Taxation about Property Purchase, Sale, and Inheritance

Italian fiscal aspects in the property purchase

Introduction

When buying a property, one must consider the taxation involved in the purchase. The buyer is required to pay a registration tax of 2% (for the primary residence), instead of 9%, on the cadastral value of the property. Additionally, there are fixed charges of 50 euros each for the mortgage tax and cadastral tax in the case of purchasing a primary residence.

Let’s explore everything there is to know about taxes when buying a house, whether from a private seller, a company, also in case of a second home purchase.

How many and which taxes are paid for the purchase of a house?

To get an accurate picture and calculate the expenses for notary fees in the case of buying a house, it’s essential to be thorough and not forget anything. Overall, the taxes for buying a house include:

  • Registration tax
  • VAT
  • Cadastral tax
  • Mortgage tax
  • Stamp duty

However, to determine precisely which taxes are due for the purchase of a house, it’s necessary to analyze whether it is a first or second home purchase and whether it is purchased from a private seller or a company.

Registration tax and VAT

The taxes for buying a house involve paying a registration tax of 9% of the cadastral value of the property (in addition to the fixed cadastral and mortgage taxes, both requiring a payment of 50 euros each). However, in some cases, instead of the registration tax, VAT must be paid if the company that built the property completed the work within the last 5 years.

Moreover, VAT must be paid for the purchase of a house even if the property is classified as social housing (10% is calculated on the final price of the property). In these cases, the payment of the cadastral, mortgage, and registration taxes totaling 600 euros is also required.

Another scenario is when the purchased property is considered a luxury property. In this case, the taxes for buying a house will be 22% regarding VAT. Additionally, the payment of the mortgage tax of 90 euros and the stamp duty of 230 euros is required.

Taxation for buying the first home

The taxes for buying a first home involve different expenses, thanks to the so-called first home benefits. To benefit from them, specific requirements must be met:

  • The property belongs to certain cadastral categories (A/2, A/3, A/4, A/5, A/6, A/7, A/11).
  • The property is located in the municipality where the buyer resides, works, or intends to establish a residence.
  • The buyer does not own any other property.

Taxes for buying the first home from a private seller

The taxation for buying a first home, if the seller is a private individual or a company selling without VAT, include:

  • Proportional registration tax at a rate of 2% (instead of 9%)
  • Fixed mortgage tax of 50 euros
  • Fixed cadastral tax of 50 euros
  • Taxes for buying the first home from a company

The taxes for buying a first home, if the seller is a company subject to VAT, include:

  • Reduced VAT at 4%
  • Fixed registration tax of 200 euros
  • Fixed mortgage tax of 200 euros
  • Fixed cadastral tax of 200 euros

Taxation for buying a second home

In the case of buying a second home, in addition to the taxes for the property buyer (registration, mortgage, and cadastral taxes), an additional tax for property maintenance is required, as property owners are also obligated to pay the IMU (Property Tax).

Price-value system: when it applies

In detail, the price-value system applies when the purchase of a home is subject to proportional registration tax, and the buyer is an individual (not engaged in commercial, artistic, or professional activities). It can also be applied in the absence of first-home benefits.

The price-value system can be used in property transactions where both parties are private individuals, as well as when an individual purchases a property from sellers not subject to VAT (such as associations, foundations, and similar entities). The same applies to transfers, always to individuals, from companies or businesses under VAT exemption.

Registration tax, how is it calculated?

In light of the explanation, let’s provide a practical example to understand how registration tax is calculated. Consider the case of purchasing a residential property for 200.000 euros with a cadastral income of 900 euros. Using the price-value system, the taxable base for applying the 9% registration tax is calculated as follows: 900 x 1.05 x 120 = 113.400 euros.

Therefore, the registration tax due would amount to 10.206 euros (113.400 x 9%). If the “price-value” rule were not applied, the tax calculation would have to consider the agreed-upon value (200.000 euros) and would be 18.000 euros (200.000 x 9%).