Friday, August 31, 2012

Retirement Planning - Italian Property Tax

imposta municipale unica

When I read in an update from Clare Galloway that her house was so inexpensive she paid no property tax, I immediately wondered how that could be. It turns out that for ordinary folks like us, the Italian system is amazingly simple.

In Italy, property tax (for real estate at least) is called IMU - imposta municipale unica (it used to be ICI). The problem with getting a handle on what one might pay lies in the fact that the base number is something called "rendita catastale" - a notional "rent" that might be obtained from the property. In many cases this number is very low and it can be reduced further if the house is in a mountainous area or a depopulated town.

Once you've got the rendita catastale for your property, calculating the tax is simple:



Calculate the "basis" value: (RC * 1.05) * 160
Calculate the IMU: basis * 0.004 for primary residence, 0.0076 for second homes

So, if the rendita catastale for your property is €500:

basis = (€500 * 1.05) * 160 = €84000

Primary Residence IMU = €84000 * .004 = €336

There's a €200 credit plus €50 for each dependent under age 26. So worst case for this primary residence is €136!

Second Home IMU = €84000 * .0076 = €638,40

Of course, if things were that simple we wouldn't be in Italy. For second homes the comune can adjust the IMU tax rate between .0046 and .0106. Right now, nobody really knows how this will work since the IMU has only been in place since June. Presumably one's comune will issue some sort of statement for each property in it's jurisdiction.

You may recall that I mentioned Clare pays no property tax. She doesn't seem to have children so that must mean her IMU is €200 or less. With that knowledge we can easily determine that her rendita catastale must be below €297,61. Given that she's in a depopulated hill town, chances are it's considerably lower than that.

Paying the IMU

You pay the tax in 2 installments, June 18 and December 17 (which will presumably change slightly each year to avoid holidays and weekends. It can be paid online so even from this country it shouldn'r be too inconvenient.

My Thoughts

Nobody like to pay taxes, but this one is easy to calculate and easy to pay from abroad since it can be done online. The kind of places we're looking at buying will likely have a low rendita catastale so the actual amount paid during the few years before retirement will be almost meaningless.

Most Italians seem to hate the new system. The old way used a different basis value which in many cases hadn't been updated in decades (just as in some cities here in the US).  Apparently the new system also involves re-calculating the basis value, so lots of people are either getting hit with new larger tax bills (or paying their fair share depending on how you look at it). I've seen some comments on "living in Italy" forums indicating that compliance with the new system is as low as 40%.

Rendita catastale - It's  an important number you'll want to be sure you have as part of purchase planning. If you're renovating a ruin or even just fixing up a nearly livable place I suspect it could be hard to come by. This is one of the many places where developing a face to face relationship with the local political establishment will be helpful. Clare has indicated that in Guardia Sanframondi folks interested in buying will be meeting with the mayor when visiting properties. Fellow HHI addicts will recall that Trivigno Basilicata episode in which the mayor of Trivigno showed the couple around town.

And just to be perfectly clear, no one should take my ramblings as authoritative tax advice.

Much of the information in the post comes from Italy4Me.

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