Taxes in the sale between individuals in Italy

Introduction

When a foreign citizen decides to buy a property in Italy, often do not fully understand the quote that the notary calculates.

This can happen because it may seem difficult to understand what taxes is needed to be paid.

In this article we deal with classifying taxes to be paid for the purchase of a property, and to understand how they are calculated in the real estate purchase between individuals.

Real estate purchase between individuals: taxes

Before to understand the amount of tax in buying a property between individuals, and the main difference from buying a first home to buying a second home, it is useful to understand how these taxes are classified.

The taxes that the buyer of a property must pay are:

cadastral tax or property tax
mortgage tax
registration tax

Cadatsral tax

The cadastral tax is a tax that the buyer must pay because there is a cadastral vault after the transfer of ownership of the property purchased, and is regulated by Legislative Decree No.347/1990 c.d. “Consolidated Text of the provisions on mortgage and cadastral taxes”.

The cadastral tax, which we treat here in reference to the purchase of a property, in general concerns all the real estate transactions, such as inheritances and donations.

Mortgage tax

The mortgage tax is regulated by Legislative Decree No. 347/1990, and is an autonomous tax due every time you make a change of ownership of a property or when a mortgage is registered on it.

The purpose is to make opposable to the third party all acts that transfer ownership of property or act on a real right.

Registration tax

Registration tax is an indirect tax since it affects transfers of wealth (for example the purchase of a property).

This tax is regulated by the Decree of the President of the Republic no. 131/1986 the c.d. “Consolidated text of the registration tax”, and is a tax that aims to remunerate the State for the service it offers to private individuals which is to keep track of some particular acts in order to provide certainty to legal transactions.

Registration tax is also the largest one to be paid when buying a property. That is why it is important to be able to calculate it.

To calculate the registration tax, however, it is necessary to refer to the cadastral value of a property.

The difference between buying from an individual and buying from a company

We also said that, in this article we deal with the taxes and duties that the buyer must pay when buying from a private individual and not when buying from a company.

So let’s see what is the difference between these two subjects:

The private: when the real estate sale is made by a subject that does not carry out it as a business activity.

The company: when the real estate sale is made within an economic activity organized by the entrepreneur and professionally exercised by him for the purpose of the production and exchange of goods and services.

How to calculate the cadastral value

To calculate the cadastral value, a cadastral survey is required.

The cadastral survey is a document issued by the Revenue Agency, which contains information registered with the Land Registry, concerning a property located in the territory of the Italian State.

Inside the cadastral survey, precisely on the right, there is a box entitled “cadastral rent”.

The cadastral rent is the income that the Revenue Agency attributes to any property that is able to produce or generate an income.

The value in this box is the basis for calculating the cadastral value.

The procedure for calculating the cadastral value is different depending on whether it is the purchase of a first or a second home:

First house purchase: the cadastral value is obtained by multiplying the cadastral rent by the coefficient of 115.5.

Second house purchase: the cadastral value is the result of the cadastral rent multiplied by the coefficient of 126.

Taxes in the purchase with “first house benefits”

Now that we have all the elements, let’s see specifically what is the calculation to be made to understand what is the amount of taxes to be paid when buying a property using the “first home benefits”.

First of all it is important to know that when you proceed with this kind of purchase, mortgage and cadastral taxes are paid in the fixed amount of € 50.00 each.

The registration tax is paid in variable amount of 2% on the cadastral value and is calculated as follows:

1. take the cadastral rent and multiply it by the coefficient of 115.5, thus obtaining the cadastral value

2. take the cadastral value and on this we calculate 2%

3. the result will be the amount of registration tax to be paid for the purchase of the property

Formula: cadastral rent x 115.5 = cadastral value à cadastral value x 2% = registration tax.

It should be remembered that the registration tax can never be less than 1000.00 euros.

To the registration tax must be added the mortgage and cadastral taxes each of the fixed measure of € 50.00.

Taxes in the purchase of the 2nd house

It is useful to say that when we talk about the purchase of the second house, we must mean the purchase of all the properties for which you can not enjoy the first house facility.

Here too, it should be noted that mortgage and cadastral taxes sell for a fixed amount of € 50.00 each.

What changes with respect to the purchase with first house facility is the multiplicative coefficient applied for the calculation of the cadastral value that will be 126 and the percentage of the registration tax that will rise to 9%.

In this case then, the operation to be done is as follows:

1. take the cadastral rent and multiply it by the coefficient of 126, thus obtaining the cadastral value

2. we take the cadastral value and on this we calculate 9%

3. the result will be the amount of registration tax to be paid for the sale of the property

Formula: cadastral rent x 126 = cadastral value à cadastral value x 9% = registration tax.

To this must be added that the registration tax can never be less than 1000.00 euros.

Also in this case to the registration tax must be added the mortgage and cadastral taxes each of the fixed measure of € 50.00.