The Italian Tax Code (in Italian, codice fiscale) is your Tax Identity Number in Italy. There are several times when you are likely to be required to produce your Italian Tax Code:
- When you buy a property
- Opening a bank account
- Dealing with the utility companies
- Taking out insurance
- Dealing with the tax authorities
- Buying or selling shares, bonds and stocks
- Buying a car
The calculation of Taxes in Italy is quite complicated and we do not have the space here to provide a detailed explanation.
However, in general, the transfer taxes when you buy a residential property are as follows, calculated on the cadastral value of the property which is, in general, much lower than the transfer price:
- When you buy from a developer you must pay 10% VAT (22% if the property is registered as luxury). If you take up residency within 18 months from the purchase and it is your “first home” (prima casa) in Italy, VAT is 4% and a fixed rate of euro 504 for the other taxes
- When you buy from private or a company not considered developer, you must pay 10% transfer taxes (7% imposta di registro, 3% imposta ipotecaria, 1% imposta catastale). If you buy a “first home” you have to pay 3% imposta registro and a fixed rate of euro 336 for the ipotecaria and catastale taxes Transfer taxes are normally paid to the Notary who calculates the amount and transfers the payment to the Tax Office.
Capital gains (Plusvalenza), a tax based on the increase in the value of the property since the last transfer, is applicable only if the property is re-transferred within 5 years from its purchase. The rate is 20% on the capital gain to be calculated by the Notary and checked by your lawyer.
If you are non-resident you must declare any income you have earned in Italy.
This applies even if you receive this income by renting out to people from your home country and the money never touches Italy.
If you do not receive any rent from the property you do not have to pay any income tax. However, it may be necessary to submit the relevant Tax Declaration.
You will also normally have to declare any income in the country where you are tax resident but can normally offset the tax paid in Italy through Double Taxation Treaties.
Tax Residency Status in Italy
The taxes that you pay when you buy a property in Italy will normally depend on whether you are resident there or not.
Tax residence is a determined by a number of factors:
- How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.
- Is your main home there? If it is then you are likely to be tax resident there.
- Is your main economic interest there? If so you are likely to be tax resident there.
- If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country.
- Do not be tempted to have selective amnesia when it comes to declaring taxes. The authorities in both Italy and the UK are clamping down on people who do not do things properly.
- Sometimes you should declare something for tax purposes in one country and also in another. Italy and the UK have a Double Taxation Treaty which means that you don’t normally pay tax twice and can offset the tax paid in the other country against the tax that you would otherwise pay in your home country.