If you are thinking of selling a property on Lake Garda, the most common question is: will I have to pay tax on the gain from the sale? The answer depends on the purchase date, the use of the property, the period of ownership and any renovation works. In this guide you'll find it all explained with concrete examples — when capital gains tax applies and how, legitimately, to reduce it or bring it to zero.
What capital gains tax is
The capital gain is the profit realised by selling a property at a higher price than the purchase price.
Worked example
You buy in 2022 for €250,000 and sell in 2026 for €330,000 → a gross gain of €80,000.
This gain is not always taxable: the exemptions provided by law are broad and, in most cases, allow you to sell without additional tax on the gain.
When capital gains tax applies
The gain is taxable only if you sell the property within 5 years of purchase (or construction): the rule aims to discourage short-term speculation. Beyond that threshold, the gain is not subject to tax, regardless of the amount.
When it does NOT apply: the exemptions
There are important exceptions that let you sell tax-free even within the 5 years:
1. Ownership of more than 5 years
Beyond 5 years from the purchase deed, the gain is always exempt, whatever the profit realised.
2. Main residence
Even selling within 5 years, you pay nothing if the property was your main residence (with registered residence) — or that of a family member — for the majority of the period of ownership. This is the most widely used exemption.
3. Property received by inheritance
Inherited properties are always exempt from capital gains tax, whatever the time elapsed or the sale price.
4. Property received as a gift
In the case of a gift, the 5-year count starts from the donor's purchase date, not from the gift. The rules differ from inheritance: a specific check is always advisable.
How the capital gain is calculated
The taxable gain is not the simple difference between sale and purchase price: you can deduct all documented costs, often reducing the taxable amount significantly.
Formula
Capital gain = sale price − (purchase price + documented incidental costs)
Deductible costs include:
- Notary fees and taxes paid on purchase
- Estate agency commissions
- Renovation and extraordinary maintenance works (with invoices and bank transfers)
- Other documented costs relating to the property
The real impact of documentation:
| Item | Amount |
|---|---|
| Sale price | €330,000 |
| Purchase price | €250,000 |
| Notary fees + taxes | €8,000 |
| Renovation costs | €35,000 |
| Taxable capital gain | €37,000 |
Without the documented costs the apparent gain would be €80,000; with invoices and bank transfers it drops to €37,000. The difference is huge.
The 26% substitute tax: is it worth it?
When capital gains tax is due, you can ask the notary to apply a 26% substitute tax directly at completion, instead of including the gain in your income tax return.
Numerical example
On a gain of €37,000, the substitute tax amounts to €9,620. With ordinary income tax — depending on total income — you could pay from 23% to 43%, plus regional and municipal surcharges.
- Fixed 26% rate, independent of total income
- No regional or municipal surcharges
- Everything is settled at completion, with no later return
- Simplicity and certainty
In most cases it is the more convenient option, especially for medium-to-high incomes. Check with your notary or accountant before signing.
Watch out for the Superbonus: a specific rule
If you used the Superbonus, a specific rule (Decree-Law 39/2024) changes the capital gains rules.
⚠ Caution
If you sell within 10 years of the completion of the Superbonus works, the gain may be taxed (with the 26% substitute tax) even beyond the 5 years of ownership. Exceptions are provided, including properties used as the main residence for the majority of the period. It is a technical area: always check case by case.
Many properties on Lake Garda have benefited from this incentive in recent years. If you are in this situation, targeted tax advice before selling is essential.
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Frequently asked questions
Is capital gains tax paid on the main residence?
Not necessarily. It applies only if you sell within 5 years of purchase and the property was not your main residence for most of the period of ownership. If you kept your registered residence there for more than half the time, the exemption applies.
What happens if I sell within 5 years?
If you do not fall under the exemptions (main residence, inheritance), the gain is taxable. However, you can opt for the 26% substitute tax at completion, often more advantageous than ordinary income tax.
How is the gain calculated exactly?
Sale price minus (purchase price + all documented costs, including renovations and notary fees). Only the positive part is potentially taxable; keeping invoices can greatly reduce the taxable amount.
Do renovation costs reduce the gain?
Yes, often significantly. All expenses evidenced by invoices and bank transfers increase the recognised cost and lower — or eliminate — the taxable base.
Who calculates it: notary or accountant?
The notary applies the substitute tax on request at completion. For advance planning — especially with major renovations or Superbonus — an accountant before selling is advisable.
Gifted and inherited property: differences?
Yes. Inherited properties are always exempt. With a gift, the 5-year period runs from the donor's original purchase date, not from the gift. Every case should be checked specifically.
The information in this article is for general guidance and does not replace advice from a notary or accountant. Tax legislation may change and is subject to updates: always check with a professional before proceeding with a sale.