Published on and written by Cyril Jarnias
Buying a house in Tuscany, an apartment in Rome, or a pied-à-terre on the shores of Lake Como is a dream for many French people. But behind the postcards, Italian real estate taxation remains complex, especially when you remain a French tax resident. Between local taxes in Italy, taxation of rents, capital gains rules, and coordination with the Franco-Italian tax treaty, an error in analysis can be costly.
This article provides a complete, plain-language breakdown of Italian real estate taxation, based on current Italian rules and the tax treaty between France and Italy.
Buying a Property in Italy as a French Person: What Are the Entry Taxes?
When a French person buys real estate in Italy, they are immediately faced with a first set of taxes: registration duties, possible VAT, mortgage and cadastral taxes. The treatment depends mainly on two factors: the nature of the seller (individual or VAT-registered company) and the use of the property (primary residence for an Italian resident or secondary residence / vacation home for a non-resident).
In most cases for a French person who remains a French tax resident and buys a secondary residence, the transaction is with an individual seller, under the imposta di registro regime.
The “Imposta di Registro”: The Main Purchase Tax for Secondary Residences
For a French person buying a secondary residence in Italy from an individual, the main tax is the registration tax (imposta di registro), at a rate of 9%. This tax is calculated not on the actual price paid, but on the cadastral value of the property, provided the buyer opts for the so-called prezzo-valore mechanism.
Multiplier coefficient used to calculate the Italian cadastral value from the cadastral income revalued by 5% for most residential properties in category A
A classic example, drawn from real cases, illustrates the difference in tax base:
| Purchase Example | Market Price | Cadastral Value | 9% Base if on Price | 9% Base if on Prezzo-Valore |
|---|---|---|---|---|
| Farmhouse in Tuscany | €1,600,000 | €900,000 | €144,000 | €81,000 |
By activating the prezzo-valore regime, the French person buying this farmhouse in Italy significantly reduces the tax cost of their acquisition. This possibility is crucial to know for any secondary residence purchase.
In addition to this imposta di registro of 9%, mortgage and cadastral taxes are added, but they are often fixed amounts (e.g., €50 or €200 each depending on the case) and remain marginal compared to the 9% registration fee.
If the buyer is an Italian resident and meets the conditions for the “prima casa” (primary residence), the imposta di registro rate drops to 2% of the cadastral value. However, this option is effectively closed to a French person who keeps their tax residence in France and does not have their main home in Italy.
VAT, Mortgage and Cadastral Taxes: The Exception for Purchases from Developers
When the seller is a construction company selling the property within the first five years after completion, the transaction falls under Italian VAT. In this case:
– VAT is calculated on the actual price paid, not on the cadastral value
– the rate is generally 10% for a non-luxury secondary residence, and can go up to 22% for luxury properties (categories A/1, A/8, A/9)
– the imposta di registro then becomes a modest fixed tax (a few hundred euros), while the imposta ipotecaria and imposta catastale are also flat rates.
For a French non-resident buying a new or very recent vacation property from a developer, the entry cost can therefore increase significantly, sometimes exceeding 15% of the purchase price once VAT, notary fees, intermediary commissions, and property taxes are added together.
IMU: The Cornerstone of Local Taxes for a Secondary Residence
Once a property owner, the French non-resident becomes liable each year for Italian local taxes. The key one for a vacation home is the IMU, Imposta Municipale Propria (often called Imposta Municipale Unica), i.e., the municipal property tax.
IMU is a tax paid by the property owner, separate from taxes on rental income. For a French non-resident, the rule is clear: a property that is not their primary residence in Italy is treated as a secondary residence and subject to IMU without the exemption reserved for “abitazioni principali.”
How is IMU Calculated for a French Non-Resident?
IMU is based entirely on cadastral value, not market value. The calculation follows a standardized national formula, with a margin of adjustment left to municipalities.
The method for a standard residential property (category A, excluding A/10) is as follows:
1. Obtain the rendita catastale This figure appears on the notarial deed (rogito) or on a cadastral extract (visura catastale) provided by the Agenzia delle Entrate.
2. Revaluation of 5% The rendita catastale is increased by 5% (coefficient 1.05).
For a group A property, the tax base is calculated by multiplying the *Rendita catastale* by 1.05, then by the legal coefficient of 160.
4. Application of the municipal IMU rate The standard national base rate is 0.86% (8.6‰). Municipalities can increase it up to 1.06%, or even 1.14‰ in certain deficit cases, or reduce it to 0% within strict limits.
This mechanism can be summarized in a table:
| Step | Operation | Comment |
|---|---|---|
| 1 | Obtain the rendita catastale | Official data from the cadastral administration |
| 2 | Rendita × 1.05 | Legal 5% revaluation |
| 3 | Result × 160 | Legal coefficient for residential properties (cat. A excluding A/10) |
| 4 | Base × municipal IMU rate | Rate between 0.86% and 1.06% depending on the municipality |
For a secondary residence in a sought-after area, many municipalities frequented by foreigners (Forte dei Marmi, Capalbio, Punta Ala, Cernobbio, Bellagio, Olbia, Porto Cervo, etc.) apply the ceiling of 1.06% on non-exempt properties.
Thus, a French person buying a luxury villa (category A/8) in Forte dei Marmi, with a rendita catastale of about €5,400, would face an annual IMU bill of around €9,600 at a rate of 1.06%. If the same villa were located in a less expensive municipality, with a rate of 0.76%, the IMU would drop to about €6,900.
Primary Residence, Secondary Residence, and Luxury Properties
Italian law provides for a full IMU exemption for the primary residence of the household (the “abitazione principale“) and its annexes, provided the property does not fall into the luxury categories A/1, A/8, or A/9. For these prestige properties, a “luxury surcharge” remains, even if the property is the primary residence.
For a French tax resident, a vacation home in Italy is considered a second home and therefore subject to IMU without benefiting from the “prima casa” exemption, even under the Franco-Italian tax treaty.
Properties classified as A/1 (prestigious homes), A/8 (villas), and A/9 (castles and historic palaces) also have special tax treatment: they can never benefit from “first home” advantages, whether it is the reduced 2% rate at purchase, the IMU exemption, or certain capital gains calculations. This classification is therefore an essential element to check for a French person targeting a character property.
A Declarative Tax: No Bill, but Strict Deadlines
Another peculiarity that often surprises foreigners: the Italian municipality does not systematically send you an IMU “bill.” It is up to the owner to anticipate and calculate the amount due themselves, applying the cadastral formula and the rate voted by the municipal council in its annual delibera.
Payment is split into two deadlines:
The two property tax payments: down payment and balance.
Paid around June 16, generally calculated based on the previous year’s tax.
Paid around December 16, once the definitive rates are published by the municipality.
Non-payment or insufficient payment automatically results in penalties, which increase with late payment interest. In some pilot municipalities, a pre-filled notice system is emerging, but it remains prudent for a French person not to rely on it and to have their calculations verified by a local professional.
Possible Reductions: AIRE Pensioners and Special Cases
For the vast majority of French non-residents, IMU is due in full. However, there is a specific regime for certain Italian pensioners registered with AIRE (register of Italians abroad) receiving a pension under an international convention: in this specific case, IMU can be reduced by 50% on a single unrented property in Italy. This very targeted regime does not apply to a simple French retiree who has bought a secondary residence.
Other reductions exist for technical situations (uninhabitable buildings, illegally occupied properties, buildings of historical interest, etc.), but they require formal procedures and only cover exceptional cases.
Other Local Taxes: TARI and Former TASI
IMU is not the only tax to consider. Two other components are part of Italian local taxation: TARI and, to a lesser extent today, the former TASI now integrated into IMU.
TARI: The Waste Tax
TARI (Tassa / Tributo sui Rifiuti) funds waste collection and treatment. It is due by the person who occupies the home, whether owner or tenant. For a French person using their property as a vacation home with no year-round tenant, they are generally personally liable for TARI.
This tax is primarily calculated based on two parameters:
– the floor area of the property
– the number of declared occupants (or a standardized scale depending on the municipality).
More and more cities are experimenting with a “tariffa puntuale”, where the bill also depends on the actual volume of waste produced, tracked via chipped bins or weighing systems.
TARI is an annual charge for the waste management service, not to be confused with IMU, which is a tax on property ownership.
TASI: Integrated into IMU
TASI (Tributo per i Servizi Indivisibili) funded municipal services such as public lighting or road maintenance. Since the 2020 reform, it has been merged into IMU, so the owner no longer has to manage two separate taxes. Payment dates and exemption rules have aligned with those of IMU.
For a French owner, the practical effect is simplification: a single property tax (IMU), but potentially at a slightly higher level than before the TASI-IMU merger.
Renting Out Your Italian Property: Taxation of Rents for a French Resident
If the French person decides to rent out their Italian property, either occasionally as a seasonal rental or more regularly, the taxation becomes dual: they are taxed in Italy, the country where the property is located, and must then declare these revenues in France, with a tax credit mechanism provided by the bilateral treaty.
Taxation of Rents in Italy: IRPEF or Cedolare Secca
In Italy, income from renting out real estate is, in principle, taxable in the country, even if the owner is a non-resident. Domestic law provides for two main regimes:
The cedolare secca rate increases from 21% to 26% starting from the second short-term rental property in Italy.
For a French non-resident, opting for the cedolare secca is, in most cases, the most advantageous: it locks the rental income into a fixed rate of 21% or 26%, avoids including this income in the progressive Italian tax brackets, and neutralizes local surtaxes on this income. It also exempts the landlord from paying Italian social security contributions on these rents, unlike what may exist for landlords in France or Spain.
Control of Rentals via Platforms
Rental platforms like Airbnb or Booking must now annually transmit, under the European directive DAC7, a statement of income paid to owners to the tax authority of the country where the property is located, which then forwards it to other relevant states. Concretely, if a French person rents out their Italian apartment via a platform, both the Agenzia delle Entrate in Italy and the French tax administration will be informed of the rents received.
The increased flow of information between countries exposes you to an audit in case of non-declaration. It is therefore crucial to choose the Italian regime (IRPEF or cedolare secca) carefully and coordinate it with the French declaration.
Declaring Italian Rents in France and the Tax Credit
On the treaty side, Article 6 of the Franco-Italian convention gives the country of location of the property (here Italy) the right to tax real estate income, including rents. France, as the owner’s state of residence, does not give up taxing these rents, but must avoid double taxation through a tax credit system.
For a French resident:
Italian rents must be declared in France as rental income (unfurnished rental) or industrial and commercial profits (furnished rental) using forms 2047 and 2044 or 2042 C PRO. The Italian tax paid (IRPEF or cedolare secca) is not deducted from the income but gives rise to a tax credit in France.
Two mechanisms coexist in French treaties, but with Italy, the scheme for real estate income is as follows: France calculates tax on total worldwide income, including Italian rents, then grants a tax credit equal to the French tax attributable to these rents. In other words, Italian rents serve to determine the effective tax rate in France, but do not undergo a second full taxation.
From a practical standpoint, the French taxpayer must: inform themselves of their tax obligations, declare their income on time, and respect the deadlines set by the tax authorities.
– report the gross amount of Italian rents on form 2047
– carry this amount over to the appropriate boxes on the 2042 form
– indicate the treaty tax credit in boxes 8TK (or equivalent), so that the French tax authorities apply the effective rate mechanism.
For a landlord who has already paid 21% in Italy via cedolare secca, this arrangement avoids a second French tax on the same income, while maintaining some degree of overall progressivity.
Capital Gains on Real Estate in Italy: The Major Advantage of 5 Years
In the area of capital gains, Italy offers French owners a notable advantage: the rule of exemption after five years of ownership. The provision is found in Article 67, paragraph 1, letter b, of the TUIR (the Italian income tax code).
The General Rule: Taxation if Sold Before 5 Years
In principle, any for-profit transfer of Italian real estate by an individual generates a taxable capital gain if the property is sold within five years of its acquisition or construction. The seller’s nationality and tax residence are irrelevant: French, Italian AIRE, or other non-residents are subject to the same rules for properties located in Italy.
The gross capital gain is determined as the difference between: the sale price and the acquisition price.
The capital gain equals the difference between the net sale price (deed price minus seller costs such as agency commission, diagnostics, mortgage release) and the adjusted acquisition cost (costo fiscalmente riconosciuto) which includes the purchase price at the rogito, registration/mortgage/cadastral duties, notarial fees, and documented intermediary commissions, as well as extraordinary work justified by traceable invoices.
Under certain conditions, a revaluation using the ISTAT index can be applied to properties held for more than one year, which reduces the taxable gain accordingly.
Once the net capital gain is calculated, two taxation methods exist:
– inclusion in taxable income and subject to the IRPEF progressive brackets, with special treatment for long-term gains
– or an option, at the time of signing the deed before the notary, for a flat substitute tax of 26% on the gain, fully collected by the notary on behalf of the Treasury.
Full Exemption After 5 Years
The major difference from France lies in the timeframe: in Italy, once the property has been held for at least 5 years, the capital gain realized by an individual is completely exempt from income tax, regardless of their tax residence.
This rule applies equally to:
– an Italian resident in Italy
– an Italian expatriate registered with AIRE
– a French person with tax residence in France selling their vacation home in Italy.
Another exemption pathway exists: if the property was used as the primary residence of the seller or their family for most of the holding period, the capital gain may be exempt even if sold within five years. But this scenario is rare for a French person who keeps their main home in France.
Also note: properties received through inheritance are, in practice, largely exempt from capital gains tax, regardless of the holding period, as the tax base is most often reconstructed from the value declared in the estate.
What Happens in France for the Italian Capital Gain?
The Franco-Italian tax treaty provides, in Article 13, that gains from the alienation of real estate are taxable in the state where the property is located. In other words, the capital gain on the sale of an apartment in Milan by a French resident is, in the first instance, taxable in Italy.
In practice, for an individual:
– if the property is sold more than five years after its acquisition, the capital gain is exempt in Italy. For France, tax doctrine results in these Italian real estate capital gains being excluded from the French tax base, while sometimes still needing to be declared for informational purposes for the calculation of the reference tax income.
– if the property is sold within five years and a capital gain is effectively taxed in Italy (at 26% or under the IRPEF brackets), France, as the state of residence, includes this gain in the calculation of worldwide income but grants a tax credit that, for this type of income, generally neutralizes double taxation, in application of the treaty’s credit mechanisms.
The difference in exemption periods (5 years in Italy vs. 22 years for income tax and 30 years for social levies in France) can favor Italian real estate investments for medium-term projects.
Franco-Italian Tax Treaty: Who Taxes What, and How to Avoid Double Taxation?
At the heart of cross-border taxation lies the tax treaty signed between France and Italy. It organizes the allocation of taxing rights between the two states and defines the methods for eliminating double taxation.
Real Estate Income: Primacy of the Property’s Location Country
For rents and income from the use of the property, Article 6 of the treaty is unambiguous: income from real estate located in one state may be taxed in that state, even if the owner resides in the other. This covers all income resulting from direct use (e.g., imputed cadastral income in some systems), rental, or any other form of exploitation.
For a French person who owns a rented apartment in Florence, Italy has the primary right to tax the rents. France retains a residual right but must grant a tax credit to avoid double taxation.
Capital Gains on Real Estate: Same Logic
Article 13 follows the same approach for gains from the disposal of real estate: capital gains from the alienation of real property are taxable in the state where that property is situated. Thus, a French resident selling an Italian property is in principle taxable in Italy on the gain, with treatment in France dictated by the treaty (exclusion or tax credit depending on the exact nature of the gain).
Local Property Tax and TARI: Not Covered by the Treaty Tax Credit
The tax treaty primarily covers income taxes and, where applicable, wealth taxes. Purely asset-based or service-oriented local taxes, such as IMU or TARI, are not income taxes within the meaning of the treaty. Consequently, a French person cannot claim a tax credit in France for the IMU they pay each year in Italy, nor for the TARI.
Taxes paid in Italy on real estate remain local charges. Although deductible under certain Italian rental income regimes, they have no direct impact on French tax. Only certain effective expenses may be deducted when calculating foreign-source rental income.
Practical Management on the French Side: Declarations and Tax Credits
On the French side, the mechanism relies on a cascade of forms and specific boxes. A French resident who receives Italian rents must:
– report these revenues on form 2047 (income received abroad)
– possibly, detail their expenses on form 2044 (actual rental regime)
– integrate them into form 2042, in the sections dedicated to foreign-source rental income
– finally, fill in lines 8TA or 8TK depending on the applicable treaty tax credit type, so that the French tax authorities calculate the theoretical French tax on these rents, then offset it with a tax credit equal to the corresponding French tax.
This mechanism is technical, but the issue is simple: fully apply the treaty so that the Italian real estate income is not taxed twice.
Implicit Comparison with France: What Really Changes for a French Investor
The value of examining Italian taxation is only truly understood by comparing it, at least implicitly, with the French system.
A few key points emerge:
At purchase, transfer taxes in France (7-8% of the actual price) may appear higher than in Italy (registration tax of 9%), but the latter is applied to a cadastral base that is 30-40% lower than the market value, making the cost comparable or sometimes lower via the *prezzo-valore* mechanism. Local taxes include property tax (taxe foncière) in France and IMU in Italy (coefficient 160, municipal rate up to 1.06%), which can be higher in Italy for luxury villas in tourist areas. Rents are taxed at progressive rates + 17.2% social levies in France, versus a *cedolare secca* capped at 21% (or 26%) in Italy with no social charges, advantageous for heavily taxed taxpayers. Capital gains are exempt from income tax after 22 years (and 30 years for social levies) in France, but after only 5 years in Italy for individuals, an advantage for short- or medium-term holdings.
What a French Person Should Keep in Mind Before Investing in Italy
At the end of this overview, a few key ideas emerge for a French resident interested in Italian real estate taxation:
Italy taxes income and capital gains from a property on its territory; the Franco-Italian treaty avoids double taxation. The entry tax (imposta di registro at 9%) can be optimized via the prezzo-valore regime. IMU is the local tax on secondary residences, varying by municipality (up to 1.06% of the taxable base). TARI is added for waste. For rents, the cedolare secca offers a rate of 21% (first short-term rental) or 26% (second), with no social security contributions. A capital gains exemption is possible after five years of ownership. The treaty avoids double taxation on income and capital gains, but not on IMU or TARI, which are not deductible in France.
For a French investor, Italy therefore offers a contrasting tax landscape: entry and occupancy costs that can be high in the most sought-after locations, but taxation on income and especially capital gains that is potentially more favorable than in France, provided you master the rules and integrate the tax treaty into the overall strategy.
Before signing a preliminary contract for a property in Italy, it is prudent to have the Italian and French tax impacts precisely calculated over several years, because taxation determines the real return on investment without necessarily killing the dream.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
