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Italy Explains New Local Property Tax

by Ulrika Lomas, Tax-News.com, Brussels

24 May 2012


The Italian Treasury has issued a circular which attempts to explain the complex regulations surrounding the introduction of IMU, the new unified local property tax, which formed the major revenue-raising measure within the government’s ‘Save Italy’ budget finalized in December last year.

That budget presaged the levying of IMU at a standard rate of 0.4% applying to first residences and with all other residences being subject to the expected standard rate of 0.76%. The extension of local property taxes to primary residences, accompanied by a 60% average increase in the official value of properties, was budgeted to bring in an extra EUR10bn (USD14.1bn) per year.

It is firstly explained that all buildings are divided into various categories, including residential buildings and adjoining properties, such as garages. Where the latter are classified as part of a property owner’s prime residence, the 0.4% standard IMU tax rate is applicable, unless the local authority in which the property is situated takes advantage of a possibility to increase or decrease it by a maximum of 0.2%.

In like manner, for all other properties, the standard 0.76% IMU tax rate can be raised or lowered by the local authority, to a maximum of 1.06% or a minimum of 0.46%.

Furthermore, local authorities have been given the opportunity to vary the standard IMU threshold of EUR200 for prime residences. In fact, an authority can increase that threshold so as to reduce the tax payable to zero, but, in that case, it cannot increase the tax on other properties above 0.76%.

The threshold is increased by EUR50 for each dependant living in the home, up to the age of 26 years, with a maximum threshold of EUR400 per property.

A prime residence is the property in which the owner and his family live normally, and where they also have their official residence. It is further specified that, if a family has more than one such residence in the same local authority, the threshold deduction will apply only to one of those properties. However if they are situated in more than one local authority, more than one deduction (but no more than three) can be obtained.

IMU will normally be payable in two equal instalments (on June 16 and December 16), with the possibility of paying in one amount on the first date. However, the payment dates have had to be altered in 2012, due to the fact that the actual rates payable by taxpayers have not yet been finalized.

By September 30 this year, local authorities will have had to approve their IMU tax rates and deduction thresholds, but those rates will then be subject to change by Italian goverment decree, by December 10, 2012, in order to protect the revenue expected from the tax.

Therefore, this year, it will not be possible to pay IMU in one amount by June 18 (June 16 is a Saturday), and the payment on that date will be calculated with reference to the 0.4% and 0.76% standard rates. A balancing tax payment has then to be made by December 17.

A comprehensive report in our Intelligence Report series dealing with the issues raised by international property investment, and the possible taxation implications raised by such purchases, with an account of the likely (and some less obvious) potential countries for your consideration, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report15.asp
TAGS: tax | investment | real-estate investment | property tax | real-estate | budget | tax thresholds | tax rates | Italy | tax breaks

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