If I own a house in Italy, do I need to file an income tax return with the Italian tax authorities?
Are there any differences if I own one or more properties? How does the situation change if I am resident in Italy or not?
If you own one or more properties in Italy, the owner who has the residence abroad (or the usufructuary) must pay every year the municipal property tax (IMU) to the Italian tax agency. No income tax return has to be submitted in Italy.
The subject would require a long explanation, especially if we were to consider all individual cases even in the context t. ex. with tax deductions, additional income generated in Italy (due to renting their home in Italy or commercial activities), residing in a property other than the one owned. We therefore try to simplify the answer by providing general information.
In this case, we are also considering only private properties, not rented and not those considered as luxury homes.
It should also be noted that:
- houses abroad (in our case…in Italy) can be subject to property tax also in the owner’s country of residence
- every Italian real estate (house or land) has a specific value according to the land register, it is called in Italian “rendita catastale“. The value can be found in the land title (visura catastale) or in the purchase contract. This value is used to calculate all taxes on real estate;
- in Italy, the municipal property tax (IMU) generally replaces the income tax for natural persons (IRPEF) related to real estate not rented. This means that when you pay municipal property tax (IMU) you do not have to pay income tax (IRPEF) on the value of the property and consequently, if you have no other income apart from the property, you do not have to submit an income declaration to the Italian tax agency “Agenzia delle Entrate”.
As indicated in the question, it is necessary to distinguish cases where the owner is resident in Italy from those where he is not.
RESIDENCE ABROAD (i.e. not tax redicence in Italy) + income declaration abroad
If you own one or more properties in Italy, the owner (or the usufructuary) must pay every year the municipal property tax (IMU) to the Italian tax agency “Agenzia delle Entrate”. This means that no income tax return has to be submitted in Italy.
Don’t forget that in addition to the property tax (IMU), there are also another municipal tax (TARI) that the owner must pay. More details on the annual property taxes can be found on this article >>>
RESIDENCE IN ITALY + income declaration in Italy
1) A property owned
If you own a property in Italy and you are registered there (i.e. tax redicence in Italy), you do not have to pay the property tax IMU. You also do not have to pay the personal income tax (IRPEF) on the value of the property.
In practice, the value according to the land registry (rendita catastale) must be declared in the Italian income tax return, but since the law in this case allows to deduct the entire value from the total taxable value, it means that no income tax is paid on the property.
2) Two or more properties located in different Italian municipalities
For example, if you own two properties located in two different Italian municipalities and you are registered in one of the two properties, then the situation is as follows:
- property 1 in municipality A where you are registered => see point 1);
- property 2 (not rented) in municipality B => you only pay the municipal property tax (IMU). Consequently, no income tax (IRPEF) is payable on the value of the property.
3) Two or more properties located in the same municipality
For example, if you own two properties located in the same municipality and you are registered in one of the two properties, then the situation is as follows:
- property 1 in municipality A where you are registered => see point 1);
- property 2 (not rented) in municipality A => in this particular case the general rule does not apply. This means that you have to pay both the municipal property tax (IMU) plus a reduced income tax (IRPEF) on the assessed value (income tax is only paid on the 50% of the assessed value). For more details on the calculation of the tax, we recommend contacting us directly or getting in touch with a trusted Italian accountant.
NOTE: The reduced assessed value must be added to other income. Depending on the level of all income, different tax rates are paid (23%, 25%, 35% and 43%).
NOTE: If the property is rented out, different rules apply and, in addition, an income tax return must be filed in Italy even if the owner is resident abroad.
