The sale of properties undergoing renovation or construction transformation often involves complexities from a tax point of view, which are not always immediately evident for those who work in the real estate sector.
One of the most controversial issues concerns the cadastral category to be considered for the calculation of indirect taxes at the time of transfer of the property.
The Court of Cassation, with theordinance no. 24774 of 16 September 2024has recently clarified that, even when a building is temporarily classified in category F/4 (properties being defined), the taxes must be calculated based on its original cadastral category, the one prior to the transformation. This principle is destined to significantly influence future real estate sales.
But what does this mean in practice for those selling or purchasing a property under renovation? And what are the tax implications in the case of transfer of instrumental properties compared to residential ones?
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Properties under transformation: the F/4 category and its characteristics
The cadastral category F/4 is reserved for properties that are in a phase of building transformation, i.e. those buildings for which neither the intended use nor the extension have yet been clearly defined.
This is a provisional classification, pending the completion of the works and the attribution of a new definitive cadastral category, which could correspond to a residential, commercial or industrial building.
The critical point concerns the intermediate phase of the transformation. In fact, the sale of a property during this period of uncertainty raises the question of which cadastral category to use for calculating taxes: the provisional one (such as F/4) or the definitive one, which will only be attributed at the end of the works?
This is a particularly important aspect because the tax regime varies considerably depending on whether it concerns residential or instrumental buildings.
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Residential buildings vs. instrumental buildings: tax implications
Italian tax legislation provides for different treatment for residential and instrumental buildings. In the case of the sale of residential buildings subject to VAT taxation, the registration, mortgage and cadastral taxes are due at a fixed rate of 200 euros each, significantly simplifying the tax burden.
This occurs by virtue of a clear distinction between buildings intended for residential use, generally belonging to the cadastral category “A” (excluding offices classified as A10), and instrumental ones.
On the other hand, instrumental properties, which include offices, warehouses, industrial plants and other structures for specific uses, are subject to a more complex tax regime. While maintaining the registration tax fixed, the mortgage and cadastral taxes are calculated in proportion: 3% and 1% of the value of the property respectively.
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The specific case: the ruling of the Court of Cassation
In the case examined by the Court of Cassation, the property, originally registered as an instrumental building in the category D/8had been temporarily reclassified to F/4 due to the start of renovation works.
During the sale phase, the property was still classified as F/4, but the notary in charge of drawing up the deed had applied the taxation foreseen for residential buildings, presuming that, at the end of the works, the property would take on a intended for residential use.
The tax authorities, however, contested this decision, arguing that the F/4 category was only a temporary classification and that the tax should be calculated based on the original category (D/8), as it was an instrumental building.
The Court of Cassation confirmed this position, establishing that, to determine the applicable tax regime, it is necessary to consider the cadastral category valid at the time of the transfer, regardless of future building transformation projects.
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The implications for the real estate market
This ruling introduces important clarity for those who work in the real estate sector, establishing that the temporary cadastral category F/4 cannot be used as a basis for the calculation of taxes during a sale.
Indeed, the Court underlined that there is no guarantee that a transformation project will be completed or that it will lead to a reclassification of the property into a new category. Consequently, indirect taxes must always be calculated based on the factual situation existing at the time of the sale.
This principle requires greater attention from sellers, buyers and notaries, as it directly affects the calculation of taxes due. For the real estate sector, this means that those involved in transactions will have to rely on the original cadastral category, thus avoiding potential challenges from tax authorities.
