Taxation in Italy
Local Taxes
There are two local property taxes in Italy which are both based on the property's theoretical rental value according to the local land registry, and are adjusted in line with inflation. The rates of tax will vary from region to region due to the varying rates of tax imposed by the regional and local governments.
Imposto municipale or Imposta Comunale sugli Immobili (ICI)
There is a local municipal property tax called ICI, and is paid by anyone who owns property or land in Italy, whether they are a resident or non-resident. The amount of the tax is calculated by reference to the "rendita catastrale" (official value of the property) registered in respect of all properties in Italy. The tax is approximately 0.4% - 0.7% of the official value of the property. The tax is paid in two instalments, June and December.
Some municipalities raise additional local taxes. These are generally less than €500 per year.
Income Tax
A non resident individual receiving rental income from an Italian property is obliged to submit an annual Income Tax return. This return will only detail Italian sourced income.
In respect of rental income, expenses directly relating to the property, e.g. repairs, local taxes, management fees, etc. are allowable deductions for Income Tax purposes. The residue is taxes at between 19% and 40%, depending on the amount.
Notional Income Tax
There is also a tax to pay upon the notional rental value of your house, even if you do not actually rent it out. This is based on the official rendita catastrale (rateable value).
Capital Gains (Imposta sostitutiva sulle plusvaenze)
Capital Gains tax on property on longer exists. It has been replaced by the annual tax on property, ICI (Imposta Comunale sugli Immobili).
Inheritance Tax
Both resident and non-resident owners are subject to Italian inheritance law, with the amount of tax paid varying depending on the relationship between the deceased and the heirs.