First-time home buyers’ concessions for under-36s available throughout 2023

The 2023 Budget Law has extended provisions introduced in 2021 to provide tax relief on the purchase of a “first home” and related structures by persons under 36 in the year of signing the deed of sale, and whose equivalent family financial standing (ISEE) does not exceed €40,000.

First-time home buyers’ concessions for under-36s

The 2023 Budget Law (no. 197 of 29.12.2022) contains numerous provisions applicable to the real estate sector. Of particular interest among these is the extension (art. 1, par. 74, letter c) of the first-time home buyers’ concession for persons under 36, which had been due to expire at the end of 2022, for the whole of the current year.

The concession was introduced on 26.5.2021 (“Sostegni” Decree Law no. 73/2021, art. 64, paras. 6 to 11) to “eliminate” indirect taxes due on the purchase of a “first home” and related structures (garage or parking space, basement or attic) for buyers who are under 36 in the year of signing the deed of sale and whose family financial standing (ISEE) does not exceed €40,000.

Initially available until 30.6.2022, the concession was first extended until 31.12.2022 and now until 31.12.2023.

Scope of the concession

As mentioned, the purpose of the “under 36” concession is to provide an exemption from the indirect taxes (registration or VAT, mortgage and land registry) normally due on the purchase of a “first home” for persons under 36 in the year of purchase.

Actually, it is a “concession on a concession”, as all persons purchasing a “first home”, regardless of age, have for decades been eligible for preferential treatment in the form of a significant reduction in registration tax or VAT (2% or 4%) compared to the standard rate (9% or 10%, respectively), as well as the application of fixed-rate mortgage and land registry fees (€50 each if the deed is covered by the registration system, €200 each if subject to VAT).

As such, if all conditions to qualify for the “under 36” concession are met, the buyer can in fact eliminate their tax liability for the purchase of a “first home” by availing:

• directly of the exemption from paying the registration tax and mortgage and land registry fees (if the deed is subject to registration tax) to the notary, who then forwards such payments to the State;
• indirectly, of the subsequent rebate of the VAT, which must in any case be paid to the seller company (if the deed is subject to VAT). Indeed, in this situation, the buyer must pay VAT to the seller at the time of signing, but can then reclaim it via a dedicated tax credit amounting to the VAT paid on the purchase, for which they are eligible by law and that can be used in various ways.

Specifically, “the tax credit can be used to reduce the registration, mortgage, land registry, inheritance and gift taxes due on deeds and returns submitted after the date of acquiring the credit, or used to reduce income taxes owed by natural persons on the basis of the return to be submitted after the date of purchase.  It may also be used to ‘offset’ other taxes and contributions via the F24 form” (tax code 6928).

It must be noted that the VAT tax credit does not, in any case, give rise to a right to refunds, but must instead be used to perform a “reclaim” using one of the methods set out above.

If, as is commonly the case, the purchase is funded by a mortgage, the buyer also has the right to exemption from the substitute tax, otherwise due at a rate of 0.25% of the total loan amount.

Conditions for availing of the “under 36” concession

Certain conditions must be met to avail of the “under 36” concession, and specifically:

• the purchase must satisfy the criteria that all taxpayers must meet to qualify for the “first home” concessions;
• the buyer must be under thirty-six years of age in the year the deed is signed;
• the buyer must have a family financial standing (“ISEE”) that does not exceed €40,000 per year, based on the year preceding that immediately preceding the year of purchase (therefore, for deeds to be signed in 2023, the relevant year for financial standing purposes is 2021). A major caveat in this regard is that, for ISEE purposes, the “nuclear family” (under art. 3 of Italian Prime Ministerial Decree no. 159/2013) consists of the group of persons who make up the household on the date of submission of the Single Substitute Declaration (Dichiarazione Sostitutiva Unica­ “DSU”) for the purposes of issuing the ISEE, without prejudice to the exceptions set out in that article. As such, “moving out” from the nuclear family home must be planned in time to ensure that the personal ISEE amount is reduced to below the limit of €40,000 at the relevant moment.

Consequences of undue application of the “under 36” concession

Persons who avail of the “under 36” concession without being eligible, or who forfeit their eligibility status (e.g. by not transferring their place of residence to the Municipality of the property purchased using the concession within 18 months, as required by law), must pay the taxes that would have been due had they not satisfied the criteria, plus legal interest and a penalty of 30%.

Property that can be purchased using the “under 36” concessions

The “under 36” concessions apply to the same categories of property and/or rights covered by the “first home concession” and, specifically, can be used to purchase:full or bare ownership and the rights of usufruct, use and dwelling in relation to houses in land registry categories other than A/1 (“luxury homes”), A/8 (“villa homes”), A/9 (“castles and buildings of notable artistic or historical value”) and related structures, limited to a single unit in each of the land registry categories C/2 (basements and attics), C/6 (garages and parking spaces), C/7 (“Closed or open carports”).

Final considerations

Above is a summary explanation of the “under 36” concession which has seen significant uptake.

As always, there are many other issues that may arise in relation to the practical application of the concession. In that regard, the Italian Revenue Agency has provided useful information in circular no. 12/2021 and in certain subsequent responses to questions.

To conclude, it is worth noting that, more so than facilitating “young people” to move away from the nuclear family, the “under 36” concession instead makes it easier for young people who have already lived outside the family home for some time to purchase their “first home”. This is, in fact, a significant consequence of the fact that the ISEE is calculated on a family basis, and must be noted to ensure that the buyer can plan to “move out” soon enough to facilitate the subsequent purchase.

Article by Stefano Baruzzi, chartered accountant and legal auditor, real estate tax expert,
Head of Real Estate Contracts, Tax & Fiscal for Morning Capital Srl