New property taxes in Italy from 2014.

The revolution of registration taxes and other taxes related to the purchase of a house in Italy.

 

Who gains and who doesn’t?

Beginning January 2014, buying an apartment could be less costly in some cases, but more expensive in others. Here are the new features recently introduced by the Italian legislature. They contain information that is good to know…

Re-appended taxes

It should be noted that taxes on the purchase of a property are varied or rather complicated, as some may say. Indeed, there are different tax rules, with different tax rates, depending on what you buy (first home, second home, land, etc..), and depending on the type of seller (an individual, a private company, etc..).

Rules in force until December 31

Let’s begin with the purchase of the primary house (prima casa) of an individual. When you buy a property that is not considered the “prima casa” of an individual, you have to pay these following taxes:

Registration fee of 7%
Mortgage tax 2%
Cadastral tax 1%
On the other hand, if the property purchased is a “prima casa” the
Registration fee drops to 3%
Mortgage tax = 168 euro
Cadastral tax = 168 euro
Great savings!
But in January 2014, things should be even better.

New rules as of January 1, 2014

Following the mini-government reform, and subject to last minute changes, as of January 1, 2014, the registration tax on the purchase of a “prima casa” from an individual will drop from 3% to 2% (with a minimum of 1,000 euros), while mortgage tax and cadastral tax decrease from € 168 to just € 50 each. This means that in many cases, the purchaser will be left with a tidy sum. To understand this concept, let’s have an example:
Mr. Henry decides to buy a private apartment in Rome, taking advantage of tax breaks for the “prima casa”. Assuming a tax base of 300,000 Euros, current taxes payable on the acquisition are:

Registration tax 3% = € 9,000
Mortgage tax = € 168
Cadastral tax = € 168
for a total of € 9,336
The new rules on tax treatment will be more rewarding and Mr. Henry will only have to pay:
Registration tax 2% = € 6000,
Mortgage tax = € 50
Cadastral tax = € 50
With a total of € 6100. A gain of more than € 3,200!

Reductions are possible, but only if…

The new tax benefits for purchasing a “prima casa” will only come into force on January 1, 2014. Before reviewing the new conditions, let’s go over what is currently applicable:

• The house must not have luxury features (see the upcoming news);
• The property must be located in the municipality where the buyer resides or plans to reside within 18 months of signing the deed or in the municipality in which he carries out his main activity or, if transferred abroad for work, in which the employer has its headquarters.

And there’s more:

At the signing of the deed of purchase, the buyer must declare the following:

• he must not be the owner or spouse, hold property rights, usufruct, use and habitation of other houses in the municipality where the property is purchased with these tax benefits
• not hold, even through shares or legal communion, within the country, the rights of ownership, use, usufruct, housing or bare ownership of another house, bought, even by the spouse, who has already benefited from tax incentives for the purchase of a “prima casa” Commit
• to establish residency within eighteen months in the municipality where the property is purchased, if not already residing there.

Simplifications

As of January 1, 2014, one of the first conditions will be redefined – the property should not be a luxury. To verify the classification of the apartment, check the cadastral category in which the building is under. According to the new rules, these buildings are considered luxury and do not reap the tax benefits of a “prima casa”:

A / 1, manor-style houses
A / 8, villas
A / 9, castles and palaces of prominent artistic and historical value.

Purchasing a “Prima Casa” from the manufacturer

Let’s briefly review what happens if the purchase of a first home is made directly from a company that charges VAT. Currently, even the direct purchase of a “prima casa” from the manufacturer can have some attractive tax benefits. If you are entitled to “prima casa” benefits, then the rate of VAT will be reduced to 4% and the registration fee, mortgage and land registry are all a fixed amount of 168 euros each. As of January 1, 2014, there will not be many changes: the VAT rate will stay 4%, while the registration, mortgage and cadastral tax will increase to 200 euros each, so a slight increase.

Example

Mr. Mario wants to buy a new apartment in the capital from an individual company that charges VAT. Mr. Mario meets all the requirements for “prima casa” tax benefits.

Assuming a tax base of 300,000 Euros, current taxes payable on the acquisition are as follows:

VAT 300,000 x 4% = € 12,000
Registration tax = € 168,
Mortgage tax = € 168,
Cadastral tax = € 168,
For a total of € 12,504

With the new rules, taxes will be slightly less rewarding:
VAT 300,000 x 4% = € 12,000
Registration tax = € 200
Mortgage tax = € 200
Cadastral tax € 200
For a total of € 12,600.
An increase of about one hundred euro in total.

Purchasing a second home from an individual

It is not always possible to respect all the necessary conditions in order to qualify for the tax benefits of the “prima casa.” Sometimes, even a small share of property denies the right to a tax bonus, therefore making the taxes much heavier. But now we begin to consider buying another home from an individual. According to current rules, the taxes paid to the tax authorities are:

Registration tax 7%
Mortgage tax 2%
Cadastral tax 1%
(7+2+1=10) which is a total of 10% of the purchase price.

Under the new rules, however, things should improve: the registration tax increases to 9%, but the registration, mortgage and cadastral taxes will have a fixed amount of € 50 each.

Example

Assuming a tax of 300,000 Euros, current taxes on the acquisition by a private entity are:

Registration tax 7% = € 21,000
Mortgage tax 2% = € 6,000
Cadastral tax 1% = € 3,000
A total of € 30,000

With the new rules on tax treatment, taxes will generally be cheaper:
Registration fee 9% = € 27,000
Mortgage tax € 50
Cadastral tax € 50
For a total of € 27,100. A total economy of almost € 3,000.

Purchasing a second home from a company

The second home can be purchased through a company, a manufacturer that has very attractive prices, or a real estate company that buys and sells real estate to the public. In this case, if the company charges VAT, one must deal with this tax. Today, the VAT is a standard rate of 10% (except in the case of real estate). It is in addition to registration, mortgage and cadastral taxes, which have the fixed amount of EUR 168 each. From January 2014, things should remain substantially the same, the tax rate will remain the same, but the other three taxes (registration, mortgage and cadastral) will go up to 200 euros per share.

Example

Mr. John decides to buy a second apartment from a company that charges VAT. Always assuming a tax base of 300,000 Euros, current taxes payable on the acquisition are as follows:

10% VAT = € 30,000
Registration tax = € 168,
Mortgage tax = € 168,
Cadastral tax = € 168,
Totaling € 30,504

With the new tax rules:
10% VAT = € 30,000
Registration fee € 200,
Mortgage tax = € 200,
Cadastral tax = € 200,
A total of € 30,600. Not much of a difference!