Fees and taxes: expenses and instructions of buying property in Italy


HOW TO BUY A PROPERTY IN ITALY

 

It is very hard to found out all the information and the procedure you need when you buy a property.

 

Generally, there are three steps to buy a property:

 

Step 1: Proposal of purchase or Proposta

This document is a written offer on a property in which the purchaser acknowledges that, having seen the property, he wants to make an offer stating his terms regarding finance, survey, etc… He will also be expected to put down a non-negotiable bank cheque as an escrow (deposito fiduciario) corresponding to 5% of the purchase price, which becomes binding if the offer is accepted. This deposit is held in a special bank account under the responsibility of the real estate agency.

Step 2: Preliminary purchase contract or preliminare

This contract, which is binding on both parties, clearly states the promise to sell and the promise to buy. The buyer has to deposit a sum usually corresponding to 10/20% of the purchase price (caparra confirmatoria) which includes the previous 5% already deposited. The notary will then require about a month to make all the necessary enquiries, e.g. find out if there are legal problems or if there is a mortgage on a property, and prepare all the paperwork needed for the final document.

In some cases, steps 1 and 2 can be carried out at the same time.

Step 3: Final purchase contract or rogito notarile

This final contract is signed in the notary’s office. Balance of total payment is given to the previous owner, and on final signature purchaser becomes legal owner and receives the keys.

The extras

Foreign clients often ask “…but how much are the extras?”. It is often difficult to be exact about this figure.

All properties in Italy are registered at the local land-registry office (catasto) and as far as the Italian state is concerned are given a certain value depending on district, number of rooms, etc. This value can differ greatly from the property’s commercial value, perhaps because the property has recently been restored, or because of its position, etc.

When a house is sold it has to be registered. The registry tax (imposta di registro) is 2% on a first house and 10% on a second property. This applies for Italians too, not just foreigners. The registry tax is calculated on the value stated at the land-registry office which can be considerably less than the commercial value. Here is a simple chart:

 

The registry tax (imposta di registro)

  First house Second property Historical/listed
VAT* (for companies) 4% 10-22% 22%
Registration 2% 9% 9%

* You will be liable for either VAT or registration tax. VAT is applicable on purchases from a company, whereas the registration tax applies to private purchases

 

The agency fee is usually 3% plus VAT (I.V.A.), and is payable at the signing of the preliminare contract.

All property transactions must go through a notary who is appointed by the buyer. There can be a slight variation in price between notaries, but not much. The higher the price of a property, the higher the notary fees are likely to be.

 

Fees and taxes: expenses and instructions of buying property in Italy

This practical guide for buying or selling properties tries to help you in clarifying on taxes aspects connected with the purchase.

When you purchase a property, the buyer has to pay taxes for it. The tax amount depends on different factors.

Tax regimes are different if the seller is a “private” or a “company”.

Furthermore, buying a property as “first house” provides a tax reduction.

In order to be more precise:

  • If the seller is a private, the taxes charged on the purchase are : registration tax 9%; mortgage and cadastral taxes 50,00 € each

 

  • If the seller is a company, there are two different cases:

1st case COMPANY VAT EXEMPT

the due taxes are registration tax 9%; mortgage and cadastral taxes 50,00 € each

2ndcase COMPANY VAT TAXABLE

tax rate 10% (or 22% for high quality dwellings); the registration – mortgage – cadastral taxes is 200 € each

In case of purchasing of a “first house” the law provides for a lower tax regime.

Depending on the cases, the “first house tax relief” gives the opportunity to pay different tax amount.

1st case : If the seller is a private (or a company exempt from VAT)

  • Registration Tax 2%
  • mortgage tax amount fixed on 50 €
  • cadastral tax amount fixed on 50 €

2nd case : If the seller is a company, with VAT taxable regime

  • VAT rate 4%
  • Registration Tax fixed on 200 €
  • Fixed mortgage tax of 200 €
  • Fixed cadastral tax of 200 €

If the seller is a company, the purchase is always exempt from VAT, except two cases:

1st case If the seller is a building company, and the building works ended 5 years ago or more. It is possible to choose to tax the purchase with VAT (but it is necessary to write it in the deed)

2nd case – Sell of dwellings for residential use and social purposes; it is necessary to write the choice in to tax the purchase with VAT in the deed.

 

 

Buying without benefits “FIRST HOUSE”

SELLER VAT REGISTRATION TAX MORTGAGE TAX CADASTRAL TAX
Private NO 9% 50,00 € 50,00 €
Company VAT exempt NO 9% 50,00 € 50,00 €
Company VAT taxable 10/22% 200,00 € 200,00 € 200,00 €

 

Buying with benefits “FIRST HOUSE”

SELLER VAT REGISTRATION TAX MORTGAGE TAX CADASTRAL TAX
Private NO 2% 50,00 € 50,00 €
Company VAT exempt NO 2% 50,00 € 50,00 €
Company VAT taxable 4% 200,00 € 200,00 € 200,00 €