Part 3, Countries in the world considered as property tax heaven, and Italy as “Top of the list”.
INTRODUCTION
Some time ago I saw a video online presenting the 12 countries in the world considered as Property Tax Heavens, meaning countries where properties are taxed little, both at the purchase time, than during the ownership period.
Here will explain which data they considered for the ranking, and than analyze also Italy. A country that is not indicated as probably was too complicated for them to understand how works property taxation in Italy.
DATA
The rank took in consideration basically just 2 data:
- The “stamp duty” tax on purchase of the property
- The annual property tax that owners must pay to local governments.
Such data are not always fixed and clear in all countries, as can depend also on the property type, size, quality and other factors. Therefore in some cases, they reported a range of values.
The table below report the data of the 12 countries that made this rank.
RANK | COUNTRY | STAMP DUTY | ANNUAL TAX |
1 | Turks and Caicos Islands | 2.5 – 5 % | None |
2 | Seychelles | 1 – 5 % | 0.25 % |
3 | Switzerland | 1 – 3 % | 0.2 – 0.3 % |
4 | Bulgaria | About 2 % | 0.15 % |
5 | Malta | 2 – 5 % | none |
6 | Estonia | Undefined, still low | 0.1 – 2.5 % |
7 | Fiji | 3 % | None |
8 | Cayman Islands | 5 – 7.5 % | None |
9 | Dominica | 2 – 5 % | Just in the cities |
10 | Monaco | 1 – 7 % | 1 % |
11 | Georgia | None | 1 – 5 % |
12 | United Arab Emirates | 1 – 7 % | None |
For me they left out some other data that should be relevant when considering property purchase and investing abroad. In particular the capital gain tax on profits when a person sells the property. Other eventual taxes on sale, due by the seller.
And the possibility to transfer out of the country the money collected after the sale, or particular restrictions that might exist on selling the property.
ITALY
As introduced above, I believe Italy should be at the top of the ranking, if not the winner. To explain why, I present and explain here the data about Italy.
To start, lets look at the 2 data used in the ranking above, with some info first:
- Stamp duty for “second hand” properties, that are over 90% of the ones on sale, is calculated based on the “Cadastral” value of the property, not on the sale price. Whilst tax for newly constructed properties is calculated on the sale price.
- As introduction, a residential property purchased as living residence, is called “first house”, whilst other properties a person owns, for holiday or investment or else, are called “ second house”.
- The Cadastral value in Italy is basically always lower than the sale price. I analyzed data of 90 “second hand” properties that we presented on sale in the past 2 years, and the average Cadastral value as “first house” is 38% of sale price, and that of “second house” is 42% of sale price.
- Worth mentioning I consider this sample of 90 properties a valid one, as consist of a wide range of properties, from low quality flats in the cities, to luxury flats in the center, to new and historical villas, to countryside farmhouses, to seaside properties, from properties in good conditions that can be used immediately, to others that are in need of some restructuring or redecorating.
- The stamp duty is calculated based on the Cadastral value. Using this sample of 90 properties, on average the stamp duty as “first house” was 0.77% of the sale price, and as “second house” was 3,83% of the sale price.
- The annual property tax is paid only on “second house” and is also calculated in a particular way, based on the Cadastral value of the property. The average of the same sample of 90 properties we presented, is 0.47% tax based on sale price.
Therefore, to sum up the 2 data taken in consideration for this list, Italy properties have a stamp duty from below 1% to 4%. And annual tax, applied only on “second houses”, is average 0.5%
Than we have to look at other data that for me makes Italy one of the best countries in the world as Property Tax Heaven.
- There are no restrictions on selling a property.
- Once sold, and eventual capital gain taxes paid, you can transfer the money back to your country freely.
- If you keep the property for 5 years, than there is no capital gain tax on the profits! And no other sale taxes.
- Italy has bilateral agreements with many other countries, mostly Europeans still also with USA as example, saying that the owner can decide the country where to pay the inheritance tax on the property owned. Considering that in Italy the inheritance tax is paid on the Cadastral value, that as seen is always lower than market price, and that inheritance taxation in Italy is very low, this makes Italy very interesting, as foreigners can buy properties in Italy as way for their heirs to pay less inheritance taxes than in their countries!
I will present all data and info about Italian property taxation, and inheritance taxations, in next post. Therefore you can have all clear information in just few days.
REAL ESTATE, INVESTING OR LIVING IN ITALY (Part 2)
When buying properties in a country, either for holiday-home, or for investment, one person should have an initial general knowledge of how is the property market in that country.
Read Article