Italy’s capital gains tax system underwent significant changes in 2024, introducing new regulations that affect both residents and non-residents.
The standard capital gains tax rate in Italy stands at 26% for most transactions, with specific exemptions and conditions applying to different asset types.
Understanding these regulations is crucial for investors, property owners, and individuals considering Italian tax residency, as the implications can significantly impact investment returns and tax liabilities.
In this article, we are going to discuss:
- Tax residency in Italy
- Is there a capital gains tax in Italy on property?
- How much tax do you pay on gains on the sale of shares in Italy?
- What is the tax rate on capital gains for non-residents in Italy?
- What is the best way to avoid capital gains tax as a non-resident in Italy?
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How to establish tax residency in Italy
Tax residency refers to an individual’s legal status that determines their tax obligations within a specific jurisdiction. It significantly affects how capital gains are taxed and what exemptions may apply in Italy.
Italian tax residency is established through several criteria like the 183-day rule that must be evaluated carefully.
An individual becomes an Italian tax resident if they meet any of the following conditions during a tax year:
- They maintain their domicile (primary residence) in Italy for more than 183 days.
- They have their habitual abode or center of vital interests in the country.
- They are registered in the Italian municipal registry for the majority of the tax year.
Domicile is the most straightforward criterion for determining tax residency. The calculation includes all days spent in Italy, regardless of the purpose of stay.
Days of arrival and departure are both counted toward the total. Temporary absences for business or personal reasons do not interrupt the residency calculation.
Center of vital interests is a more complex criterion that considers personal and economic relationships.
Italian tax authorities examine where an individual maintains their primary family ties.
They also assess where the person conducts their main professional activities or business interests.
Property ownership, bank accounts, and social connections in Italy all contribute to this determination.
Once tax residency is established, individuals become subject to worldwide income taxation. This includes capital gains from both Italian and foreign sources.
Residents can claim foreign tax credits to avoid double taxation on overseas investments.
The participation exemption may apply to certain qualifying shareholdings, providing significant tax advantages.
Non-residents who establish Italian tax residency must carefully plan their transition. Pre-existing foreign investments may trigger immediate tax consequences upon becoming resident.
Professional tax advice is essential to optimize the timing and structure of residency establishment.
Capital Gains Tax in Italy on Property
Property-related capital gains in Italy follow specific rules that vary based on holding periods and property types.
The fundamental principle distinguishes between primary residences and other real estate investments, with different tax treatments applying to each category.
Plusvalenza represents the capital gain or net profit from property sales where values have increased since purchase.
This technical term describes the difference between the lower purchase price and higher sale price.
Italian tax law treats this gain as taxable income subject to specific rates and exemptions.
Capital Gains Tax on Primary Residences
For primary residences, capital gains are generally exempt from taxation regardless of holding period.
This exemption encourages homeownership and provides significant tax advantages for residential property owners.
However, strict definitions apply to qualify as a primary residence, including registration requirements and minimum occupation periods.
Capital Gains Tax on Investment Properties
Investment properties face different taxation rules based on holding periods and acquisition circumstances.
Properties held for more than five years benefit from complete capital gains tax exemption. This five-year rule provides substantial tax savings for long-term property investors.
Properties sold within five years of purchase are subject to capital gains taxation.
Italian Superbonus
The 2024 legislative changes introduced new provisions for properties renovated under the 110% Superbonus program.
Second homes or holiday properties sold within ten years of renovation completion face a mandatory 26% capital gains tax.
This measure aims to discourage speculative transactions that exploit government renovation incentives.
The ten-year period is measured from the completion of renovation works, not the original purchase date.
How is tax calculated on property gains?
Taxpayers have flexibility in choosing their tax calculation method for eligible properties.
They can opt for the standard 26% substitute tax rate applied to the capital gain. Alternatively, they can include gains in their regular income and apply progressive IRPEF rates.
The choice depends on individual tax circumstances and overall income levels.
CGT on Inherited Property
Inherited properties receive preferential treatment under Italian capital gains tax rules.
Properties acquired through inheritance are exempt from the new ten-year holding period requirements. This exemption recognizes that inherited assets are not speculative investments.
Family wealth transfer through inheritance maintains favorable tax treatment.
Corporate Capital Gains on Property Sales
Corporate property transactions follow different rules aligned with business taxation principles.
Capital gains from corporate property sales are treated as ordinary business income.
The standard corporate income tax rate of 24% applies, plus the regional IRAP tax at 3.9%.
These rates reflect the commercial nature of corporate property activities.
Capital Gains Tax in Italy on Shares
Individual investors face a standard 26% flat tax rate on capital gains from share disposals.
This rate applies to most equity investments and provides certainty for tax planning purposes.
Share-related capital gains in Italy operate under a comprehensive framework that distinguishes between different types of shareholdings and investor categories.
The tax treatment varies significantly based on ownership percentages, holding periods, and the classification of shares within investment portfolios.
The flat rate system simplifies calculations compared to progressive income tax rates. However, specific conditions and exemptions may alter this standard treatment.
Participation Exemption
Participation exemption rules provide significant tax advantages for substantial shareholdings that meet specific criteria.
Shareholdings must be held for a minimum continuous period ranging between 12 and 13 months.
The participation must be classified as a financial fixed asset rather than trading inventory.
When these conditions are met, 95% of capital gains become exempt from corporate income tax.
The participation exemption reflects Italian policy encouraging long-term strategic investments over short-term speculation.
This system rewards patient capital that supports business development and economic growth.
Professional investors and corporate entities particularly benefit from these provisions when structuring significant acquisitions.
Financial Institution and Corporate Capital Gains Tax in Italy
Financial institutions face different capital gains treatment reflecting their specialized business models.
Banks and other financial institutions (excluding asset management companies and brokerage companies) pay corporate income tax at 27.5%.
Their capital gains from participations may not qualify for IRAP exemptions that apply to other businesses.
These higher rates recognize the financial sector’s role and regulatory requirements.
Non-Operating Companies
Non-operating companies encounter the highest capital gains tax burden at 34.5% corporate income tax rate.
This elevated rate discourages passive investment structures and promotes active business operations.
Companies classified as non-operating face additional scrutiny and presumptive income rules that limit tax planning flexibility.
How is tax calculated on shares?
Individual taxpayers can choose between different tax calculation methods for certain share disposals.
The standard 26% flat rate provides simplicity and predictability for most transactions.
Alternatively, inclusion in regular income allows the use of personal allowances and deductions.
The optimal choice depends on overall income levels and available tax reliefs.
Are dividends taxed in Italy?
Yes. Dividends received by Italian residents are subject to the same 26% flat rate.
Dividend taxation interacts with capital gains rules to create comprehensive investment taxation.
This alignment between dividend and capital gains rates prevents tax arbitrage between income and growth strategies.
Integrated taxation supports neutral investment decision-making.
Capital Gains Tax in Italy for Non-Residents
Non-resident capital gains taxation in Italy follows specific rules designed to capture tax on Italian-source gains while respecting international tax treaty obligations.
Capital Gains on Shares for Non-Residents
Non-resident individuals generally face a 26% flat rate on capital gains related to Italian participations (e.g., shares in Italian companies).
This rate aligns with resident taxation but may be reduced under applicable double taxation treaties.
Treaty provisions can provide lower rates or exemptions based on the investor’s country of residence.
Professional review of treaty benefits is essential for tax optimization.
Property Capital Gains for Non-Residents
Property capital gains for non-residents follow the same fundamental rules as residents regarding holding periods and exemptions.
The five-year exemption applies equally to non-resident property owners.
However, non-residents cannot benefit from primary residence exemptions since they do not maintain Italian domicile.
This limitation increases the tax burden on non-resident property investment.
Non Resident Withholding Tax on Capital Gains
Withholding tax obligations create immediate tax collection mechanisms for non-resident gains.
Italian purchasers or paying agents must withhold appropriate taxes at the time of transaction.
These withholding requirements ensure tax collection before non-residents leave Italian jurisdiction.
Proper documentation and treaty claim procedures can reduce withholding rates.
Italian Lump-Sum Regime
The EUR 200,000 lump-sum tax regime provides an alternative for qualifying non-residents establishing Italian residency.
This special regime allows new residents to pay a fixed annual amount instead of worldwide income taxation.
Foreign capital gains can be excluded from Italian taxation under this regime. However, specific conditions and limitations apply to qualify for this preferential treatment.
CGT for Corporate Non-Residents
Corporate non-residents face capital gains taxation aligned with general business taxation principles.
Foreign companies with Italian permanent establishments include capital gains in their Italian taxable income.
Companies without permanent establishments may avoid taxation on certain gains, depending on treaty provisions and the nature of underlying assets.
International tax planning requires careful consideration of source rules that determine where capital gains arise.
Italian-source gains generally include real estate located in Italy and participations in Italian companies.
Mobile assets and international securities may qualify for foreign-source treatment.
Proper structuring can influence source characterization and resulting tax obligations.
How to avoid capital gains tax in Italy for non-residents?
Several legitimate strategies can minimize or eliminate capital gains tax obligations for non-residents investing in Italian assets.
These approaches require careful planning and professional guidance to ensure compliance with all applicable rules and regulations.
Holding Period Optimization
This represents the most straightforward approach to reducing capital gains tax exposure.
Non-resident property investors can benefit from the five-year exemption by maintaining ownership beyond this threshold.
This strategy requires long-term investment commitment but provides complete tax elimination.
Careful timing of disposals can maximize this benefit.
Tax Treaty Optimization
Treaty shopping through appropriate residence planning can reduce withholding tax rates on capital gains.
Investors may establish residency in countries with favorable Italian tax treaties before making significant disposals.
However, substance requirements and anti-avoidance rules limit purely tax-motivated residence changes.
Legitimate business or personal reasons must support residency decisions.
Corporate Structuring and Treaty Networks
Corporate structuring can provide flexibility in managing capital gains taxation across multiple jurisdictions.
Holding Italian investments through foreign corporations may defer or reduce taxation depending on corporate residence and treaty networks.
However, controlled foreign company (CFC) rules and substance requirements limit pure tax planning structures.
Pre-immigration Planning
This allows prospective Italian residents to realize capital gains before establishing residency.
Foreign investors can dispose of appreciated assets while still non-resident to avoid Italian worldwide taxation.
This strategy requires coordination between residency establishment and investment timing.
Professional advice ensures optimal sequencing of these transactions.
Inheritance and Gift Planning
Family wealth transfer strategies can minimize capital gains tax through inheritance and gift planning.
Italian inheritance rules may provide more favorable treatment than capital gains taxation
Cross-border family structures require careful consideration of multiple tax jurisdictions.
Estate planning professionals can optimize these complex arrangements.
Loss Harvesting
Loss harvesting techniques allow non-residents to offset capital gains with realized losses from other investments.
Italian tax law permits carrying forward losses to offset future gains within specific time limits.
International investors can coordinate loss realization across multiple jurisdictions to optimize overall tax efficiency.
Key Takeaways
Italy’s capital gains tax system in 2025 presents both opportunities and challenges for residents and non-residents alike.
- Understanding Italian capital gains tax requires attention to holding periods, with five-year exemptions providing significant savings opportunities.
- The 26% flat rate applies broadly but various exemptions and special rules create planning flexibility for different asset types and investor categories.
- Property investors benefit most from long-term holding strategies that qualify for exemptions.
- Recent Superbonus changes require careful consideration of renovation timing and disposal planning for affected properties.
- Non-residents should evaluate treaty benefits and consider timing strategies around residency changes.
- Professional advice remains essential given the complexity of international tax coordination and ongoing legislative evolution.
- Corporate structures require specialized analysis considering participation exemption rules and different tax rates for various business types.
- The integration of capital gains and dividend taxation supports neutral investment decision-making across different strategies.
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Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
