A new Italian real estate tax was recently introduced on
property located outside of Italy, owned by individuals who are
resident in Italy for Italian tax purposes, regardless of the use
of the property.(Law Decree 6 December 2011 no. 201 - the so-called
"Decreto Salva Italia").
This tax does not apply if the property owner is a corporate
entity or an entity treated as akin to a corporate entity for tax
purposes (e.g. a company, foundation; trust, etc.).
The annual tax is 0.76% of the value of the property. For these
purposes, the 'value' is deemed to be equal to the purchase
price as shown on the purchase agreement (as is customary e.g. in
the UK). If a purchase agreement does not exist, the
'value' is deemed to be equal to the fair market value
determined by appropriate criteria applicable in the country where
the real estate is located.
When a purchase price is not provided, it is unclear what it is
intended by 'value' i.e. if it is the cadastral (i.e.
rateable or assessed) value (where one exists in the foreign
country) or if instead it is necessary to carry out a valuation on
the property in order to assess its current value.
The law also allows the Italian taxpayer to claim a foreign tax
credit against the Italian real estate tax in the event he/she has
already paid tax under the tax legislation of the country in which
the property is located.
It is still unclear which documents must be filed with the
Italian Tax Authority in order to obtain the abovementioned tax
This tax applies from 2011 and therefore must be paid in 2012 by
the deadline for payment of the Individual income tax return
(IRPEF) (i.e. 20th of June, if not extended).
For the time being, no circulars or opinions have been issued by
the Italian Tax Authority. It is likely (and desirable) that in the
coming weeks the Italian Tax Authority will issue a circular
clarifying the practical details of the application of this new
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The BEPS project is part of wider developments in the international tax field, including plans for automated exchange of information between tax authorities and efforts to improve transparency on tax matters.
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