Buying a house in Italy

10 Aug 18

Can a foreign national buy a house in Italy? As a general rule, yes. Find out the property purchase process and an overview of taxes in this article.

Can a foreign national buy a house in Italy?

As a general rule, Italian law permits the purchase of real estate by foreigners. However, can be a few exceptions for foreigners coming from “sensitive” countries or countries that do not grant reciprocity rights to Italian citizens, which shall be examined on a case-by-case basis.

How difficult is the property purchase process in Italy?

The whole process takes around one/two months after choosing the property:

  1. Hire a Public Notary to check property compliance
  2. Sign the “compromesso” i.e. preliminary contract + Ser terms & conditions
  3. Sign final Sale Contract before the Notary + Pay sale price & taxes
  4. Notary fulfills relevant obligations: cadastral registration + transcription + tax payment

Which documents do I need to sign the contract?

You will need to present a valid identification document and a Tax Code (we can obtain it from the Tax Agency).

Is my purchase safe and guaranteed?

The purchase of real estate, from a legal standpoint, is very safe in Italy. Notaries act on behalf of the Government and NOT on behalf of either the buyer or the seller and they are completely neutral. Italian Notaries perform more duties than those normally associated with Notaries in other countries. Notary Public must carry out a due diligence on the property to make sure that the seller has the full title on the property, the property is free from mortgages, liens or other burdens, and it is compliant with building and safety regulations. It is vital that all these verifications are carried out prior to signing any contract and paying a deposit. Your purchase is safe because the Notary has the responsibility of performing due diligence.

As an additional guarantee, if you buy a property under construction, the builder – until Closing is finalized – must provide a bank or insurance guarantee equal to the price paid. The buyer is therefore protected against the builder bankruptcy or failure to complete the project. Furthermore, the seller is liable for major defects of the property until 10 years after the Closing. Any sensitive information about the property are accessible to any third party because are listed at the Land Registry (Conservatoria dei Pubblici Registri Immobiliari).

How much does it cost to own a property in Italy?

Tax liability varies according to if an individual has applied for residency or not. Applying for residency means requesting the local authorities to register an individual as living in its territory. A foreigner can apply for local residency only if in possession of a permit of stay document issued by national immigration authority (immigration compliant).

Taxes also vary whether the property is considered “primary home” (prima casa) or not.

 

PRIMA CASA “PRIMARY RESIDENCE” NO PRIMA CASA “PRIMARY RESIDENCE”
\Type of tax

Type of seller\

VAT % IMPOSTA DI REGISTRO -REGISTRY TAX IMPOSTA IPOTECARIA – LEGAL TRANSCRIPTION FEE CADASTRAL TAX VAT % IMPOSTA DI REGISTRO -REGISTRY TAX IMPOSTA IPOTECARIA – LEGAL TRANSCRIPTION FEE CADASTRAL TAX
PRIVATE
OWNER
NO 2% on
property cadastral value
50 € 50 € NO 9% on
property cadastral value
50 € 50 €
COMPANY-SALE
NOT SUBJECT TO VAT
NO 2% on
property cadastral value
50 € 50 € NO 9% on
property cadastral value
50 € 50 €
BUILDING
COMPANY -SALE SUBJECT TO VAT
4% on
the sale price
200€ 200€ 200€ 10% on the sale price
(22% luxury home)
200€ 200€ 200€

 

Local Taxes connected to property ownership: IMU, IUC, TARI, TASI

IMU: the tax on ownership of real estate. It is not due on “prima casa” (primary home), provided this is not a luxury home. The amount due is based on the cadastral value of the property multiplied by the coefficients established according to the different types of houses.

TASI: municipal tax for services provided by the local administration. Based on the tax rate decided by the municipalities

TARI: waste tax, due to financing the costs of collection and garbage disposal.

IUC: it is made of IMU, TARI, and TASI. It is due both by owners and tenants.

 

Taxes on the income from real estate

Foreign residents owning properties in Italy are only taxed on the income earned in Italy (i.e. interest on any money you have on deposit with an Italian bank or income you derive from letting your Italian property)

Foreign citizens who are resident in Italy – have applied for residency registration or spend more than 183 days a year in Italy – are subject to pay taxes (IRPEF) not only on Italian income but also on their worldwide income. In sum, the income of all kinds received by individuals resident in Italy are taxable in Italy and any income received by non-residents from an Italian source is taxable in Italy. This general rule is subject to the provisions of international tax treaties, which prevents the double taxation of expatriates.

Advice

  • If the Seller asks for a portion of the selling price to be paid “black” (i.e. undeclared) please note that accepting it will make you non-compliant with Italian law and you can have criminal as well as fiscal consequences. Also, if you declare a certain price in the deed (lower than the one you have really paid, because there is the “black part”) in case of your next resale at market price (higher than the one you have declared) you are subject to pay a capital gain “plusvalenza” on the difference between the purchase price and the selling price.
  • If you do not speak Italian, it may be necessary to have an interpreter who assists you while signing the contract with the Notary; typical fees might be around € 1.000,00.
  • Make sure you do not pay any deposit or sign any documents before the “compromesso” (preliminary contract)!
  • The “compromesso” is not mandatory, but it is strictly recommended to verify in advance all relevant aspects regarding the property.  Therefore, despite being subject to an EUR 200 registration fee and a proportional fee on the deposit (0,50% on the amount, which will be detracted from final taxes) it is definitely worth doing it.
  • Though this is the notary’s duty, as an extra guarantee you may want to appoint a lawyer to look after your interests and to ensure the property is clear of all liabilities by keeping an eye on the notary and ensure that he is completing all the necessary searches.
  • You may want to get the building inspected or surveyed by a professional (such as architect or geometry)

Glossary

COMPROMESSO (“PRELIMINARY CONTRACT”):
Promise to sell or pre-sale arrangement. It is best practice to sign it before proceeding with the purchase. It provides a further guarantee to the parties and protects you in case there is something wrong with the property. Be warned, however, you will not be able to pull out just because you have changed your mind. You will need to pay a deposit (usually of 10% of the total purchase price). Generally, the deposit is non-refundable, except in the event that the terms indicated in the contract are not respected.

CATASTO, CATASTALE (CADASTRE, CADASTRAL):
land register for the purpose of taxation, showing details of properties ownership and value.

 “PRIMA CASA” (PRIMARY/MAIN HOME):
In Italy, a house is defined “primary home” (prima casa) when it is located within the jurisdiction where the buyer is registered as a resident or where he/she intends to transfer his/her residency within 18 months from the date of execution of the purchase agreement. Taking out residency means that you are required to physically live there and be registered on public vital records (Residenza anagrafica). The owner must not have other properties in Italy on which he/she has claimed the primary home benefits and the property must not be registered as a luxury property.

RESIDENZA ANAGRAFICA (RESIDENCY):
Applying for residency means requesting the local authorities to register an individual as living in its territory. Generally, one is required to physically be there (at least at the time of application) and as a result, be registered on public vital records. A foreigner can apply for local residency only if in possession of a permit of stay document issued by national immigration authority (immigration compliant)

IMPOSTA IPOTECARIA (“LEGAL TRANSCRIPTION FEE”):
applies whenever there is a formal transcription, registration, renewal, cancellation, and annotation in the relevant public registers (can be fixed or proportional).

IVA – IMPOSTA SUL VALORE AGGIUNTO (VAT – VALUE ADDED TAX):
VAT affects any exchange of goods and services in Italy, at a standard rate of 22% (but it can be also 4% or 10%). VAT is at the buyer’s charge. In case of real estate, if the property is sold by a building company directly and within 5 years from its construction, the Buyer is required to pay VAT (IVA) on the sale price as follows: 10% for non-luxury properties; 22% on luxury homes. A reduced rate of IVA (4%) applies to purchases with “Prima Casa” benefits and not applicable for luxury property.

IMPOSTA DI REGISTRO (REGISTRY TAX):
applies whenever documents related to specific transactions (e.g. purchase of property, lease agreements etc.) are registered with authorities (can be fixed or proportional; for a purchase of property can never be lower than 1000 Euro).

IMPOSTA CATASTALE (CADASTRAL TAX):
levied on cadastral transactions following transaction, donation or inheritance agreements, (can be fixed or proportional).

 “IMU” (IMPOSTA MUNICIPALE PROPRIA) MUNICIPAL TAX ON PROPERTY:
calculated on property value. Everyone who owns a land or a property in Italy must pay this tax which is based on the property cadastral value. The amount depends on the local authority and the size, location, and category of property. “Primary homes” are exempted from this requirement.

This post was written by Content Manager
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