Capital gains tax Italy: The tax treatment when Italian property is involved

Capital gains arising from the disposal of real estate located in Italy, or from the sale of shares in real estate-holding companies, may be subject to taxation in Italy. The Ecovis experts explain the correct tax treatment when an Italian property is involved in such transactions.

If a non-resident taxpayer directly or indirectly owns real estate in Italy and intends to sell it, the associated tax aspects must be carefully examined. This also applies to the development of a real estate investment. The reason: in some cases, taxpayers must pay tax on the capital gains realised in Italy.

Indirect disposal of real estate

In the case of an indirect disposal, pursuant to article 23, paragraph 1-bis of the Italian Income Tax Code (TUIR), income derived from the sale for consideration of shares in non-resident companies or entities is considered to be produced within the territory of Italy if more than half of the value of such entities is derived from real estate located in Italy. This type of income is subject to taxation at a rate of 26%.

In a recent ruling no. 175/2025, the Italian tax authorities confirmed this interpretation, even when the entity disposing of the shares is a foreign-law Trust. This rule is in line with paragraph 4 of article 13 of the OECD Model Tax Convention, as well as article 9 of action 15 of the BEPS Project (MLI).

We provide tax advice if you want to sell real estate or shares in companies with real estate holdings in Italy.

Alberto Gandini, Chartered Accountant and Associate, ECOVIS STLex, Milan, Italy

Direct disposal of real estate

If the property is directly sold, it must be checked whether the holding period exceeds five years or not. According to article 69 of the TUIR, capital gains will not be subject to taxation if the property has been held for more than five years prior to the sale. Otherwise, the gains will be taxable in Italy.

As a result, when selling real estate located in Italy, or disposing of shares in companies owning real estate in Italy, it is essential to carefully verify the conditions and review any applicable double taxation treaties between the countries involved.

For further information please contact:

Alberto Gandini, Chartered Accountant and Associate, ECOVIS STLex, Milano, Italia
Email: a.gandini@stlex.it

Raffaele Esposito, Junior Associate, ECOVIS STLex, Milano, Italia
Email: r.esposito@stlex.it