participations is VAT exempt and is subject to the registration duty for a fixed amount equal to € 200 Euro.

Deferral of tax

Capital gains realised by selling 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. Losses realised on participations having the requirements for the ‘participation exemption’ aren’t deductible.

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 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.

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.

 

 

This report has been produced in conjunction with Nyenrode Business Universiteit

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