UPDATE SEE: Sardinia Luxury Property TAX Abolished

Following a number of requests from our readers today’s post is all about property taxation on the island of Sardinia. Although you have probably read in the English press about the Sardinian luxury tax there is very little information on how it directly effects the cost of real estate ownership.

After researching this subject extensively for the past week I was surprised to see how difficult it was to get detailed information. So without further a do here are my findings and hopefully it will give you the information you have been looking for.

Background

The introduction of the luxury taxation scheme is the brain child of Renato Soru, the centre-left President of Sardinia. The package of taxes which have been in effect since 2006 include second homes, private yachts (over 14 meters) and private aircraft. Mr Soru has been quoted as saying “all we are asking for is a modest contribution by those who enjoy Sardinia’s natural beauty”.

Who is eligible to pay the luxury tax?

The luxury tax is targeted at non Sardinian residents or residents who have lived on the island for less than 24-months who own a property within a range of 3km from the coast. The tax is also applicable to Sardinians who have moved away and subsequently have their residency elsewhere.

How is the tax calculated?

The tax scheme is applicable to all coastal areas of Sardinia and is an annual charge relevant to the location and size of the property.

The first tax calculation is based on the size of the property. To be specific this is the number of square meters of indoor living space. A sliding scale of size bands (shown in the table below) is used to calculate the total annual tax due to the region.

Property Size

* 9 Euro per meter for properties less than 60 meters

* 11 Euro per meter for properties exceeding 60 meters and less than 100 meters

* 14 Euro per meter for properties exceeding 100 meters and less than 150 meters

* 15 Euro per meter for properties exceeding 150 meters and less than 200 meters

* 16 Euro per meter for properties exceeding 200 meters

Location banding is used to define if a property is exempt from the luxury tax scheme. Properties which exceed a distance of 3km from the coast are exempt of any charge. However properties closer to the coast (less than 300 meters) pay an additional premium of 20% on top of the standard charges shown in the table above.

Property Location

* Property within 300m of the coast - Additional 20% charge on the above table

* Property within 3km of the coast - As per the table above

* Property exceeding 3km of the coast - Tax Exempt

The future of the luxury tax

The general feedback and bad press regarding Mr Soru’s luxury tax policy has resulted in a PR disaster for Sardinia. In 2006 the Sardinian yacht tax ‘backfired’ with a drop of over 40% in the number of touristic boat arrivals. This summer the rich areas on the East coast have also seen a public boycott by the rich and famous.

In additional to the above, the centre-left government in Rome have voiced concerns over the tax legislation and has now appealed to the Constitutional Court on the grounds that the Sardinian taxation scheme is unfair and discriminates against a segment of the population.

Alghero Estates’ opinion is that the luxury tax scheme will not survive, either the central government will block the scheme on constitutional grounds or the scheme will be scrapped at the next regional election. The combination of building restrictions and loss of business resulted in the Sardinians voting against the region in the recent local elections where Alghero, Olbia and Oristano councils were landslide victories to the center-right parties.