The structures available in Italy to an outside investor are:
Last modified 13 Mar 2025
Sales of residential real estate made by VAT-liable entities are normally exempt from VAT. Residential sales are only subject to VAT if the seller is a construction company that has procured or renovated the property less than five years before the sale takes place, or after five years, if the construction company opts in the deed of sale for VAT to apply. VAT is payable at the rate of 10% (22% if the real estate is registered as a newly built luxury dwelling).
VAT-exempt residential transactions are subject to the following transfer taxes:
Sales of residential property which are subject to VAT are subject to registration, mortgage and cadastral tax at fixed amounts of €200 for each type of tax.
The sale of commercial real estate (including offices and industrial property and sales of retail properties and hotel buildings separately from any associated businesses) is subject to VAT at the rate of 22% (10% in the case of renovated properties if sold by the entity performing the renovation works) if:
Sales of commercial property, whether or not they are exempt from VAT (except where the seller is an individual), are subject to the following transfer taxes:
For acquisitions of commercial property by Italian real estate investment funds and listed real estate investment companies (SIIQs) the rates of cadastral tax and mortgage tax are halved to 0.5% and 1.5% respectively. Special rules apply to the transfer of property into a real estate fund in exchange for units if the real estate has mostly been leased to tenants.
In the case of retail property or hotels, if any licences or other intangible assets are included in the sale, then the buyer is regarded as purchasing a going concern, since the building is part of a business and the activities on the premises are carried out by means of authorizations held by the owner. The sale of a going concern is not subject to VAT, although registration tax applies as follows:
The sale of real estate as a going concern is subject to mortgage tax and cadastral tax payable at a fixed amount of €200 each.
Where real estate is acquired by way of shares in the corporate vehicle holding the asset, the transaction is normally VAT exempt. The transfer will, however, be subject to registration tax of €200.
The buyer normally pays the transfer tax, but both the seller and the buyer are liable for the payment and for any assessment by the tax authorities. VAT is also paid by the buyer, who can reclaim it by offsetting the VAT due to the tax authorities against its output operations. In some circumstances, a VAT credit can also be obtained.
EU-resident entities may request a refund of VAT paid if certain conditions are met. If the entity is not resident in the EU then it must register for VAT in order recover any VAT incurred.
Last modified 13 Mar 2025
Sales of residential real estate made by VAT liable entities are normally exempt from VAT. Residential sales are only subject to VAT if the seller is a construction company that has procured or renovated the property less than five years before the sale takes place, or after five years, if the construction company opts in the deed of sale for VAT to apply. VAT is payable at the rate of 10% (22% if the real estate is registered as a luxury dwelling).
The sale of commercial real estate (including offices and industrial property and sales of retail properties and hotel buildings separately from any associated businesses) made by VAT liable entities is subject to VAT at the rate of 22% (10% in the case of renovated properties) if:
In the first case VAT is applied under the ordinary rules, while in case of option VAT is applied with the reverse-charge mechanism.
Save the case where ‘reverse charge’ applies, VAT is charged to the buyer and then paid to the tax authority. The buyer may be able to offset this against deductible input VAT or claim a refund.
In the case of retail property or hotels where licences or other intangible assets are included in the sale, the buyer is considered to be purchasing a going concern, since the building is part of a business and the activities on the premises are carried out by means of authorizations held by the owner. The sale of a going concern is not subject to VAT.
Purchases of residential and commercial properties by a real estate investment fund normally follow the ordinary rules. Purchases of residential properties are normally exempt from VAT, unless the seller is a construction company that procured or renovated the property less than five years before the sale, or after five years, if the construction company opts in the deed of sale for VAT to apply. The purchase of commercial buildings by a real estate investment fund is subject to VAT, unless the seller is a construction company that procured or renovated the property less than five years before the sale or the seller opts in the sale deed for VAT to apply.
Where real estate is acquired by way of shares in the corporate vehicle holding the asset, the transaction is normally VAT exempt.
Last modified 13 Mar 2025
In addition to the relevant taxes, costs include the fees of professional advisors and notary’s fees. Notary’s fees are mostly set by law and are related to the value of the transaction within a maximum and minimum range.
The buyer normally pays the notary’s fees, while professional advisors are paid by the instructing party.
Last modified 13 Mar 2025
If the real estate is leased to tenants, the rental income generated is subject to corporate tax (IRES) at the rate of 24% and regional tax (IRAP) ordinarily levied at the rate of 3.9% although the effective tax rate depends upon the Italian region in which the company is located and upon the activity carried out by the company.
Taxable income for IRES purposes is the net revenue after the deduction of costs, as shown in the annual profit and loss account. With some minor exceptions, all costs relating to the activities of a company can be deducted, including interest (as long as this exceeds interest receivable), up to an amount equal to 30% of “fiscal” EBITDA not including depreciation and financial lease payments (ie EBITDA net of depreciation and financial lease payments, computed considering only taxable and deductible items).
Property tax (IMU) paid on commercial property, 10% of IRAP paid and IRAP due on the cost of employees are deductible for the purposes of IRES. Depreciation of property is deductible to the extent allowed by law (ordinary depreciation rate for real estate properties is 3%, retails units can be depreciated up to 6% for the period 2023–7). In certain circumstances, taxable income can be mitigated for IRES purposes by using appropriate leverage. In particular, interest due on loans which are secured by mortgages over real estate for ‘letting’ is not subject to the 30% EBITDA threshold under certain conditions and is therefore fully deductible.
The income subject to IRAP is the amount of revenue after the deduction of costs, as shown in the annual profit and loss account. However, not all costs related to the company's activities can be deducted, including interest payments, in certain circumstances the cost of employees, IMU and IRES payments.
IMU (property tax) is a wealth tax related to the possession of real estate and is calculated on the basis of the cadastral income of the property (rendita catastale) which is set by the competent local tax authority in whose jurisdiction the property is located, on the basis of certain legally established parameters.
IMU is levied on the cadastral value of the property (valore catastale), that is obtained by applying a multiplier to the rendita catastale (which is recorded in the Cadastral Register and thus is publicly available). Due to the fact that the cadastral income registered in the Cadastral Register is often much lower than the market value, multiplying factors are applied, in order to bring the tax payable more in line with the current market values of properties.
As far as the tax rate is concerned, each municipality is generally authorized to set the IMU tax bracket within a range from 0.76% to 1.06%. The IMU tax due annually is the result of applying the relevant rate within that range to the cadastral value of the property.
An Italian partnership is a transparent entity for tax purposes. Consequently, income deriving from investments is taxed at the level of individual partners, even if this is not distributed as dividends.
Interests are 100% deductible for the purposes of computing the partnership taxable income to be transferred and taxed at the level of the partner (they are not subject to the 30% EBITDA threshold limitation). 10% of IRAP and IRAP due on the cost of employees is deductible from the partnership taxable income, while IMU is not deductible.
In the case of non-resident entities partners, the income is taxed as business income at the level of the partner at the rate of 24%.
Regional tax (IRAP) at the rate of 3.9% applies at the level of the partnership. The income and allowable deductions for the purposes of IRAP are the same as for corporate vehicles.
IMU applies to partnerships in the same way as it does to corporate vehicles.
In the case of investment by a foreign company without a permanent establishment in Italy (please note that, in contrast to the position in some countries, owning Italian real estate does not automatically give rise to a permanent establishment in Italy), the income derived from letting property is subject to corporation tax (IRES) payable at the rate 24%. 95% of the gross income derived from letting is taxable and no depreciation or other costs can be deducted. Interest on loans secured on the property is not deductible for tax purposes.
Investors without a permanent establishment in Italy are subject to IMU in the same way as Italian entities.
Real estate investment funds are not subject to IRES or IRAP while for VAT their transactions are subject to VAT whose fulfilments are accomplished by the management company (SGR). IMU is payable by real estate investment funds.
Listed real estate investment companies (SIIQs) are not subject to corporate income taxes (IRES and IRAP) on income from letting property, or on the dividends paid by another SIIQ, if those dividends are related to letting property.
Other income generated by a SIIQ is subject to IRES and IRAP.
IMU also applies to SIIQs.
Last modified 13 Mar 2025
In addition to the ordinary costs of running the business, costs for the investment vehicle include the board of directors’ fees, the board of auditors’ fees and the external auditors’ fees, where applicable.
Real estate investment funds also incur the cost of management fees paid to the management company.
Last modified 13 Mar 2025
An investor may derive income from letting property, either directly or by means of dividends or distributions made by a corporate vehicle or fund.
Last modified 13 Mar 2025
If the real estate is leased to tenants, any rental income generated is subject to corporate tax (IRES) at the rate of 24% and regional tax (IRAP) at the rate of 3.9%.
Taxable income for IRES purposes is the net revenue after the deduction of costs, as shown in the annual profit and loss account. With some minor exceptions, all costs relating to the activities of a company can be deducted, including interest (as long as this exceeds interest receivable), up to an amount equal to 30% of “fiscal” EBITDA not including depreciation and financial lease payments (ie EBITDA net of depreciation and financial lease payments, computed considering only taxable and deductible items).
Property tax (IMU) paid on commercial property (as for FY 2022), 10% of IRAP paid and IRAP due on the cost of employees are deductible for the purposes of IRES. Depreciation of property is deductible to the extent allowed by law (ordinary depreciation rate for real estate properties is 3%). In certain circumstances, taxable income can be mitigated for IRES purposes by using appropriate leverage. In particular, interest due on loans which are secured by mortgages over real estate for ’letting’ is not subject to the 30% EBITDA threshold and is therefore fully deductible.
The income subject to IRAP is the amount of revenue after the deduction of costs, as shown in the annual profit and loss account. However, not all costs related to the company’s activities can be deducted, including interest payments, certain cost of employees, IMU and IRES payments.
An Italian partnership is a transparent entity for tax purposes. Consequently, income deriving from investments is taxed at the level of individual partners, even if this is not distributed as dividends.
In the case of non-resident corporate partners, the income is taxed as business income at the level of the partner at the rate of 24%.
Regional tax (IRAP) at the rate of 3.9% applies at the level of the partnership. The income and allowable deductions for the purposes of IRAP are the same as for corporate vehicles.
In the case of investment of a foreign corporate entity without a permanent establishment in Italy (please note that, in contrast to the position in some countries, owning Italian real estate does not automatically give rise to a permanent establishment in Italy), the income derived from letting property is subject to corporation tax (IRES) payable at the rate of 24%. 95% of the gross income derived from letting is taxable and no depreciation or other costs can be deducted.
Interest on loans secured on the property is not deductible for tax purposes.
Real estate investment funds are not subject to IRES or IRAP.
Listed real estate investment companies (SIIQs) are not subject to corporate income taxes (IRES and IRAP) on income from letting property, or on the dividends paid by another SIIQ, if those dividends are related to letting property.
Last modified 13 Mar 2025
Profits on the sale of property are subject to corporate tax (IRES), regardless of how much time has elapsed since its acquisition. The profit is the difference between the book value of the property at the time of the sale (as reduced by depreciation) and the agreed purchase price. In some cases (ie if the property has been held for more than 3 years) it is possible to spread the liability for tax on capital gains over a period of five years.
Capital gains realized from the sale of property are also generally subject to regional tax (IRAP) at the rate of 3.9%.
If the property is sold as a going concern (ie if it is a real estate asset including licences and other intangible assets), the sale is not subject to IRAP.
In case of share deal (ie if the foreign investor sells the Italian corporate vehicle), the capital gain upon sale would be subject to taxation in Italy at the rate of 26%, unless the applicable DTT provides for the taxation in the Country of residence of the seller. The same taxation would be applicable also in case of indirect sale of the Italian corporate vehicle. Participation exemption regime (allowing the exemption of 95% of the capital gain) can be applied in certain circumstances, but not if the Italian corporate entity is a real estate company.
Capital gain realised upon sale of an Italian corporate vehicle by an investment fund set up in an EU Country are not subject to any taxation in Italy, under the condition that the investment fund or its management company is subject to surveillance authorities in its country of set up.
Financial transactions tax (Tobin Tax) is payable by the purchaser of shares in an Italian resident joint stock company, even if the purchaser and the seller are not Italian resident. This tax is levied at a rate of 0.2% on the agreed price.
Capital gains derived from the sale of real estate are not subject to corporate tax (IRES) if the property is sold more than five years after its acquisition. If the sale occurs within five years, IRES applies at the rate of 24% if the seller is a foreign company. Since depreciation is not permitted in the absence of a permanent establishment, taxable gains comprise the difference between the acquisition cost at the time of purchase and the price agreed for the sale of the property.
The sale of foreign entities that directly or indirectly owns Italian real estate assets, when such assets represent more than 50% of the total assets of the foreign company, are subject to Italian capital gain tax at the rate of 26%, unless the applicable DTT provides for the taxation in the Country of residence of the seller.
In the case of Italian partners, no taxation applies at the moment of distribution, since the income is taxable at the level of the individual partners under a tax transparency principle even without being distributed.
Non-resident partners are subject to tax in Italy on their share of the partnership’s worldwide income. Non-resident partners must therefore submit a tax return for corporate or individual income tax purposes. In this case, any other income derived from Italy (and not subject to a substitute or final withholding tax) will also be taken into account.
Once the profits have been taxed in Italy, they can be transferred to the foreign parent company without any further taxation.
Proceeds distributed by a real estate investment fund, whose units are held by institutional investors such as asset management companies or pension funds, or by non-institutional investors owning less than 5%, are subject to a 26% withholding tax distributed by the relevant management company to unit-holders. This is payable as a final withholding tax if the investor is an individual, or as an advance payment of tax if the investor is a corporate entity. Conversely, the mechanism mentioned above is not applied to those real estate investment funds more than 5% of whose units are held by non-qualified investors. Such funds are taxed on the basis of a ‘transparency regime’ pursuant to which the income generated by the fund is taxed directly vis-à-vis the unit-holders irrespective of the distribution of the income.
As far as non-resident entities are concerned, if the foreign investor is a specific qualified investor (eg funds, pension funds, other sovereign entities) resident in a ‘white list’ country, no withholding tax is due on the fund’s distributions, otherwise income is subject to a 26% withholding tax, potentially reduced by the applicable tax treaty.
Dividends distributed by a SIIQ are subject to withholding tax at the rate of 26% upon distribution. This is payable as a final withholding tax if the investor is an individual, or as in advance if the investor is a corporate entity.
Last modified 13 Mar 2025
No other costs would normally be incurred in relation to income generated in Italy.
Last modified 13 Mar 2025
No other costs would normally be incurred in relation to income generated in Italy.
Last modified 13 Mar 2025
Profits on the sale of property are subject to corporate tax (IRES), regardless of how much time has elapsed since its acquisition. The profit is the difference between the book value of the property at the time of the sale (as reduced by depreciation) and the agreed purchase price. In some cases (ie if the property has been held for more than 3 years) it is possible to spread the liability for tax on capital gains over a period of five years.
Capital gains realized from the sale of property are also generally subject to regional tax (IRAP) at the rate of 3.9%.
If the property is sold as a going concern (ie if it is a real estate asset including licences and other intangible assets), the sale is not subject to IRAP.
In case of share deal (ie if the foreign investor sells the Italian corporate vehicle), the capital gain upon sale would be subject to taxation in Italy at the rate of 26%, unless the applicable DTT provides for the taxation in the Country of residence of the seller. Starting from 2023, the same taxation would be applicable also in case of indirect sale of the Italian corporate vehicle. Participation exemption regime (allowing the exemption of 95% of the capital gain) can be applied in certain circumstances, but not if the Italian corporate entity is a real estate company.
Capital gain realised upon sale of an Italian corporate vehicle by an investment fund set up in an EU Country are not subject to any taxation in Italy, under the condition that the investment fund or its management company is subject to surveillance authorities in its country of set up.
Financial transactions tax (Tobin Tax) is payable by the purchaser of shares in an Italian resident joint stock company, even if the purchaser and the seller are not Italian resident. This tax is levied at a rate of 0.2% on the agreed price.
Capital gains derived from the sale of real estate are not subject to corporate tax (IRES) if the property is sold more than five years after its acquisition. If the sale occurs within five years, IRES applies at the rate of 24% if the seller is a foreign company. Since depreciation is not permitted in the absence of a permanent establishment, taxable gains comprise the difference between the acquisition cost at the time of purchase and the price agreed for the sale of the property.
Starting from FY 2023, the sale of foreign entities that directly or indirectly owns Italian real estate assets, when such assets represent more than 50% of the total assets of the foreign company, are subject to Italian capital gain tax at the rate of 26%, unless the applicable DTT provides for the taxation in the Country of residence of the seller.
Since an Italian partnership is a transparent entity for tax purposes, any income deriving from the sale of real estate is taxed at the level of the individual partners even if this is not distributed. If the partner is non-resident, income is taxed at partner level at the rate of 24%.
Capital gains are excluded from the IRAP taxable basis of a partnership, unless its normal business activities include the sale of real estate. If this is the case, capital gains would be included in the IRAP taxable basis.
If the property is sold as a going concern (ie if it is a real estate asset including licences and other intangible assets), the sale is not subject to IRAP.
Capital gains from the sale of property are included in the fund’s net income and taxed at the level of the investors when the income is distributed or upon redemption of the units.
Capital gains from the sale of real estate by a SIIQ are included in the taxable income for IRES and IRAP purposes.
Last modified 13 Mar 2025
In addition to the relevant taxes, costs include the fees of professional advisors and notary’s fees. Notary’s fees are mostly set by law and are related to the value of the transaction within a maximum and minimum range.
The buyer normally pays the notary’s fees, while professional advisors are paid by the instructing party.
Last modified 13 Mar 2025
How can investment in real estate by an individual/organization/company be set up?
The structures available in Italy to an outside investor are:
Last modified 13 Mar 2025