Are you a European citizen who has lived in Italy for five years or more? If so, this information could be particularly relevant to you, as you may now be eligible for tax breaks when purchasing a home in Italy.
Background: Why This Change?
This legislative update stems from Italy’s need to address an infringement procedure (No. 2014/4075) initiated by the European Commission, which challenged certain provisions of Italian law as being contrary to EU principles. The European Commission found that Italy’s rules on the “first home” tax benefit (agevolazione prima casa) discriminated against non-Italian EU citizens.
Before this amendment, Italian law excluded non-Italian citizens from claiming the 2% reduced registration tax rate on first-home purchases unless they intended to establish permanent residence in Italy. This restriction disproportionately affected EU citizens residing abroad.
The Previous Legal Framework
Prior to the amendment, Note II-bis, paragraph 1, letter a) of Article 1 of the Tariff, Part One, attached to the Consolidated Text of Registration Tax (Presidential Decree No. 131 of April 26, 1986) set out the requirements for accessing the reduced 2% registration tax rate. To qualify for this benefit, the buyer had to:
- Establish residence within 18 months in the municipality where the purchased property was located; or
- If they had moved abroad for work-related reasons, the property could be located in the municipality where their employer’s headquarters were located or where the employer carried out its business; or
- If the buyer was an Italian citizen emigrated abroad, they could purchase a first home anywhere in Italy and still qualify for the tax benefit.
This provision effectively excluded non-Italian EU citizens, as they could not benefit from the tax incentive unless they physically relocated to Italy. Additionally, it limited access to Italians living abroad, further restricting eligibility based on nationality.
The Legal Challenge and Legislative Reform
The European Commission challenged these restrictions, arguing that they violated EU principles of non-discrimination and freedom of movement. As a result, Italy had to amend its legislation to align with EU law.
To resolve the issue, Law No. 103 of August 10, 2023 (which converted Decree-Law No. 69/2023 into law) amended Note II-bis, paragraph 1, letter a) of Presidential Decree No. 131 of April 26, 1986. This amendment extended access to the first home tax benefit to a broader group of EU citizens, regardless of nationality, provided they met specific residency or work history requirements.
The New Legal Framework
Under Article 2 of Law No. 103 of August 10, 2023, the 2% reduced tax rate now applies if the following conditions are met:
1. Location of the Property
The property must be located:
- In the municipality where the buyer resides or establishes residency within 18 months from the date of purchase; or
- If different, in the municipality where the buyer carries out their professional activity.
2. Special Rules for Buyers Residing Abroad
If the buyer has moved abroad for work reasons and had resided or worked in Italy for at least five years, the property must be located:
- In the municipality of their birth, or
- In the municipality where they previously resided or worked before relocating abroad.
3. Declarations Required in the Purchase Deed
The buyer must declare in the deed of purchase that:
- They do not own (either exclusively or jointly with their spouse) rights of ownership, usufruct, use, or habitation on another residential property within the same municipality where the purchased property is located;
- They do not own, even partially or under a legal community property regime, rights of ownership, usufruct, use, habitation, or bare ownership on another residential property acquired with first-home tax incentives, either by themselves or their spouse.
Scope of the Tax Benefit
The 2% tax rate applies to:
- Transfers for consideration of ownership of non-luxury residential properties;
- Transfers or establishment of rights of bare ownership, usufruct, use, and habitation related to such properties.
Key Takeaways
- Expanded Eligibility: EU citizens who previously resided or worked in Italy for at least five years before moving abroad can now benefit from the first home tax reduction, even if they do not currently reside in Italy.
- Elimination of Nationality-Based Discrimination: The law is now aligned with EU principles, ensuring that the tax benefit is based on objective criteria rather than nationality.
- Stronger Legal Compliance: Italy has fully addressed the European Commission’s concerns, avoiding further infringement proceedings.
If you’re an EU citizen considering buying a first home in Italy, these new rules could significantly reduce your tax burden. If you’d like to discuss your specific situation, feel free to DM me.
Also, DM me to receive my exclusive Guide on How to Purchase Real Estate in Italy. This guide was carefully compiled based on interviews with many of our clients and is packed with valuable insights and practical tips to help you navigate the process with confidence.
