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PROPERTY

What taxes do you need to pay on a second home in Italy?

Owning a second home in Italy is a dream come true for many - but make sure you stay out of trouble with the Italian taxman.

Second homeowners in Italy still have taxes to pay, even if it's not their primary residence.
Contemplating buying a place in Italy? Remember you'll need to budget for taxes, too. Photo by La So on Unsplash

If you’re planning to buy or have just bought a holiday home in Italy, getting through the purchase process is just the first step.

Owners should also plan to set aside for taxes on a second home – but how much should you expect these to come to, when are they due, and how are they paid?

READ ALSO: Everything you need to know about having a second home in Italy

Here’s a quick guide to what you’ll need to be aware of.

Working out the tax on owning a second property

The first thing to note is that taxes on second homes are inherently higher than primary residences – or at least, a main home qualifies for certain tax reliefs that second homes can’t benefit from.

This is due to the fact that a primary residence reflects the Italian constitutional right to a home. As such, utility bills may also be higher on holiday properties compared to reduced tariffs for first homes.

The good news is the hardest part is over if you’ve managed to get through the buying part of the process.

READ ALSO: The real cost of buying a house in Italy as a foreigner

“The cost of maintaining a property in Italy is much easier to calculate than the fees you need to work out for buying a property,” said tax expert Nicolò Bolla of Accounting Bolla.

Compared to the stamp duties, VAT payments and notary fees involved with buying a house, paying taxes is less involved – but still crucial to understand to avoid problems or possible fines from the Italian Revenue Agency (Agenzie delle Entrate).

What are the taxes you’ll pay?

Get ready for some acronyms, as you’ll need to get used to them if you pay tax in Italy.

As an owner of a second property, you’ll be liable to pay IUC or imposta unica comunale (‘single municipal tax’), which covers levies called IMU and TARI. Here’s a guide to each one of these.

IMU

Imposta Municipale Unica (‘Unified Municipal Tax’). This is the basic rate of tax that has to be paid to the Italian state, based on the value of the property.

You don’t pay this if your main residence is in Italy and you live in the country for more than six months a year. But if it’s your second home, you must pay this tax.

Non-EU nationals without residency in Italy, including Americans and now Brits are allowed to spend 90 days out of every 180 in the EU. Anyone in this category with a second home in Italy would need to pay IMU.

The popularity of one euro home schemes may be on the decline.

Italy is known for having a large number of cheap properties for sale, but taxes are another cost to consider. Photo by TIZIANA FABI / AFP.

You’ll also need to pay IMU if you own a home in Italy classed as ‘luxury’ property under the Italian tax system, even if it’s your main residence.

In this case, the cadastral categories A1, A8 or A9, for tax purposes are all luxury dwellings (stately homes, villas and castles).

How much you pay depends on your property’s class and the area you live in – payments are based on a percentage of the property value, collected by the municipality where your home is located, with part of the tax also going to the national government.

READ ALSO: How can a non-EU citizen get a mortgage to buy property in Italy?

As a rough guide, you’ll need to take five percent of the property value and then multiply that number by a coefficient – a figure that changes according to property type.

This will give you a taxable base and from there, you’ll be charged anything from 0.4 to 1.06 percent of that figure, depending on the municipality in which your second home is located.

You won’t get a bill for this, just a deadline of when to pay and what coefficient your type of property is to be able to do the sums. IMU needs to be paid for each month and is due twice a year, in June and December.

You can pay this via a form called F24 through the bank or Post Office.

For this and other tax payments in Italy, it’s always advisable to consult an accountant who can ensure the correct amount is paid and arrange the transaction for you too.

TASI

The Tassa sui Servizi Indivisibili (‘Tax on Indivisible Services’) covers services provided by the town hall or ‘municipio‘, such as road maintenance, public lighting and maintaining green spaces.

Despite reports of this tax being abolished, it does still exist but has now been merged with the above IMU tax. So as far as your checklist is concerned, you don’t need to pay another separate tax as it is now incorporated into IMU.

READ ALSO: Should you hire a renovation agency for your Italian home?

It’s important to note its cost for second homes, as TASI is much higher than for primary residences.

An accountant can assist on how this may affect your IMU costs.

Customer speaking with employee in a tax office in Italy

Photo by Andreas SOLARO

TARI

Tassa sui rifiuti (‘refuse tax’) is paid to cover rubbish collection, and this doesn’t depend on the type of property or how long you are there for.

It’s a fee that you’ll pay after receiving a bill from your municipality and should be due only once a year. It includes a fixed fee based on the square metres of the house and the number of people living there.

When it comes to second homes, the calculation of how many people living there can sometimes create difficulties, but individual municipalities may offer reductions based on individual circumstances.

Irpef (Income tax)

This is personal income tax (L’imposta sul reddito delle persone fisiche), which might be confusing if you own a second home that you spend a few months a year in. How can it apply to you?

Well, it can, but the good news is that if you pay IMU tax, you shouldn’t have to worry about IRPEF calculations.

A second home can be subject to income tax if it is rented out and generates rental income.

However, if you are using it as your second home only and don’t rent it out when you’re not in Italy, income tax is not due.

What if I want to rent out my second home?

If you’re considering letting your property in Italy, be aware that there will be extra taxation and bureaucracy involved.

Firstly, Irpef would be due on the income generated from rent paid by your tenants according to the established scale rates.

In Italy, income tax ranges from 23 percent on the first €15,000 gained, gradually increasing to 43 percent tax as earnings rise.

There are also municipal and regional taxes to add on to this income tax too.

EXPLAINED: What are Italy’s rules and taxes for Airbnb rentals?

If you’re a US citizen, there’s an added consideration which can be “tricky”, Bolla warned.

“Americans would need to pay taxes to both America and Italy if you earn money in Italy, as their taxation principle is different,” he said.

There’s also the question of who you want to rent it out to and for how long, since renting your home as a residential property is different from using it as a holiday let, for example, with different obligations for both.

A professional could guide you on which route is right for your circumstances.

The type of property you own as a second home

There are tax exemptions and concessions for second home owners, “depending on the type of property and its conditions”, according to Bolla.

But the variables are vast and there’s no one-size-fits-all solution to how much tax you have to pay on your second home.

“Always ask what the type of property your house is classified as and what is the most convenient use of your property, taking your situation into account,” Bolla advised.

For further information on the taxes you will need to pay in Italy, check with a professional as the amounts owed may change depending on personal circumstances, property location and type.

Please note The Local cannot advise on specific cases. Read more in our Italian property section here.

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MONEY

What you need to know about opening a bank account in Italy

There are a few things to know before choosing the right place to put your cash in Italy. Here’s our guide to finding the best bank for you.

What you need to know about opening a bank account in Italy

Money makes the world go round, they say, and even in notoriously cash-friendly Italy, your life will be a lot easier if you have somewhere to put it.

But with daunting paperwork, confusing opening hours and array of diverse offerings, interacting with Italian banks can be challenging.

Here’s our guide to opening a bank account in Italy to get you started.

Step one: Know what’s out there

I come from Canada, where you can count the number of big banks on one hand. That means Italy’s banking sector can be a little dizzying in comparison. At the time of writing, Italy has more than 20 banks with assets of more than €10 billion. 

Among the biggest names in Italy are Dutch-based ING, Germany-based Deutsche Bank, Italy’s own Unicredit, and the Banca Nazionale di Lavoro (now owned by France’s BNP Paribas).

READ ALSO: Which are the best Italian banks for foreigners?

Alongside these big national banks, there are regional providers like the Banca Popolare di Puglia e Basilicata or the Banco di Sardegna, which confusingly operate branches far from their respective homelands. As a result, it’s not uncommon to find a Pugliese bank next to a Venetian one in Lombardy, or encounter a local bank that has just a handful of branches throughout the country.

Consider the fees applied to transactions and cash withdrawals when choosing your Italian bank account. (Photo by ANDREAS SOLARO / AFP)

Disrupting the banking world in recent years has also been the emergence of a whole new crop of online banks, like N26 and HYPE, which offer very low fees by operating no physical branches.

And lastly, there’s the post office: Poste Italiane, in an unholy alliance of paper-based bureaucracy, also operates a consumer bank notorious for slowing down postal lines everywhere.

Knowing the lay of the land will help you pick out the best offering for your life and location. Consider your choice carefully. When we arrived, we chose N26 for its low fees and easy sign-up. But soon, we needed a bigger bank that could offer services like a fideiussione (renter’s guarantee).

Choosing the right bank is about more than knowing if it has a branch in your area — as you settle, a bank’s mortgage offerings, insurance, or high-interest savings accounts may become more important to you.

Step two: Decide what account you need

Technically, if you’re over the age of 18, you’re eligible to open an account in Italy — but most account types are only available to residents, which includes foreign nationals who are here because of a valid job offer or degree program.

The most common account type is a conto corrente or current account (a checking account for American readers). These accounts are designed with daily transactions in mind, meaning there are often opportunities to save on fees by maintaining a minimum deposit or balance.

Ask an expert: Which are the best UK banks for Brits living in Italy?

To earn higher interest, you can place your savings in a conto di risparmio or savings account, which offer fewer transfers and transactions in exchange for higher interest. There is also the conto di deposito, a more restrictive but even higher-interest savings account designed for parking your money just to earn.

Lastly, there are conti correnti esteri, foreign accounts, which can offer deals on wire transfers or allow you to use your home currency and save on exchange fees. These accounts don’t require you to be an Italian resident, making them a good choice for people staying for an indeterminate time.

Step three: Review costs

There’s a reason some of Italy’s nicest buildings belong to banks — this country’s banking fees are among the highest in Europe.

Though comparisons are hard to come by, in 2009 the European Commission found that fees in Italy could be four or five times the amount for the same accounts in the Netherlands, Ireland, or Germany.

But choose the right offer, and they don’t have to be — one analysis found these fees could vary by as much as 10 times between banks.

On average, a typical current account cost nearly €95 per year in 2022, with high-interest savings accounts costing even more. But that average dropped to just €25 for online-only accounts like those offered by N26.

A branch of Unicredit bank in Milan. (Photo by FILIPPO MONTEFORTE / AFP)

In exchange for these fees, banks offer a range of different services — everything from higher interest to lower transaction fees.

Most banks won’t charge a setup fee, but may charge to issue you with your first debit or credit card. Other services, like cheques, wire transfers, or even ATM withdrawals above a monthly limit are likely to be met with other fees.

Il Sole 24 Ore, one of Italy’s leading financial newspapers, has an online tool that will help you compare bank offers, automatically deducting your expenses from your anticipated interest to show you exactly how much your account is likely to cost.

Make sure to read the fine print — some “fee-free” accounts are promotional offers and expire after a year or so, leaving you paying hefty fees. Others look expensive, but are free if you maintain a low minimum balance or make monthly deposits of just a few hundred euro.

Step four: Visit a branch or sign up online

Now that you know the account type and bank you’re looking for, you can dive into the paperwork.

For a variety of reasons, it’s generally best to wait until you are in Italy to open your account — even in the case of online accounts or conti esteri. Banks will want to mail you your card and know a fixed address in Italy, and you will need an Italian tax code (codice fiscale) to get started in any case.

For online accounts like N26 and HYPE, paperwork is often minimal and requires filing out a few online forms and uploading your ID. 

In physical banks, by contrast, it can be quite extensive, involving a lot of fine print in Italian. If your language skills are poor, consider bringing a friend who can help you review your contracts, or select a bank that you know offers counter service in English.

To open an account, you’ll need the following documents:

  • ID or a passport;
  • Codice fiscale;
  • Residency permit (or, if you’re a non-resident, proof of address like a bill or piece of certified mail); and
  • Proof of your employment income (i.e., a contract or tax return).

Businesses will also need to provide the company’s registration certificate, a certificate of good standing, and statements of the financial status of all shareholders with more than a 20 percent stake in the company.

Take these to your local branch to get the process started. Make sure to check your local bank’s opening hours first — Italian banks are notorious for taking long lunches and closing early in the afternoon.

Closing an account

If you’ve decided it’s time to say goodbye to your bank, it’s unfortunately not quite as simple as visiting a branch.

In most cases, you will need to send a registered letter or raccomandata to your local branch before you show up in person, including signatures from everyone on the account.

And as usual, make sure to read your contract carefully — some banks will even charge a fee to close your account.

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