Understanding Italian Taxes When Buying a Second Home

Italy’s enchanting landscapes, rich history, and cultural heritage make it a dream destination for property buyers worldwide. However, purchasing a second home in Italy—especially as a non-resident or foreign investor—comes with its own unique set of tax obligations and legal considerations. Understanding the structure and impact of taxes in Italy is essential to make an informed real estate investment and to avoid unpleasant surprises and unnecessary costs.

In this comprehensive guide brought to you by IMMO ABROAD, we break down every facet of taxation you’ll encounter when buying a second home in Italy. Whether you seek a sun-soaked villa in Tuscany, a lakeside residence in Lombardy, or a coastal retreat in Sicily, this article walks you through all the taxes you need to prepare for—before, during, and after your purchase.

Who Pays Taxes When Purchasing a Home in Italy?

Understanding your fiscal status is fundamental. In Italy, both residents and non-residents can purchase property. However, taxes and eligibility for certain deductions may differ. If you are not an Italian resident and you intend to purchase a home as a holiday or investment property—your second home—the tax rates and rules you face can be notably different compared to purchasing a prima casa (primary residence).

• Residents: Those who spend at least 183 days a year in Italy or have their main center of interests in Italy.
• Non-Residents: Those who reside outside Italy but wish to buy a holiday home.

In most cases, buying a second home is treated with stricter tax rules than a first home, meaning higher rates and fewer exemptions apply.

The Key Types of Taxes Involved in the Purchase

Several distinct taxes apply when buying real estate in Italy. Some are one-off transactional taxes; others recur annually. In broad terms, the principal taxes to factor in are:

1. Registration tax (Imposta di Registro)
2. VAT (IVA – Imposta sul Valore Aggiunto)
3. Land registry and cadastral taxes (Imposta Catastale & Imposta Ipotecaria)
4. Municipal property tax (IMU – Imposta Municipale Unica)
5. Waste collection tax (TARI)
6. Notary and legal fees
7. Income tax on potential rental yields
8. Wealth taxes for non-residents
9. Inheritance and gift tax

Each type of tax has its own calculation basis and due date. Let’s explore them in detail.

Registration Tax Versus VAT: Deciding the Applicable Tax

The most significant taxes at the moment of purchase are either the registration tax or VAT. The applicable tax depends largely on the status of the seller:

• If buying from a private individual or a company selling after 5+ years of ownership: Registration tax applies
• If buying new construction or from a developer/constructor who owns it for less than 5 years: VAT applies

Registration Tax (Imposta di Registro)

For second homes, the registration tax is typically 9% of the "cadastral value" or declared value—never less than €1,000. The cadastral value is usually lower than market price, but authorities may challenge artificially low declared values. For non-primary residences, this is significantly higher than the 2% rate for first homes.

VAT (IVA - Value Added Tax)

If the transaction falls under VAT (usually for new properties sold by the builder within 5 years of completion), the rate for a second home is 10% of the declared price. Luxury properties—those classified as A/1, A/8, or A/9—attract 22% VAT. The buyer must also pay fixed cadastral and mortgage taxes.

• When registration tax applies: Cadastral value is usually the reference base.
• When VAT applies: Official transaction value is used as the base.

Your legal advisor will clarify which scenario fits your purchase and how to minimize exposure, but generally, the purchase of a second home faces higher upfront tax charges than a first home.

Other Entry Taxes: The Cadastral and Mortgage Taxes

Cadastral Tax (Imposta Catastale)

For non-primary residences, the cadastral tax is a fixed amount of €50, whether you pay registration tax or VAT. This amount is due at the time of transfer of ownership.

Mortgage Tax (Imposta Ipotecaria)

This fixed tax of €50 is also due, regardless of purchase price or property size. Both these taxes contribute to updating ownership records in the respective Italian registries.

Annual Property Taxes: IMU, TASI, and TARI

IMU – Municipal Property Tax

The IMU is the single largest annual tax for second home owners in Italy. While residents can receive significant exemptions for their primary home, IMU always applies in full to second homes. Rates generally range between 0.76% and 1.06% of the revalued cadastral value but can be set higher by each local municipality (comune).

The IMU is calculated as follows:

1. Identify the property’s cadastral income (rendita catastale) from the land registry.
2. Reevaluate this figure by adding 5% to it.
3. Multiply by 160 (the multiplier for residential properties).
4. Apply the local common IMU rate to reach the annual levy.

Failure to pay IMU leads to heavy penalties. The payment is split into two installments: June and December each year, based on the previous year’s parameter. It is your responsibility—not the local authorities'—to remember the deadlines and pay on time.

TARI – Waste Collection Tax

The TARI is an annual tax imposed by municipalities to cover refuse and environmental services. The amount you pay is determined by:

• Size (square meters) of your home
• Number of occupants (for non-residents, usually one person is considered)

Though less costly than IMU, TARI is still significant and is invoiced by your local city hall.

Additional Local Taxes

Some communes implement extra levies—such as the addizionale comunale or addizionale provinciale, which are minor surcharges to property taxes or utility bills.

Ongoing Obligations: Tax Returns and Rental Income

Reporting Property in Your Tax Return

Even as a non-resident, you are required to file an Italian tax return if you derive income in Italy (e.g., through rental of your second home), or if you own property above a certain value. Failing to do so may result in fines and back taxes.

Income Tax on Rental Yield

If you rent out your second home, you must declare this rental income to the Italian tax authorities. Rental income is taxed as follows:

• Standard (Progressive) Tax Rates: Rental income is added to your total income and taxed at Italy’s progressive rates (23%–43%).
• “Cedolare Secca”: Flat Tax Option: Non-residents can opt for a flat substitute tax of 21% (for standard contracts) or 10% (for contracts to residents of main towns with discounted rents). This excludes any deductions but is simpler to apply.

Foreign owners must check any double-taxation treaty between Italy and their country of residence to avoid dual taxation on worldwide income.

Taxation of Non-Italian (“Foreign”) Buyers

While EU citizens and non-EU citizens alike can buy property in Italy, non-residents should be aware of several extra nuances:

• Non-residents are not eligible for lower “first home” purchase taxes.
• Second homes are always taxed at the higher rates for all entry and annual taxes, regardless of citizenship.
• If you become an Italian resident post-purchase, you may request reclassification, but it’s not retroactive.
• Some countries may require declaration of overseas property on your home country tax return (e.g., France, UK, US).

Clients should always consult a tax advisor with international expertise when buying or holding overseas real estate.

Purchase Costs in Addition to Taxes

Besides the taxes discussed, don’t forget to budget for compulsory transactional costs:

• Notary Costs: Completion must occur before a Notaio, a public official who handles land and office registry entries. Fees typically range from 1–2.5% of the property value, often with a €2,000–€5,000 minimum.
• Legal and Translator Fees: Required for due diligence, translation of contracts, and assistance at the notary’s office. Fees vary widely based on complexity and language requirements.
• Agency Fees: When using real estate professionals, the standard fee is 3%–4% (+ VAT) of the sale price, split between seller and buyer. Always clarify in advance what your obligations are.

It is vital to confirm whether the stated sale price includes or excludes taxes and fees to avoid underestimating total expenditure.

Owning a Second Home in Italy: Annual Compliance under Italian Law

Registering with Authorities

Property owners must register with the Italian tax authority (Agenzia delle Entrate). All taxes should be paid using the unique property code (codice catastale) assigned to your asset. Additionally, if you plan to let out your home, you must file details with the local police and municipality.

Utilities and Insurance

Opening accounts for utilities (water, electricity, gas, internet) involves registering tax codes and updating local authorities. Comprehensive home insurance, while not compulsory, is highly advisable, primarily to cover risks such as earthquake, flood, and fire, which are not rare in various Italian regions.

Homeowner Associations and Maintenance Fees

If your property is in a block or complex, you’ll pay annual condominio fees towards maintenance, security, cleaning, and communal facilities. These are independent of state taxes but are an essential recurring household cost.

Inheritance and Gift Taxes on Italian Property

Inheritance Tax

Planning for the future is essential. In the event of inheritance, Italian state taxes apply to properties according to kinship between deceased and beneficiary:

• Spouse & direct descendants: 4% for value above €1 million
• Siblings & relatives up to 4th degree: 6% for value above €100,000
• Others: 8% with no threshold

Inheritance involving foreigners presents additional documentation and declaration requirements.

Gift Tax

Gifts of real estate (inter vivos transfers) are taxed identically. Such transfers must be formalized before a notary and registered.

Your estate plan should be revisited regularly, especially if your second home is significant in value or is owned with other individuals/family members.

Case Studies: Tax Calculations for Different Property Types

Example 1: Restored Farmhouse in Umbria, Bought from a Private Seller

Let’s assume:

• Purchase price: €300,000
• Cadastral value: €140,000
• Not a luxury property

1. Registration Tax: 9% of €140,000 = €12,600
2. Cadastral Tax: €50
3. Mortgage Tax: €50
4. IMU (annual): Assume rendita catastale is €600. After revaluation and multiplication: (€600 + 5%) x 160 = €100,800. Suppose IMU rate is 0.96% → €968 annually.
5. TARI: Typically €150–€350, depending on area and size.

Total upfront government taxes: €12,700. Ongoing annual taxes: roughly €1,200–€1,400 (primarily IMU + TARI).

Example 2: Newly Built Lakefront Apartment from a Developer

Assume:

• Purchase price: €600,000 (VAT applies)
• VAT: 10% of €600,000 = €60,000
• Cadastral and Mortgage Tax: €50 each

• Upfront taxes:
  • VAT: €60,000
  • Cadastral: €50
  • Mortgage: €50

If the lakefront apartment is classified as luxury (A/1, A/8, A/9), VAT rises to 22%.

Example 3: City-Center Flat, Renovated & Rented Out

• Market rent: €12,000 per year

• Annual taxes:
  • IMU: calculated as above (commune-specific)
  • TARI: as above
  • Income Tax: If opting for 21% cedolare secca → €2,520 per year on gross rental income. No further income tax, but municipal surcharges may apply.

Potential Tax Benefits and Incentives

For buyers of second homes, tax relief is limited compared to first-time buyers. However, some possibilities exist:

• Restoration Bonus (Bonus Ristrutturazioni): Up to 50% tax deduction, spread over 10 years, on qualified renovations; subject to various maximums and conditions, and available to resident/non-resident owners alike.
• Ecobonus: 50%–65% deduction for energy-efficient improvements, also over 10 years.
• Furnishing Bonus: For purchases of furniture and large appliances as part of a renovation project.

These deductions are typically used to offset Italian income tax, so only beneficial to those who pay such tax (e.g., those earning rental income in Italy).

Local councils or regions may run additional schemes, especially for the restoration of historic properties or encouraging rural development.

Legal and Fiscal Risks: How to Avoid Common Pitfalls

The Italian tax system is complex. Missteps can cause significant financial and legal issues:

• Under-Declaration of Value: Attempting to reduce taxes by declaring below-market values is illegal and regularly checked by authorities.
• Late Payments: Failure to pay IMU or file a return on time incurs fines of up to 200% of underpaid tax, plus interest.
• Unregistered Rentals: Renting your property without proper registration can lead to fines and even criminal proceedings.
• Incorrect Ownership Structure: Direct ownership versus ownership via company or trust has radically different tax outcomes for foreign investors.
• Inheritance Issues: Italian succession law can override your home country’s will or estate plan. Consult a cross-border legal expert.

Due diligence is essential: always engage local legal, fiscal, and property professionals to ensure compliance from day one.

Tax Planning Strategies for Second-Home Buyers

Proactive and knowledgeable tax planning can help minimize exposure:

• Choose the Right Ownership Structure: Buying individually, jointly (with spouse or children), or through an entity (company, partnership, or trust) all have major fiscal implications. The optimal structure depends on personal situation, intended use, and inheritance planning.
• Plan for Inheritance: Consider gifting shares, using life insurance, or placing property in a structure that matches your family’s succession wishes and limits exposure to inheritance tax.
• Take Advantage of Renovation and Energy Incentives: If you plan to restore, ensure all claims are made according to Italian fiscal rules, with appropriate permits and invoices.
• Monitor Double Taxation Agreements: Clarify whether property taxes and rental income are reportable in your country of residence and Italy, and claim foreign tax credits as appropriate.
• File Early and Keep Records: Retain all purchase, renovation, utility, and tax payment documents for at least ten years to defend your case in any tax audit.

Regional Variations: How Tax Rates Differ Across Italy

Not all areas impose identical taxes—the following variations can occur:

• IMU Rates: Each commune sets its own annual rate within state-imposed minimums and caps.
• Luxury Property Surcharges: Larger or classified homes can see much higher rates or different multipliers for IMU.
• Renovation Incentives: Some regions (e.g., Piedmont, Tuscany, Sicily) offer additional bonuses to encourage buyers to restore and revive rural or historic homes.

Before purchase, always ask your agent to request a recent breakdown of all local taxes from the current owner and city hall.

Frequently Asked Questions

• Do I have to pay taxes in Italy even if I’m not living there? — Yes. IMU and TARI apply, and rental income is always reportable. You may also have obligations in your country of residence.
• Can I avoid IMU by using my second home as a main residence? — Only if you become an Italian resident and meet other strict criteria—verify with local authorities.
• Are property taxes higher for foreigners? — Tax rates do not differ by citizenship, but non-residents miss out on certain exemptions and thus pay more than residents.
• How do I pay property taxes from abroad? — Via the F24 payment form, online banking options available in most cases. Many Italian banks offer remote services for non-residents.
• Who is responsible for tax payment if I sell my house? — You are liable for all taxes up to the date of sale, and may owe capital gains tax if the property is sold at a profit within five years of purchase.
• What if I inherit a second home in Italy? — Italian inheritance tax applies. The value allotted to you becomes declarable to your home tax office, too.

Checklists: Before and After Buying a Second Home in Italy

Before Buying:

1. Request a recent visura catastale (land registry extract) to confirm ownership and accurate size value.
2. Obtain full fiscal estimate from legal or notary teams for all one-off and recurring taxes.
3. Review local IMU and TARI rates and get a written estimate for your property category and location.
4. Check if any renovation, energy bonuses, or local incentives will be available to you after purchase.
5. Clarify agent, legal, and notary fees and confirm whether they include or exclude VAT and other surcharges.
6. Plan ownership structure in collaboration with wealth & legal advisors to optimize succession and minimize risk.

After Buying:

1. Register yourself and your property with the Italian tax office and local authorities.
2. Ensure you have an Italian tax ID number (codice fiscale).
3. Set up alerts for IMU and TARI annual payment due dates (June and December for IMU).
4. Keep all invoices for any work or renovation (for tax deductions).
5. Set up utilities and understand your condominium or local maintenance costs.
6. Review your tax compliance every year with a certified Italian accountant experienced in foreign clients.

Italian Tax Compliance and International Property Law

Italy’s property laws interact closely with both EU and global property law frameworks. Cross-border buyers should be aware of:

• Currency Transfer Rules: Large euro transfers in and out are typically subject to anti-money laundering checks, with documents needed for source of funds.
• EU Nationals: Face no acquisition limits, but checks for “money of non-EU origin” still apply.
• Non-EU Nationals: Require reciprocal agreements (which Italy currently has with most major countries), though some restrictions may apply—consult with your embassy if unsure.
• Double Taxation Treaties: Italy has agreements with over 100 countries, including the UK, US, Australia, and Canada to prevent double taxation—seek advice to understand your reporting obligations home and abroad.

If buying via an overseas company, residency and openness of the company jurisdiction can trigger additional “black-list country” penalties—an extra tax and reporting burden imposed on buyers from non-compliant nations.

The Evolving Landscape: Recent Tax Reforms and Trends

Italian property taxes are subject to reform. In recent years, the government has:

• Made IMU and TARI simpler to pay online from abroad.
• Revised cadastral value assessments—many re-valuations have occurred, meaning higher or lower annual taxes.
• Introduced digital transfer and registry systems.
• Provided bonus schemes for ecological renovations and earthquake-proofing that also benefit non-residents.

Looking ahead, further changes may streamline or increase taxes—especially targeting overseas property owners or high-end assets. Staying up to date is fundamental; your advisors and the notary will guide you on regulatory updates affecting your compliance and planning.

Conclusion: Secure Your Investment by Staying Tax Savvy

Owning a second home in Italy provides not just a place of escape and investment opportunity, but also a long-term commitment to fiscal and legal compliance. The taxes you pay are significant—often higher than in many other European countries—but the rewards of Italian homeownership come with a price justifiable by the lifestyle, history, scenery, and heritage available to you.

The professionals at IMMO ABROAD have extensive experience guiding international buyers safely through the process—all the way from first enquiry through to notarial completion and beyond, supporting owners to remain compliant and informed year after year. We encourage you to engage with experienced legal, tax, and property professionals every step of the journey, allowing you to focus on enjoying your Italian dream home, fully confident in your understanding of all applicable Italian taxes.

Glossary of Key Terms

• IMU: Annual municipal property tax
• TARI: Municipal tax for refuse and waste collection
• Cadastral Value: Administrative value, assessed by the Italian land registry
• Notaio: Public notary needed for property sale completion
• Prima casa: Primary residence (with tax advantages)
• Seconda casa: Second or holiday home (higher taxes)
• Cedolare secca: Flat substitute tax regime on rental income
• Imposta di registro: Registration tax
• Imposta catastale/Imposta ipotecaria: Cadastral and mortgage transfer taxes

In short: Before you invest in your Italian second home, understand the taxes involved, stay vigilant on annual compliance, and plan for the future—so you can enjoy la dolce vita with peace of mind.