Declaration of succession
The case where capital gains tax never applies.
OpenProperty · Sales and purchases
Capital gains on selling property
Selling a home almost never gives rise to tax. But in the cases where it does, the amount is significant and it is decided at the notary's office, in a few minutes, with a choice that cannot be changed afterwards.
01 · The principle
The five-year rule
Selling a building gives rise to a taxable capital gain only if the property was bought or built less than five years earlier. Once that period has passed, the sale is irrelevant for tax purposes: nothing is declared and nothing is paid, whatever the gain.
The period runs from the date of the purchase deed or the date construction was completed. Not from the date of the preliminary contract, not from when you moved in.
- More than five years: no tax, regardless of the gain.
- Within five years, used as a main home: no tax, if the property was the main home of the seller or of a family member for most of the period of ownership.
- Within five years, without that use: taxable capital gain.
- Property received by inheritance: no tax, in any case, however much time has passed.
- Property received as a gift: the five years run from the donor's purchase, not from the gift.
- Building land: always taxable, with no time limit.
The gift case is the one that most often comes as a surprise: someone who receives a home as a gift and sells it straight away might think they are outside the five years, but the count starts from when the donor bought it. It can work in your favour or against you, depending on the date.
02 · How it is worked out
How the capital gain on property is calculated
The capital gain is the difference between the price received and the purchase cost plus the related costs. It is this second item that reduces most of the taxable amount, and to do that you need the documents.
| Item | Does it count? | Document |
|---|---|---|
| Purchase price | Yes, it increases the cost | Notarial purchase deed |
| Taxes paid on the purchase | Yes | Deed and receipts |
| Notary's fee on the purchase | Yes | Notary's invoice |
| Estate agent's commission | Yes | Agency's invoice |
| Renovations and extraordinary maintenance | Yes | Invoices and bank transfers |
| Urbanisation charges | Yes | Payment receipts |
| Mortgage interest | No | - |
| Routine maintenance costs | No | - |
| Furnishings and furniture | No | - |
Renovation invoices you have kept are worth money when you sell. It is one more reason not to throw away building paperwork: it serves for the tax deductions while you own the property and for the tax cost when you sell it.
03 · The choice at the notary's
Choosing between ordinary taxation and the substitute tax
When the capital gain is taxable, there are two routes. The choice is made at the signing of the deed of sale, before the notary, and cannot be changed later.
Ordinary taxation
The capital gain is added to your total income and taxed at the progressive rates, on top of the year's other income.
Substitute tax
A flat rate is applied to the capital gain alone. The notary collects it when the deed is signed and pays it over, and the amount does not form part of your total income.
How to decide
Compare the substitute tax rate with the marginal rate that would apply if the capital gain were added to the year's other income.
When ordinary taxation is better
Where total income is very low, so that the marginal rate is lower than the substitute rate.
A mistake that costs money
Arriving at the deed of sale without having done the calculation.
- The choice is made at that moment and can no longer be changed
- The notary applies what you ask for: they do not do the comparison for you
- Without a documented tax cost, the taxable amount comes out higher than it should
- Renovation invoices must be gathered before the deed of sale, not after
04 · The different case
Land follows its own rules
For land, the five-year rule does not apply. The decisive distinction is between building land and agricultural land.
- Building land: the capital gain is always taxable, with no time limit, and the substitute tax is not available. It forms part of total income, with separate taxation.
- Agricultural land: the five-year rule applies, as for buildings.
- Land that became building land after purchase: what counts is its classification at the time of sale, not at the time of purchase.
- Revaluation: when the law allows it, the tax cost of the land can be redetermined through a sworn valuation and payment of a substitute tax, reducing the capital gain or eliminating it.
The revaluation of land has been reintroduced many times over the years. If you own building land and are thinking of selling it, check whether a window is open: the saving can be substantial.
05 · The recent case
Property with works that received high tax deductions
For property on which works were carried out that benefited from the largest building tax deductions, a specific set of rules on capital gains has been introduced, with a longer time horizon than the ordinary five years and particular rules on which costs are recognised.
This is an area where the rules are recent and detailed, and where the position of each property depends on who bore the cost, which method was used to take the benefit and when the works were completed.
- Check which works were carried out and with which deduction.
- Check who took the benefit: the current owner, a previous owner, a family member, a tenant.
- Check the method used: direct deduction, discount on the invoice or transfer of the tax credit.
- Check the completion date of the works, which determines when the relevant periods run.
If you are selling a property on which subsidised works have been carried out in recent years, the check must be done before you sign the preliminary contract: it can affect what price it makes sense to accept.
06 · What you need
What to prepare before the sale
The difference between paying what is due and paying more than is due lies almost entirely in documenting the cost.
- Purchase deed or other deed of title, with the exact date.
- Notary's invoices and receipts for the taxes paid on purchase.
- The estate agent's invoice, for both the purchase and the sale.
- All renovation invoices with the related bank transfers, even from many years ago.
- Building permit documents and the charges paid, for property you built.
- Certifications for subsidised works, if there were any.
- Declaration of succession, if the property was inherited.
Frequently asked
The questions that keep coming up
I inherited a house and am selling it straight away. Do I pay anything?
No. Property received by inheritance never gives rise to a taxable capital gain, however much time has passed and whatever the gain.
The taxes that belong to the deed of sale itself are still due, and you need to check the obligations linked to the succession, starting with the voltura catastale (updating the owner in the land registry).
I only lived there for one year out of three. Does the exemption apply?
The exemption requires the property to have been the main home of the seller or of a family member for most of the period between purchase and sale.
One year out of three does not meet the requirement. Two years out of three does. The test is quantitative, and registered residence is the most immediate evidence.
Can a capital gain be offset against a capital loss?
Capital losses on property made by individuals outside a business cannot be offset against capital gains on property.
It is a well-known asymmetry: the loss does not count, the gain does. Within business income, on the other hand, the ordinary mechanism of positive and negative items applies.
What if I sell for less than the cadastral value?
The price that counts for the capital gain is the one actually agreed and stated in the deed. The cadastral value matters for the taxes on the deed, not for the capital gain.
A sale at a price well below market value can, however, attract attention, especially between related parties: it is wise for the price to be justifiable.
Let's talk
The check has to be done before the deed of sale, not after
We need the date and the title of purchase, how the property has been used and the costs incurred. With this information you know in advance what will happen when you sign.