Investment in Italy

Investment in ItalyIncome from immovable propertyIn general, income from the ownership of land and buildings is a notional amount based ona cadastral system. In the case of property that is rented out, the taxable basis is the higherof the notional cadastral income and the actual income, net of directly attributable expensesof up to 15 percent of the gross income (i.e. the actual net income cannot be lower than 85percent of the gross income).Owner-occupied homes are deemed to produce taxable income for the owner. However, thenotional income of the owner-occupied dwelling is not subject to tax because a deductionequal to the notional income is available. The income attributable to the owner-occupieddwelling is not taken into account for the purposes of computing eligibility for personal andother allowances.Notional income from other houses that are owned in addition to the principal dwelling ofthe owner or his family, is increased by one third.Income from immovable property located abroad is obviously not subject to the cadastralsystem of taxation.Principal residence: gains and lossesCapital gains realized on the sale of real estate in Italy are generally taxable whether ornot the owner is resident in Italy. Italian tax law provides that capital gains realized from atransfer for consideration of buildings held for less than five years are to be included in theindividual’s taxable income. The sale of the first habitual dwelling is not taxed as a capitalgain if the building has been appointed as the habitual dwelling for the greater part of theperiod of possession.A capital gain realized on the sale of real estate purchased more than five years previouslyis not taxed.Capital gains realized on real estate outside Italy are taxable in Italy under the above rules ifthe owner is considered to be an Italian tax resident.6.5Administrative and filing requirements6.5.1Withholding taxesSalaries and other income from employment paid by companies, businesses and professionalsare subject to an advance withholding tax, which is creditable against the recipient’s incometax liability. The tax is withheld at the ordinary income tax rates corresponding to the relevantbrackets, on a pro rata basis according to the period for which the payment is made.62© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato Consulenza legale e tributaria, anItalian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.