Taxes and Duties on Real Estate

The acquisition, use, and disposal of real estate are invariably linked to a wide range of tax obligations. The actual burden depends not only on the type of property and its intended use, but also on the status of the owner and the underlying legal transaction. A thorough legal and tax analysis is therefore indispensable to mitigate risks and to make the most of available structuring opportunities.

Taxes on the Acquisition of Real Estate in Italy and Germany

When acquiring real estate, different categories of taxes apply depending on the contractual structure and the intended use of the property.

In Italy, the most relevant are the real estate transfer tax (imposta di registro), which is generally assessed on the cadastral value, with reduced rates available for acquisitions of a primary residence or for agricultural purposes. In certain cases, value-added tax (IVA) applies, particularly when purchasing newly built properties directly from a developer or in cases of commercial use. In addition, mortgage and cadastral taxes (imposta ipotecaria e catastale) are levied for the registration of the property in the land register and cadastre.

In Germany, the acquisition of real estate is subject to the real estate transfer tax (Grunderwerbsteuer), the rate of which varies between 3.5% and 6.5% depending on the federal state. Unlike Italy, VAT is generally not charged on the purchase of real estate unless special circumstances apply (e.g., sales of new buildings by a business). Furthermore, registration fees and notarial costs arise in connection with the entry into the land register.

A careful prior assessment of the applicable taxes in both jurisdictions is essential to avoid unexpected financial burdens and to secure potential tax advantages in good time.

Taxation of Rental Income

Income derived from the rental or lease of real estate is subject to income taxation in both Italy and Germany, though under different regimes.

In Italy, rental income is generally taxed under the ordinary income tax system (IRPEF). As an alternative, landlords may opt for the Cedolare secca, a flat substitute tax that can be particularly advantageous for residential leases. For commercial leases or short-term tourist rentals, VAT (IVA) may apply in addition. In many regions, short-term rentals are also subject to specific registration and reporting requirements, which have direct tax implications.

In Germany, rental income is taxed as part of the landlord’s personal income under the Einkommensteuer regime. Deductible expenses, such as maintenance, financing costs, and depreciation, can significantly reduce the taxable base. VAT generally does not apply unless the landlord has expressly opted for taxation, which is primarily relevant in commercial contexts.

Given the potential for double taxation in cross-border constellations, the application of relevant double tax treaties must be carefully assessed to ensure that the correct tax treatment is achieved and fiscal efficiency is maintained.

Cross-Border Considerations

For non-resident property owners, additional challenges frequently arise. In addition to German or Italian tax rules, the provisions of the country of residence as well as applicable double taxation treaties must be taken into account. Uncoordinated planning can easily result in conflicting obligations or unnecessary double taxation. Close coordination with tax experts in both jurisdictions is therefore essential to ensure a consistent, tax-optimized, and legally secure structuring.

Ongoing Taxes and Charges on Real Estate in Italy and Germany

Ownership of real estate entails not only acquisition-related taxes but also recurring charges.

In Italy, the central burden is the municipal property tax (IMU – Imposta Municipale Unica), the amount of which depends on cadastral value and the use of the property. In addition, municipalities levy the TASI (Tassa sui Servizi Indivisibili), which finances certain local public services, and the TARI (Tassa sui Rifiuti), a waste collection fee calculated on the basis of the property’s surface area and use. The exact amounts vary significantly between municipalities and must be factored into any long-term cost planning.

In Germany, the principal recurring charge is the real property tax (Grundsteuer), calculated on the basis of the assessed property value and the local municipal rate (Hebesatz). The amount can differ considerably between municipalities. Furthermore, waste collection, water supply, and sewage fees are levied separately at the local level.

A structured analysis of these ongoing burdens in both countries is indispensable for realistic financial planning and for avoiding unexpected expenses in property ownership.

Taxes on Disposal or Transfer

The disposal or gratuitous transfer of real estate is of major tax relevance in both Italy and Germany.

In Italy, a sale may trigger capital gains tax (plusvalenza) if carried out within certain time limits after acquisition or in the course of business activity. The taxable gain corresponds to the difference between the sales price and the acquisition cost, adjusted for provable investments. Gratuitous transfers such as inheritance or gift are instead subject to inheritance and gift tax, calculated on the basis of kinship, cadastral value, and available allowances.

In Germany, the sale of property within the ten-year speculation period is subject to income tax on the capital gain, while sales beyond this period are generally tax-exempt. Inheritances and gifts are subject to inheritance and gift tax, also determined by the relationship between transferor and transferee, the property value, and applicable allowances, which in Germany are typically more generous than in Italy.