The Italian Home Buyer's Guide: The definitive guide for English speakers, expats, and non-Italian residents to owning property in Italy by Nicolò Bolla & Ryan Lynn

Author:Nicolò Bolla & Ryan Lynn
Language: eng
Format: mobi, epub
Published: 2018-11-07T16:00:00+00:00

Both tax regimes have impact on income tax, registrar tax, and stamp duty.

Let’s consider a residential lease contract worth € 6000 per year by a private individual.

REGIME ORDINARIO

The regime ordinario entails that the rental income is taxed based on the IRPEF brackets and it cumulates with other incomes (employment income, finance income, other income etc.) to calculate the gross income on which the progressive IRPEF brackets are calculated.

On top of that imposta di registro and imposta di bollo are due at registration, as well as the imposta di registro is due every year and at early termination.

Every year, the landlord can adjust the annual lease value based on the national inflation index.

At registration, the imposta di registro is calculated as 2% of the annual lease value while the imposta di bollo is calculate at € 12 every 4 pages of contract (or 100 lines) per copy; assuming a standard 8 pages contract and two copies the total stands at € 48.

Imposta di registro € 120,00

Imposta di bollo € 48,00

TOTAL € 168,00

The € 168,00 are split equally between the landlord and the tenant.

From now on, the landlord (or the tenants) needs to pay the 2% imposta di registro every year for a total of € 120,00 split equally between the two. Finally, if any of the parties wish to terminate the contract earlier than its natural termination date, a payment of € 67,00 is required and it is split between the landlord and the tenant.

As far as income taxes, the rental income is taxable for 95% of the annual value; the 5% reduction granted by law is supposed to cover the landlord’s expenses. No expense can be written off against the lease value.

In our case, the taxable income is € 5970,00 and it is taxed based on the marginal IRPEF bracket, starting from 23% up to 43% on top of any regional and municipal surcharge.

The best possible scenario is that the minimum tax payable is € 1373,10 plus any regional and municipal surcharge.

CEDOLARE SECCA

This residential property tax regime was introduced in 2011, providing great simplifications to both the landlord and the tenant.

This regime is applicable only to residential properties and to individuals, meaning that if any of the parties is a society, partnership, or corporation, the cedolare secca cannot be applied.

No imposta di registro nor imposta di bollo is levied at registration, anniversary, or early termination; cedolare secca requires the landlord to pay taxes only on income.

Furthermore, it does not allow the landlord to adjourn the lease value based on the Italian inflation index.

The Cedolare Secca is a flat 21% substitute tax on rent, regardless of the tax bracket in which that income falls.

In our case the taxable income is € 6000,00 and the tax paid € 1260,00 with no regional nor municipal surcharge.

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