Second Homes Abroad: New Tax Scenarios

For owners of second homes abroad, the rules of the game are changing: from January 2024 there are new tax scenarios.

In fact, the Budget Law introduces theIVIE increase: the Tax on the Value of Real Estate Located Abroad (IVIE) increases from 0.76 percent to 1.06 percent. In essence, the same basic IMU rate. This change will affect all types of real estate owned abroad, including also buildings, building areas, land, and real rights such as usufruct, use, and dwelling.

It is important to note that while IMU is calculated on Italian cadastral values, IVIE is generally based on the purchase cost or market value of real estate, depending on the country in which it is located. Thus, for properties held in the European Union or the European Economic Area (Norway and Iceland), the taxable base may be the cadastral value. For real estate located in other countries, the taxable amount is usually determined by the purchase price or, failing that, by the market value detectable in the country where the property is located.

For example, for France, Circular 28/E/2012 allows the IVIE tax base to be determined by applying multiplier 160 to the ordinary mean income (RMO), which corresponds to 50 percent of the tax base for taxe d'habitation. For the United Kingdom, following Brexit, from 2021 it is necessary to use the purchase price as the taxable base, as it is no longer possible to refer to values determined for municipal tax purposes as in the past.

These changes are part of a broader update of tax legislation aimed at increasing tax revenues from assets and property held abroad. The new rates will apply from tax year 2024 and will affect all Italian tax residents.

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