REGISTRATION TAX OF 0.5% FOR DEPOSITS AND DOWN PAYMENTS IN PRELIMINARY CONTRACTS

LT Immobili & Design 16 January 2025

The 2025 tax reform introduces a significant simplification in the taxation system for preliminary real estate purchase agreements. Starting from January 1, 2025, Article 2 of Legislative Decree 139/2024 establishes a uniform 0.5% tax rate for both earnest money deposits and down payments, amending Article 10 of Part I of the Tariff in Presidential Decree 131/1986.

Until 2024, the taxation system applied two different rates:

• Earnest money deposits: taxed at 0.5%.
• Down payments: taxed at 3%.

This dual taxation created uncertainties and frequent disputes, complicating transaction management and increasing the risk of errors in the classification of amounts paid.

With the 2025 reform, the 0.5% tax rate will apply uniformly to both earnest money deposits and down payments. Additionally, a maximum cap of €200 for the tax due on the final contract has been introduced, bringing greater clarity and predictability to transaction costs.

Practical example

For a down payment of €40,000, the tax due is now €200 (0.5%) instead of the previous €1,200 (3%). This change significantly reduces fiscal costs and encourages transparency in real estate transactions.

The tax paid during the preliminary agreement will be credited against the tax due on the final contract. For instance:

• If the tax paid on the preliminary contract is €200 and the tax on the final contract amounts to €400, the parties will need to pay only the difference of €200.

If the final contract is not concluded, the regulation allows for a refund of the tax already paid, provided the parties document a mutual agreement to terminate the contract.

The reform facilitates real estate transactions by making them less costly, especially for large amounts. For example:

• For a deposit or down payment of €50,000, the tax due is now €250 (0.5%) compared to the previous €1,500(3%).

For contracts subject to VAT, such as those signed with construction companies for new properties, down payments are exempt from registration tax as they are already subject to VAT. This rule, established by Article 10 of Presidential Decree 633/1972, ensures consistency in tax regulations.

Real estate operators and professionals will need to update their contractual documentation and ensure compliance with the new rules. However, the introduced simplification will reduce errors and disputes, making their work more efficient.

The new regulation on registration tax for preliminary agreements represents a step forward in tax simplification and transparency. In addition to reducing transaction costs, it improves system efficiency and provides greater certainty for industry professionals.

If you have questions or want to learn more, contact us: we’re here to guide you through every step of your real estate transaction!