What follows is a description of the taxes due in relation to the purchase of immovable properties for residential use and the relevant tax reductions. 

Requirements for tax reductions: 

Those who purchase their first property can benefit from a tax reduction. For the latter to be granted, both the property and the purchaser must meet a set of conditions. 

The property must be located: 

In the territory of the municipality where the purchaser habitually resides; 
In the territory of the municipality where, within 18 months from the date of purchase, the purchaser establishes his or her habitual residence;
In the territory of the municipality where the purchaser conducts his or her business (members of law-enforcement bodies and soldiers abroad are exempted from this requirement);
If the purchaser was relocated abroad for work purposes, in the territory of the municipality where the the purchaser’s employer, i.e. the subject from whom the purchaser depends, has its premises or conducts its business;
If the purchaser is an Italian citizen living abroad (registered in the AIRE), the purchased property must be his or her first immovable property owned within the Italian territory. 

In the purchase deed, the purchaser declares not to hold, neither exclusively nor jointly with his or her spouse, any property, usufruct or use rights in other dwelling house(s) within the territory of the municipality where the property being purchased is located (bare ownership is excluded, since bare owners are not in the possession of the property). 

In the purchase deed, the purchaser also declares not to hold any property, usufruct, use or bare ownership rights, not even in shares nor in the form of community ownership by undivided shares, on any other dwelling house(s) within the whole national territory purchased by the purchaser or by his or her spouse benefiting from tax reductions for the purchase of their first immovable property for residential use. 

In relation to the requirements concerning the property itself, reductions only concern the purchase of non-luxury properties belonging to certain predetermined categories (NO A1 - A6 - A8 - A9 - A10)

 

Purchasers lose their right to the so-called “first house” tax benefit if:

The declarations required by law and rendered by them at the time of the final deed before the public notary prove to be false;
The property purchased with such benefits is then transferred, whether for consideration or not, within a 5-year time limit from the date of purchase.

In such case, the Italian Tax Agency will recover registration charges, mortgage registration fees and the Land Register fees while also applying a penalty equal to 30% of the abovementioned charges and fees plus interests.


No tax benefit loss occurs if, within 12 months from the sale of a property purchased with the so-called “first house” tax benefit, purchasers/taxpayers proceed to purchase another immovable property for their residential use.

 

The purchase of a new dwelling house within one year from the sale of the previous one generates a tax credit. 

In order to benefit from it, the following conditions must be met:

The new purchase must take place within one year from the sale of the previously owned dwelling house;
Purchasers/taxpayers must not have lost their “first house” tax benefit;
The previously owned dwelling house must have been purchased with the “first house” tax benefit.

The tax credit amount – the tax credit corresponds to the registration fees or the VAT payed at the time of the first purchase. In any event, it must not exceed the registration charges or the VAT to be paid for the new purchase; no right to reimbursement may arise.

E.g. first purchase of a “first house”: Euro 100,000.00; registration charges paid (2%): Euro 2,000.00; second purchase of a “first house”: Euro 200,000.00; registration charges paid (2%): Euro 4,000.00.

To decrease the amount due as registration charges in relation to the new purchase;
To decrease the amount due as registration charges, mortgage registration fees and Land Register fees due in relation to deeds and tax returns filed after earning the tax credit; 
To decrease the amount due as personal income tax according to the tax return filed on the next deadline after the purchase of the new property (only with the first tax return after the date of purchase); 
To set off against other taxes in case of unitary deposit by means of the F24 model.

The tax credit is limited in time: should purchasers mean to use it for the payment of taxes due in relation to deeds and tax returns filed after the second purchase, they will need to bear in mind that such benefit has a 10-year time limit from its original earning. 

In case of death of the tax credit right-holder before the credit was used, it is transferred on to heirs. 


Loss of the tax credit: 

As the tax credit is linked to the so-called “first house” tax reduction benefit, the loss of the latter automatically implies, in addition to the recovery of ordinary taxes as seen above, the recovery of the credit used.

If a “first house” was purchased directly from a construction company, for which reduced VAT have been paid (4%) and registration charges applied as a set amount of Euro 200.00 rather than as a percentage, since no set off is possible with construction companies, the tax credit deriving from the difference between the VAT paid in the first and second purchase (still in the event that the first amount is lower than the second) this may be set off against the “Modello Unico” or F24 model.