A second home in Italy
If you have bought a house in Italy, but do not intend to live in it as your habitual abode, it will be considered a second home and not an “abitazione principale” or “prima casa” (main home).
Under Italian law, taxes on second homes are higher than on first or main homes – or rather a main home qualifies from a series of tax reliefs not available on a second one. This is due to the higher degree of public interest in a principal residence reflecting constitutional rights to a home.
Taxes are higher from the moment of purchase, as you will not be able to take advantage of the “agevolazioni prima casa” (first home benefits) and the various taxes will have to be paid in full (see the post “Italian Real Estate Purchase Tax Guide” on the website).
Expenses for utilities (energy, water etc) may also be higher for a second home as result of reduced tariffs for the first home.
Taxes on the second home
The taxes, related to real estate property, that you have to face are:
• IRPEF “Imposta sul Reddito delle Persone Fisiche” (Personal Income Tax) on the deemed catastral (land registry income), on rents and on any capital gain on a disposal within 5 years of purchase;
• IMU “Imposta Municipale Unica” (Unified Municipal Tax);
• TARI “Tassa sui Rifiuti” (Waste Tax).
Previously there was also the TASI “Tributo sui servizi indivisibili” – local services tax, which has been abolished with effect from 1 January 2020.
IRPEF and IMU taxes are calculated on the cadastral income of the property, revalued according to a series of coefficients. The cadastral rent can be obtained from the visura catastale.
As far as IRPEF is concerned, the second home is subject to income tax at the ordinary scale rates.
The property income must be indicated in the RA/RB sections of the Italian income tax return. From a tax point of view, income from property that is subject to IMU is generally not liable IRPEF.
There is an IMU-IRPEF substitution effect, which operates for non-rented property.
In the event that the property is rented out, IRPEF is due on the rental income , but in this case it is paid on the actual income for the period in which the property is rented and on the revalued cadastral income for the period or periods in which the property is not rented.
Finally, it should be borne in mind that if you have no other source of income in Italy, and your total income from property including the deemed catastral/land registry income, does not exceed €500.00, you do not need to submit an income tax return.
Also you do not need to file an income tax return, if you have no other income or foreign assets, if the your total income from your Italian real estate exceeds € 500.00, but the total tax due is lower than € 10.33.
As far as IMU is concerned, from 2020 the basic rate set by the State is 0.86%, to be calculated on the deemed cadastral income, uplifted by a set coefficient.
The rate may vary depending on the cadastral category to which the property belongs and, in addition, individual municipalities may decide to increase the rate up to a maximum of 0.106.
IMU must be paid – by the owner of the property and for the period of the year in which he possessed it – in two annual instalments, on 16 December and 16 June respectively. The F24 form must be used with the relevant tax code and the code identifying the municipality, requiring that payment be made from an account held with an Italian bank that offers this service. Alternatively payment can be made at a Post Office using cash or a bank card.
The waste tax (TARI) does not follow the above rules and is always due regardless of the cadastral category or habitual residence. TARI is generally payable on receipt of a demand for payment issued by your municipality.
The calculation of the tax varies according to rates applied by the municipality and the number of family members living in the property.
This last point, when it comes to second homes, creates difficulties in the calculation, but some municipalities provide reductions depending on the circumstances.
For those who do not reside in Italy, dealing with all the necessary formalities can be difficult.
Therefore, we have developed a Tax Management Service for Homes in Italy, including:
1. Obtaining a copy of the updated visura catastale;
2. IMU: calculation of the amount due and payment of the two annual instalments;
3. Assistance for TARI payments;
4. IRPEF: submission of the Italian tax return for Section RB and support with payment of income tax.
The package may vary according to specific circumstances.
The service is also available for those who reside in the property or for the “abitazione principale”
Please contact us here if you would like more details.