First Home Sold Within Five Years: Repurchase Abroad and the Budget Law Changes

Two recent developments have affected the rules on a first home sold before five years have elapsed since its purchase. The first is ruling no. 200/2026 (risposta a interpello), in which the Italian Revenue Agency clarified that a taxpayer who, after purchasing with the relief, buys a new main residence abroad and then sells the Italian property within two years of that purchase does not forfeit the benefit. The second is the 2027 budget bill, which extends all the time limits under the rules to two years, with effect also on transactions already carried out whose time limits have not yet expired. To grasp the scope of both developments, it is worth recalling the basic rules in brief.

The Rules in Brief

Anyone who purchases a main residence with the "first home" relief benefits from a considerably reduced tax charge: in purchases from private individuals, registration tax applies at the rate of 2% instead of 9%, while in purchases subject to VAT, for example from a builder, the tax is due at 4%. This is, however, an advantage conditional on the stability of the investment, since the sale or gift of the property before five years have elapsed from the purchase entails forfeiture of the benefit, with recovery of the unpaid taxes, a 30% penalty and interest.

Two cases are exceptions to this rule, distinguished by the chronological order of the sale of the relieved property and the new purchase. Where the sale precedes the purchase, the benefit is preserved if, within one year of the disposal, the taxpayer purchases another property to be used as a main residence. Where, conversely, the new purchase precedes the sale, the taxpayer may enjoy the reliefs on the second property as well, while still owning the first, provided that the latter is disposed of within two years of the date of the purchase deed.

The result is a framework that is not fully harmonious, since the time limit is one year for those who sell first and two years for those who buy first. This lack of harmony emerges particularly clearly when the new home is located abroad, a frequent situation for those who move their centre of interests out of Italy and one in which the rule has a gap: neither para. 4 nor para. 4-bis specifies whether the property to be used as a main residence must be located in Italian territory. The resulting interpretative doubt is whether the saving from forfeiture can also be used with a purchase abroad, even though the Italian authorities may have difficulty verifying the actual use of a property located outside national borders.

The Revenue Agency's Clarification on Purchases Abroad

The doubt was addressed in ruling no. 200/2026, concerning an Italian citizen resident abroad who, in 2025, had purchased with his spouse a home in Italy with VAT at the reduced rate of 4%. A few months later the spouses had purchased a second property abroad, to be used as their main residence, intending to sell the Italian home within two years of that purchase and, therefore, before five years had elapsed from the first.

The Agency gave a favourable answer, starting from a coordinated reading of para. 4 and para. 4-bis. It held that even a person who purchases the new home before selling the relieved one may retain the original benefit, provided that the sale takes place within the two-year period, and that this also applies where the new property is located abroad. As regards the latter point, the Agency does not change its position but refers to its own practice: circular no. 31/E of 2010 had already stated that the purchase of a property located in a foreign State does not result in forfeiture, provided that administrative cooperation instruments exist enabling verification of its actual use as a habitual residence, and this approach was recalled in subsequent rulings, including no. 126 of 2021 and no. 29 of 2025, the latter concerning the purchase abroad of land on which to build the home. The novelty of ruling no. 200 therefore lies in having extended this principle to the sequence in which the purchase precedes the sale.

It follows that the decisive criterion is not the location of the new property but its actual use as a main residence, which the taxpayer must prove. Upon sale of the Italian property, it will therefore be necessary to produce to the tax office a copy of the deed of purchase of the foreign property and documentation suitable to demonstrate its habitual use, such as electricity, water and gas supply contracts, together with apostilles and an Italian translation, without prejudice to the office's power to assess their suitability.

The Budget Law Changes

Although it resolves the specific case, the clarification does not eliminate the difference in time limits between the two sequences, which the 2027 budget bill instead sets out to overcome. Article 41 provides for the alignment of all relevant time limits to two years: those who sell the relieved property before five years will therefore have two years, and no longer one, to purchase the new main residence, and the time limit for establishing residence in the municipality of the purchased property will go from eighteen months to two years. The time limit for the tax credit available to those who repurchase a first home also goes from one to two years, and the provision expressly specifies that the credit is also available where the sale of the old property follows the purchase of the new one, provided that it takes place within the two-year period.

Of particular importance is the provision for retroactive application, which extends the new rules to purchases and sales already made, provided that the previous time limits have not yet expired on the date the law enters into force. Those who sold their home only a few months ago and have not yet purchased the new one will benefit, for example. It remains the case that the changes are contained in a bill and may therefore be amended during parliamentary examination.

Conclusions

In conclusion, the Agency's clarification offers a reassuring answer to those who move their main residence abroad, while the budget bill promises to make the time limits for changing home without losing the reliefs more uniform and wider. Pending final approval of the law, however, it is advisable to plan transactions around the time limits currently in force and, in the case of a purchase abroad, to keep carefully the deed of purchase and the documentation on the use of the property as a habitual residence, it being understood that every situation requires a specific check before proceeding.