Sometimes the seller is not subject to tax when selling his property. This happens when the operation does not generate a capital gain, meaning that the value he gets for the sale of the property is not higher than what he had paid when buying it. In other words, when the seller doesn’t make a profit from the property sale.
On the contrary, taxes shall be paid on the sale of the property when the operation generates a capital gain for the seller when he bought it. However, this rule applies only if the property is resold in the five years following the purchase or construction of the building: in this case the property sale shall be considered as “speculative”. The same applies in case a property received by donation is sold, within five years from the deed of donation.
The biggest exception is when the capital gain shall be never taxed if the property sold has been assigned by inheritance.
In summary, the seller of a property sale does not have to pay taxes over the sale when:
• the property has been purchased or built since more than five years;
• the property is transferred by inheritance;
• it is the house in which the seller or a family member has had their residence for most of the time elapsed between the date of purchase or construction and that of sale;
• the property was received as a donation and more than five years have passed since the donor bought it or since the house was built.
Property sale in Italy: calculation of capital gains and taxes
The capital gain is nothing else than the difference between the purchase value and the higher value obtained from a sale: as an example: I buy for 200 thousand and sell for 250 thousand, so I will have a 50 thousand euro capital gain. This sum is calculated together with any other costs relating to the asset, such as taxes paid on the purchase, notary fees, etc. Costs that must be documented by the notary’s invoice and, if the seller is a company and the sale was subject to VAT, by the invoice of the company that had sold the house. As for the actual taxation, the seller must declare the capital gains of the property sale in the tax return. The tax is calculated according to the rates that apply to total income.
The rates maybe calculated in two different ways:
• up to 15,000 euros: 23%;
• from 15,001 to 28,000 euros: 27%;
• from 28,001 to 55,000 euros: 38%;
• from 55,001 to 75,000 euros: 41%;
• over 75,000 euros: 43%, if they are calculated within the context of the overall income of the tax payer.
While, upon specific request of the seller a fixed tax of 20% is applied to the capital gain and this exempts the seller from any tax checks and inductive assessments by the Tax Authority, over that transaction.
VGS Lawyers has extensive experience in Real Estate and property sale and purchase. Our assistance includes also tax advice. For information contact info@vgslawyers.com