Substitute tax on an Italian mortgage: 0.25% or 2%

What the tax replaces

Article 17 of DPR 601/1973 allows the lender, if it so opts, to pay a substitute tax in place of the registration tax, stamp duty, mortgage and cadastral taxes and the government licence taxes that would otherwise apply to the loan. The option is exercised in writing in the loan deed. The loan documents therefore refer to the substitute tax, not to a list of separate taxes.

Article 15 describes which loans are covered: medium- and long-term financing, meaning loans whose contractual term is more than 18 months. A normal home mortgage is far longer. The same article covers the deeds that concern the loan: its guarantees, its execution, modification and extinction, and also subrogation and other changes of the loan. For the transfer of a loan to another lender, see mortgage portability.

The two rates

The text of article 18 in force since 1 January 2008 has two parts relevant to a home buyer:

1. The substitute tax is applied at 0.75% of the total of loans paid out in each year; that rate was then unified at 0.25% by D.L. 70/1988 (the Normattiva notes record the change).
2. If the loan does not relate to the purchase of a prima casa and its pertinences, the rate is 2% of the total loans paid out.

The 2% rate extends, by the amendment recorded in the same article, to loans for the purchase, construction or renovation of a dwelling where the prima casa conditions exist but are not shown by a declaration of the borrower in the loan deed or attached to it. In other words, if the conditions apply, the borrower should make the declaration, or the higher rate applies.

Calculating the figure

Formula: substitute tax = loan amount × 0.25%, or loan amount × 2%.

Calculations with the official rates:

The base is the amount of loans paid out, so a loan paid out in tranches over more than one year is taxed in each year on what is paid out in that year, per the text of article 18. For credit lines the text refers to the amount of the facility. Ask your lender how its deed applies this to your product.

Who is the “prima casa” borrower?

The substitute tax uses the prima casa conditions of note II-bis of the registration-tax tariff: residence (or work) in the municipality, no other home in it, and no other relief home elsewhere in Italy; see prima casa tax benefits. The Agenzia delle Entrate (the tax agency) describes those conditions for the purchase. The rate on the mortgage follows what the borrower declares in the loan deed.

That gives a practical point. If you buy as a prima casa and expect the loan to follow, make sure the declaration is in the loan deed. If you buy a second home, the 2% rate applies to the loan, in addition to the 9% registration tax on the purchase; see buying a second home.

What the sources do not say

The text read sets the rate and the base, not who bears the cost between lender and borrower. Payotte has not read a source on that point, so the loan offer and the loan deed are where to look: the lender’s cost schedule should show whether and how the substitute tax is charged to you. Payotte also has not checked whether the provision is carried into another consolidated act in 2026 or 2027; the consolidated registration-tax act of 2025 (D.Lgs. 123/2025) concerns the registration tax, and the rate quoted here is that of art. 18 as in force on 19 October 2026.

What varies locally

Nothing: the substitute tax is national, and the rate depends on the prima casa test, not on the region. The test of residence is applied by municipality.

Which professional to consult

A mortgage broker can ask several lenders how they present the substitute tax, and the notary can tell you which declaration the loan deed needs for the 0.25% rate.