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Italian luxury properties: requirements and taxation ​

- what is meant by “luxury property” in Italy, and what are the requirements of a luxury property?

- can a swimming pool turn a house in a luxury property?

- when can a property be considered a luxury property?

The Italian Court of Cassation has identified the criteria according to which a property can be considered a luxury home, in order to establish if the requirements for obtaining “first home” benefits in matters of registration fees and hypo-cadastral fees are met.

More in detail, the Italian Court of Cassation focussed on “first house benefits”, which provide for the application of:

- registration tax with a reduced rate of 3% in case of transfers for consideration of non-luxury residential properties or in case of transfer or establishment of bare ownership, usufruct, use or occupancy of non-luxury residential properties, under certain conditions;

- mortgage registration fee and cadastral fee calculated on a fixed basis.

A necessary condition of eligibility for first home benefits is that the purchased residential home should not be a luxury home.

Luxury homes buyers are not entitled to first home benefits. Moreover, they have to pay 22% VAT in case of purchase from a company, and they are subject to enforcement proceedings (real estate foreclosure).

Italian luxury properties: what is a luxury home? 

In the past years, the Italian Ministerial Order of 2 August 1969 linked the definition of “luxury property” to the size of the purchased property. More in detail, properties with a usable floor area of more than 240 m2 (excluding balconies, terraces, basements, attics, stairs and car parkings) were considered luxury homes and therefore first home benefits could not be applied, regardless of the cadastral category to which the purchased home belonged.

Since 2014 anyway, the definition of luxury home depends on the cadastral category to which the property belongs.

More in detail:

For transfers made after 13 December 2014, for VAT purposes with “luxury property” in Italy is meant a property recorded under the cadastral categories A/1 - Luxury dwelling-houses, A/8 – Villas, and  A/9 – Castles, palaces of great artistic and historical value.

Therefore, before signing the deed of sale, in order to be eligible for first home benefits, buyers should declare that:

- the purchased property belongs to “non-luxury” cadastral categories;

- they meet the so called ''first home requirements'', set out in Note 2b to Article 1 of the Tariff, part  one, annexed to the Italian Presidential Decree No. 131/1986.

In summary, all transfers made after 13 December 2014 are subject to a VAT rate of 4%, provided that the purchased properties or buildings belong to “non-luxury” cadastral categories, which are  different from categories A/1, A/8, and A/9 and include the following categories:

- A/2 –  Well-finished dwelling-houses;

- A/3 – Economic dwelling-houses;

- A/4 – Cheap dwelling-houses;

- A/5 - Ultra-cheap dwelling-houses;

- A/6 - Rural dwelling-houses;

- A/7 - Detached houses;

- A/11 - Traditional local dwelling-houses and accommodations.

The following categories, instead, are not eligible for first home benefits and foreclosure prohibition:

A/1 - Luxury dwelling-houses;

A/8 - Villas;

A/9 - Castles, palaces of great artistic and historical value.

The purchase of swimming pools can imply a change of cadastral category, turning the property into a luxury property. The presence of a swimming pool of at least 80 m2 is a sufficient condition for a property to be considered luxury.

Italian luxury properties: requirements excluding properties from tax benefits 

- What is the size of a luxury property? 

The Italian Court of Cassation established that in order to identify luxury properties, and to exclude eligibility for first home benefits, the usable floor area of a property should be determined on the basis of the actual usability of its rooms, and regardless of their habitability, since this is the most effective criterion to express the luxury character of a property. Therefore the idea of “usable floor area” does not coincide with the idea of habitability.

Italian luxury properties: requirements for obtaining first home benefits and taxation 

Luxury property taxation is a controversial theme, above all when speaking of first home benefits.

First home taxation depends on the choice whether to buy a property by means of a transaction subject to VAT, or by means of a transaction subject to proportional registration tax.  

In case of transaction subject to VAT: the rules for luxury homes set out in the Italian Ministerial Order of 2 August 1969 apply.

In case of transaction subject to proportional registration tax: Taxation depends on the property's cadastral category. If the purchased property belongs to categories A/1 - Luxury dwelling-houses, A/8 – Villas, or A/9 – Castles, palaces of great artistic and historical value,     first home benefits do not apply and the property is subject to IMU (Municipal Property Tax).

The only category exempted from IMU is A/7, nica esenzione prevista per il pagamento di quest’ultima riguarda le abitazioni A/7, rural dwelling houses, even though they share some features with luxury properties.

Properties are excluded from tax benefits in the following cases:

- false declarations during the registration of the deed;

- failure to transfer the buyer's habitual residence in the place where the purchased property is located within 18 months from its purchase.

Luxury homes in Italy, requirements, taxation and sale: how can we help you? 

Arnone&Sicomo international Law Firm provides legal assistance to buyers at all stages of the sale process of luxury properties in Italy.

Our Lawyers specialized in Tax Law provide legal assistance in case of tax assessment notices by the Italian Revenue Agency, especially in case of undue payments or in case of suspension of tax benefits.

Would you like to buy a luxury home in Italy? Do you need help with looking for luxury homes in Italy for sale? Did you receive a tax assessment notice by the Italian Revenue Agency and you would like to know if you can appeal? Contact us, click here.

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