Italy taxes the gain only if you sell within five years of buying. Past that, the gain is not taxed at all. How the 26% notary option compares with ordinary income tax, and what a non-resident should check.
Italy has a simple core rule that works in the seller's favour: a gain on real estate is only taxed if you sell within five years of acquiring it. Hold the property for longer and there is no Italian capital gains tax. The complications are in the exceptions, the choice of method and the position of a non-resident.
The five-year rule
Under article 67 of the Italian income tax code, a gain is taxable if the property was bought or built within five years before the sale. The period runs from the acquisition date or, for a newly built home, from the date it was first fit for habitation. After five years the gain is simply not reportable, and no election is needed.
When even a sale inside five years is not taxed
- Main residence: the gain is exempt if the property was used as your main residence for most of the time between purchase and sale. A non-resident owner will usually find this very hard to satisfy, so do not assume it applies to a holiday home.
- Inherited property: inherited property is generally outside the tax. The detail around donated property is more technical, so ask the notary how the clock runs in your case.
How the gain is calculated
The taxable gain is the sale price minus the purchase or construction cost, increased by related costs such as notary fees, ordinary maintenance and the cost of removing liens (article 68). Keep the documents for the original purchase and for any works.
Two ways to pay
When the sale falls within the five years, you choose how it is taxed:
- Substitute tax of 26%: you ask the notary to apply it at the deed, and the notary withholds and pays it to the tax authority. It replaces income tax and the regional and municipal surcharges, and it keeps the process simple.
- Ordinary income tax (IRPEF): you report the gain in your tax return, where it is taxed at progressive rates of 23% to 43% plus local surcharges, and you can use deductible costs. This tends to pay off only when your total income is low, so run both numbers before the deed.
The choice must be made at the deed, so decide it in advance with your adviser.
The non-resident position
Italy taxes non-residents on income from Italian sources, which includes gains on Italian real estate. A non-resident selling inside the five years is commonly quoted the 26% rate. Whether you can use a double tax treaty, and how your home country credits the Italian tax, depends on where you are resident. Separately, since 2023 non-residents are taxed at 26% on the sale of participations in companies whose value derives mostly from Italian real estate, subject to treaties, so holding an Italian property through a foreign company does not remove the issue.
Works under bonus schemes
Some sources point out that properties that benefited from the Superbonus or similar building incentives can fall under special rules on resale, including a longer look-back period. This is a specialist topic: if the property had works under an incentive, ask the notary and a tax adviser specifically.
Sale-day checklist
- Count the exact five years from the deed date (or from the date the new build was first fit for habitation)
- Gather the purchase deed, notary invoices and receipts for works and lien removal
- Decide with your adviser, before the deed, between the 26% substitute tax and IRPEF
- Check any building-incentive works on the property
- Ask your home-country adviser how the Italian tax is credited
FAQ
Do I pay capital gains tax in Italy if I sell after five years? No, the gain is not taxed after five years of ownership. What is the rate if I sell sooner? You can choose a 26% substitute tax applied by the notary or ordinary IRPEF at 23% to 43% plus surcharges. Who pays it, the notary or me? The notary withholds the 26% and pays it, but it is your tax. Can a non-resident claim the main residence exemption? Rarely, because the property must have been your main residence for most of the period. Does inherited property count? It is generally exempt, but check the details with the notary.
How we help
We help you plan the timing of a sale and introduce Italian notaries and tax advisers who can confirm the position for your property. This is general information, not tax or legal advice; the figures come from public sources and the rules, especially on incentive works, change, so confirm them before you act.