Property-Related Taxes in Italy

Non-resident individuals are generally subject to Italian taxation only on income arising from Italian sources, including income and taxable gains derived from Italian real estate.

Italian individual income tax (IRPEF) is generally progressive, with additional regional and municipal taxes potentially applying. However, qualifying residential landlords may elect to use the cedolare secca substitute-tax regime instead of ordinary IRPEF.

Income Tax (IRPEF)

Taxable income generally consists of the aggregate of all income earned during the year, reduced by allowable expenses related to acquiring and maintaining income, as well as permitted deductions.

Personal Income Tax Rates (2026)

In addition to national IRPEF, regional income tax generally ranges from 1.23% to 3.33%, while municipal income tax generally ranges from 0% to 0.9%, depending on the municipality.

Rental Income Tax

Rental income from Italian residential property may be subject either to ordinary IRPEF taxation or, where the applicable conditions are fulfilled, to the optional cedolare secca regime.

Under cedolare secca, qualifying residential rental income is generally taxed at a flat rate of 21% of the relevant rental income. A reduced rate of 10% may apply to qualifying regulated rental agreements (canone concordato).

Cedolare secca replaces ordinary IRPEF and the related regional and municipal income taxes on the qualifying rental income. Property expenses are not separately deductible when this regime is used.

For short-term residential rentals, generally meaning qualifying contracts of no more than 30 days, the substitute tax rate is 26%. However, the taxpayer may select one property for which short-term rental income remains subject to the reduced 21% rate.

Where more than four apartments are used for short-term rentals during the tax year, the activity is generally presumed to constitute a business and the ordinary rules applicable to business activity may apply.

Corporate Tax

Italian companies are generally subject to corporate income tax (IRES) at a standard rate of 24%.

Qualifying expenses incurred in generating taxable income are generally deductible in determining the corporate taxable base. Rental income earned by a company from investment property is included in its taxable income according to the applicable corporate tax rules.

Companies may also be subject to the regional tax on productive activities (IRAP). The standard IRAP rate is generally 3.9%, although the taxable base differs from the IRES taxable-profit calculation and individual regions may adjust the applicable rate.

Consequently, IRAP should not simply be added to the 24% IRES rate to produce a combined 27.9% tax rate.

Capital Gains Tax

Capital gains arising from the sale of Italian real estate by an individual can be taxable when the property is sold within five years of acquisition or construction.

Where taxable, the gain may generally be subject to ordinary IRPEF or, where the relevant conditions are satisfied, a 26% substitute tax.

The taxable gain is broadly calculated as the difference between the sale proceeds and the property's qualifying acquisition cost, taking into account eligible acquisition and improvement expenses.

A capital gain is generally not taxable when the property has been owned for more than five years.

An exemption may also apply where the property was used as the owner's principal residence for the majority of the period between acquisition and sale, subject to the applicable conditions.

Special rules can apply to inherited property, building land and properties that have benefited from certain renovation incentives, so the five-year exemption should not be treated as an absolute rule for every type of real estate disposal.

Property Buying Costs and Transaction Taxes in Italy

Annual Property Tax

Real Estate Tax (IMU)

Italy imposes an annual municipal property tax known as IMU (Imposta Municipale Propria). It generally applies to second homes, investment properties and other real estate owned in Italy.

For residential property, the taxable base is generally calculated by taking the property's cadastral income (rendita catastale), increasing it by 5%, and multiplying the resulting amount by the applicable statutory coefficient. For many residential properties, the coefficient is 160. The relevant municipal IMU rate is then applied to this taxable value.

For ordinary properties other than a principal residence, the standard IMU rate is generally 0.86%, although individual municipalities can adjust the rate within the limits established by national legislation. Consequently, the actual annual IMU liability depends on both the property's cadastral characteristics and the municipality in which it is located.

Principal residences are generally exempt from IMU, except for certain high-value properties classified in the luxury cadastral categories A/1, A/8 and A/9.

Properties recognized as being of historical or artistic interest may qualify for a 50% reduction in the IMU taxable base, subject to the applicable conditions.

For non-resident property investors, an Italian property will generally not qualify as an exempt principal residence merely because it is the owner's main property abroad. Consequently, IMU should normally be included as an annual holding cost when evaluating an Italian investment property.