The first home relief for the purchase of property in Italy

Introduction

In the Italian legal system, it is possible to decide to use a purchased property as a “first home.”

This choice has significant advantages in terms of paying taxes at the time of purchase, due to the application of lower rates as well as the application of fixed-rate taxes.

As is easy to guess, there are requirements and prerequisites to be met in order to qualify for the relief.

The prerequisites for the first home relief

Before listing the benefits, it is necessary to focus on the prerequisites necessary to make the purchase as a first home.

First of all, the property must be the subject of a deed of transfer for consideration.

In addition, except for the possibility that we will see later (“The benefit for those who already own a property used as a first home”), the buyer must not be the holder of other real rights to real estate located in the same municipality, nor must he or she be the holder, of real rights to property located throughout the country, purchased as a first home, not even under a community of property or by shares.

On the other hand, from the subjective point of view, the purchaser must be an individual, since it is not possible for the purchasing company to use the property as a primary residence.

Then there are other prerequisites to be met that deserve specific discussion.

The cadastral categories

The purchased building must belong to certain cadastral categories:

– A/2 civilian-type dwelling

– A/3 dwelling of economic type

– A/4 dwelling of the working-class type

– A/5 dwelling of ultra-popular type

– A/6 dwelling of rural type

– A/7 dwelling in cottages

No relief is allowed for the remaining categories:

– A/1 mansion-type dwelling

– A/8 dwelling in villas

– A/9 castles and palaces of historic and artistic value

The location of the real estate

Of relevance is also the location of the real estate, since it must be in the municipality where the buyer has his residence or establishes it within the term of 18 months starting from the notarial deed of purchase.

In this regard, it is necessary to recall an important novelty: when the purchaser has moved abroad for work reasons, he does not necessarily have to establish his residence in the municipality where the property is located in case he has resided in the same municipality or has carried out his activity here for at least 5 years or, again, when the municipality is the one of his birth (Article 2 Decree Law No. 69/2023).

The relief for those who already own a property used as a first home

The purchaser may apply for the first home relief even if he/she owns a property for which he/she has already taken advantage of the same relief.

In this case, the property already owned must be disposed of within one year starting from the day of the new purchase; if this does not happen, the taxpayer-buyer, in addition to having to pay taxes to the greater extent and accrued interest, is also subject to the application of a 30% penalty.

The benefits of first home relief

First home benefits consist of a reduction of the taxes payable at the time of the notarial deed of purchase, and they differ in whether the seller is a private person or a enterprise selling under VAT exemption or a enterprise that sells under VAT.

Purchase from seller who is a private person or enterprise selling under VAT exemption

In case the seller is a private person or enterprise selling under the VAT exemption regime, the taxes to be paid are calculated as follows:

– registration tax in the reduced amount of 2%; it should be borne in mind that the minimum to be paid for registration tax is always euro 1,000.00;

– mortgage tax in the amount of euro 50.00;

– cadastral tax amounting to euro 50.00.

Purchase from enterprise seller

A private individual who purchases from an enterprise that sells under VAT can also benefit from the first home benefits:

– VAT rate equal to 4%

– registration tax in a fixed amount equal to euro 200.00;

– mortgage tax in a fixed amount equal to euro 200.00;

– cadastral tax in a fixed amount of 200.00 euros.

The taxable base

The rates listed above apply to the taxable base, which may be different in consideration of the type of transfer.

In case the purchase is subject to VAT, the taxable base is the price of the sale.

In the event that the purchase is not subject to VAT, the rate may be applied, at the request of the buyer to be mentioned in the deed of sale, on the so-called price-value, which implies taxation on the cadastral value of the real estate, as a result of a certain calculation (multiplication of the total cadastral rent of the building by a predetermined coefficient).