Anyone who sells a property and realizes a capital gain may face an unexpected tax bill. Article 67, paragraph 1, letter b) of the Italian Income Tax Code (TUIR) taxes as “miscellaneous income” any capital gain arising from the sale of properties purchased or built less than 5 years earlier; after this period, the capital gain is not taxable. Properties acquired by inheritance and those used as the seller’s or their family members’ main residence for most of the ownership period remain exempt in any case.

Where the property was acquired by way of gift, the donee inherits the donor’s tax position, with two important consequences:
1. the five-year period runs from the date on which the donor acquired the property, rather than from the date of the gift;
2. the donor’s tax cost basis is transferred to the donee, but may be increased by any gift tax paid and by any other subsequent related costs.

As an exception to this general rule, the 2023 Budget Law introduced a new circumstance in which real estate capital gains become taxable in the case of properties that benefited from Superbonus works. In such cases, if the property is sold within 10 years from the completion date of the works, the capital gain is subject to taxation regardless of the original purchase date. Here too, however, the exemptions relating to the use of the property as the seller’s main residence for most of the period between completion of the works and the sale, as well as acquisition by inheritance, continue to apply, albeit with some additional uncertainty as to their practical application.

The introduction of this new taxable circumstance has naturally broadened the scope of property sales that may give rise to taxable capital gains. In this context, one benefit that is often overlooked is the possibility of applying a 26% substitute tax to the taxable capital gain, as an alternative to the general rule under which the gain is taxed through the income tax return at the taxpayer’s marginal personal income tax rate (IRPEF), which can reach 43% (in addition to local surtaxes).

This option must be considered at the preliminary stage of the sale, as it must be expressly exercised in the notarial deed of sale, with the tax being paid to the notary at the same time. Once the deed has been signed, the option can no longer be exercised, for example when preparing the income tax return.

Naturally, this option is not advantageous in every case and must be assessed in light of the seller’s personal tax position, with particular regard to their overall income and any available tax deductions. As a general rule, however, for individuals with income above €28,000 (and therefore subject to a marginal IRPEF rate of 33% or 43%), opting for the substitute tax is almost always the less burdensome choice. In any event, the decision must be evaluated before signing the deed, because afterwards it is too late.