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Newsletter March 2008
The Italian property market tax legislation and issues, Latium, Italy
Topic : Real Estate News
South Pontino (Latium, Italy) types of properties :
Throughout the long history of this area of southern Latium in Italy, numerous famous civilisations have strongly influenced this territory of hills, mountains and sea.
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3000 years of history are still visible in the medieval fortified hill and seaside towns, Romans, Etruscan and mysterious ruins, monasteries and convents between Rome and Naples or on the old Pontina Road. Dozens of ancient towers on the sea. This is the South Pontino and the area, apart from Rome, is one of the hearts of undiscovered Italy. The countryside is plenty of wonderful 17th, 18th, and 19th-century houses and farmhouses , all in the typical Italian style so loved and sought by foreigners.
The nearness to Rome is also a plus. Living in a beautiful countryside or promontory on the sea and be in Rome in a little more than one hour by train is an advantage. For peace and nature lovers the final destination could well be a country house or a farmhouse in the countryside and fields of the hillside villages.
Nestled on the mountains the picturesque villages of Campodimele, Maranola , Monte San Biagio, Spigno Saturnia, Pico and Pastena overlook valleys and the sea. A long weekend or daytrip with lunch or dinner in Rome itself is obviously a realistic charming option, not only for its cultural interests and shopping, but also for the easy access it provides to the rest of Italy and Europe. Three international airports (Fiumicino, Ciampino and Capodichino) offer a good variety of frequent low-cost flights to and from all major destinations. Lazio is still genuinely undeveloped. In a direct comparison with Tuscany or Umbria, the property prices are still relatively lower.
Depending on people’s taste, there is a good choice of rustic village houses and country cottages with plot of land for countryside lovers. Other prefer a seaside apartment or villa with garden, a grand town house or apartment either in Gaeta o Terracina or one of the smaller villages on the hills, a old farmhouse or even a disused monastery or castle like in Castellonorato near Formia.
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Before you buy your home in Italy :
Once found the home of your dreams and you face the practical purchasing options here for you some clarifications according to the Italian property market tax legislation. As Italian real estate agents we believe informing the client in every detail is an essential part of our job. We can advice you clearly about the buying process. Here some tax issues and tips.
If someone buys a house as a first home, the so called “prima casa” in Italian they will obtain the reduced taxation rate (or ‘imposte’ in Italian) of 3% instead of the full tax of 10%. However, if then owners decide to sell within five years, not only will have to pay the difference (7%) back to the state, but also have to pay the Capital Gain Tax (CGT).
Owners will be liable to pay the newly introduced capital gains rate of 12.5% on any profit made from the sale of their property if bought and then sold within five years.
The five year rule is still valid for all irrespective whether owners register it a first or second home. If however, someone purchases another property as first home (‘prima casa’) within one year from having sold their house, still have to pay CGT, although the taxman fees (the ‘imposte’) remains the same at 3%.
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The large sitting-dining room in the farmhouse Casale del Conca (Gaeta, Italy)
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View from a window on a small terrace in Casale del Conca, our 17th century property | |
As a non-resident property owner in Italy, you may be still liable to pay for income tax, capital gains, inheritance tax and value added tax wealth tax. Each person situation varies considerably and it is best to seek specialist advice from a tax consultant who has a good knowledge of the Italian tax system. If you wish to know more what is important to know before buying your property in Italy here there is your basic checklist*.
Italy: Income tax and property (Imposta sul Reddito delle Persone Fisiche (IRPEF) :
A person not resident in Italy for tax purposes must still make an annual declaration for income tax. The Italian taxman is only involved with any income you derive from activities in Italy, not your income generated abroad.
Typical examples of this will be income you may make from letting your Italian property. If you let your Italian property, normally you will have to declare the income received.
However, it is good to know that home owners can to set off certain expenses against that income. This is the case of repairs of various kind, expenses for the building management and also local council taxes.
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For most people the residue is taxed at about 30%. But, if owners rent out the home only occasionally, the amount of taxable percentage may vary between 19% and 46%, depending on the amount. If the house is rented only occasionally, the best option is to make sure to draw up a short term rental contract to make sure that your home will be free next summer or next year when you wish to use it again. Short term contracts are also a little more difficult to be detected by the Italian tax authorities and are very easy and uncomplicated to declare. Your trusted real estate agent should also be able to help you in drawing such type of contract when renting out the property.
As this income is part of your world wide income it will have to be declared to the country where you live, but double taxation relief does exist as a result of a Treaty between the two countries. You do not need to file a tax declaration if you have no income in Italy.
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Britons planning to live in Italy: Tax exemption?
For Britons buying properties and planning to live in Italy is important to be aware that the Inland Revenue rule is that even if you are not resident of the UK you will normally be liable to UK income, which in your case is your UK Company pension. But there may be circumstances, however, where there are taxes to pay also in the country where you live. Italy has a double taxation with the UK. In many cases it is always a good idea to look for expert advice and check out if this ruling applies to your situation, so that you may be able to claim the related tax exemption or relief.
I you want be familiar with the steps to take during an Italian property buying process you can read here more about the legal side of a purchase and property ownership issues.
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View from Casale del Conca higher roof terrace
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