Simply put, “capital gains” in Italian is called plusvalenza, which is the difference between the cost of purchase or to build (plus any refurbishment) and the price you sell it for.
It’s like saying: “I bought (or built) it for €100,000, sold it for €150,000, and earned a capital gain of €50,000.”
When does a capital gain arise?
A capital gains is only realized in certain cases, namely when you sell:
A property purchased or built less than 5 years ago
A building plot (always, even after 5 years)
If you sell after 5 years (and it’s not a building plot), you don’t pay any capital gain tax.
Here’s how it’s calculated:
Simple formula:
Sale price – (Purchase price + expenses incurred)
Expenses incurred can include:
- renovation or extraordinary maintenance costs,
- notary or brokerage fees,
- taxes paid on purchase, etc.
How is capital gains taxed?
There are two tax options:
1) 26% substitute tax
You can request it directly from the notary at the time of sale.
You pay 26% only on the capital gain (not on the entire sale price).
In this case, the capital gain is not included in the IRPEF (personal income tax) calculation (i.e., it is not added to other income).
2) Ordinary IRPEF taxation
The capital gain is considered miscellaneous income and is added to your other income.
It is taxed at the ordinary IRPEF rates (23%, 25%, 35%, etc., depending on your total income).
In summary:
A real estate capital gains is the profit on the sale of a property or land, taxable only in certain cases (within 5 years or always for lands were you can build).
You can choose whether to pay a 26% substitute tax or the standard IRPEF tax, depending on your convenience.