ITALY Law and Practice Contributed by: Paolo Ludovici and Andrea Mirabella, Gatti, Pavesi, Bianchi, Ludovici
Tax Step Up of the Value of Shareholdings and Lands for Capital Gains Tax Purposes The 2025 Budget Law (Law No 207 of 30 Decem - ber 2024) introduced, effective as of 1 January 2025, the option to revalue the tax cost of shareholdings, whether listed or unlisted. In summary, with respect to shares and equity inter - ests held as at 1 January of each year, the legislation permits individuals, simple partnerships, non-com - mercial entities, and non-resident persons without a permanent establishment in Italy to adjust the pur - chase cost or acquisition value – relevant for the cal - culation of taxable capital gains – by paying a substi - tute tax at the rate of 18% no later than 30 November of the same year. The option to pay the substitute tax in instalments is also permitted; for this purpose, the instalments must be of equal amount. The Tax Regime of “Controlled Realisation” (Realizzo Controllato) If certain conditions are met, Article 177, paragraph 2 and 2-bis, TUIR, recently amended by Legislative Decree No 192 of 13 December 2024, provide a form of tax neutrality regime for contributions of sharehold - ings, based on their accounting classification in the financial statement of the receiving company. Such tax neutrality regime has proven successful for corporate reorganisations and for the creation of fam - ily holding companies. 1.4 Taxation of Real Estate Owned by Non- Residents General Considerations From a tax perspective, the most efficient way for an individual to purchase and hold residential properties is through direct ownership, since individuals may be entitled to certain benefits, especially in terms of reduction of transfer taxes. Taxes Upon Purchase One of the following alternatives may be applied to the purchase of a property in Italy:
• registration tax ( imposta di registro ) at the rate of 2% (if the primary residence tax benefit applies) or 9% of the purchase price of the property; or • VAT at the rate of 4% (if the primary residence tax benefit applies), 10% or 22% on the purchase price of the property (in this case, registration tax is also applied at the fixed amount of EUR200). In case of application of registration tax, it is also pos - sible to apply the “cadastral value” ( valore catastale , usually substantially lower than the market value) as taxable base, if the purchaser is an individual who is not acting in the context of a business activity. Mortgage and cadastral taxes are also due (EUR50 each in case of application of registration tax or EUR200 each in case of application of VAT). Capital Gains Upon Sale For capital gains realised from the sale for considera - tion of undevelopable land and buildings, the seller may request the application of a 26% substitute tax. Capital gains realised upon sale of properties held for more than five years are not taxed. Capital gains arising from the transfer of urban real estate units used as the main residence of the sell - er or his/her family members for most of the period between purchase and transfer are exempt from taxa - tion, even if sold within five years from the purchase. Rental Income It is possible to opt for a regime of substitute taxation replacing personal income tax, regional and municipal surcharges, registration tax and stamp duties related to a rental agreement ( cedolare secca ). The tax rate varies according to the type of contract. For ordinary leases it is 21%; for short-term leases it is 26% (or 21% on a short-term lease indicated by the taxpayer on the tax return). In respect of lease agreements governed by Law No 431/1998, commonly referred to as “agreed rent” contracts ( canone concordato ) – where the rental amount is determined in accordance with territorial agreements between landlords’ and tenants’ associa - tions rather than being freely negotiated between the
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