You have decided to invest in properties in Italy but what next? It is important to have a good understanding of the process when you want to buy a property in Italy, as it will help you avoid some of the most common hazards of home-buying.
The list below covers the main steps you will go through when buying a property in Italy:
1) THE FISCAL CODE (CODICE FISCALE)
The first thing you need to get familiar with is the FISCAL CODE.
If you are thinking to purchase a property in Italy, in fact as well as to open an Italian bank account (or to buy a car) you will need a FISCAL CODE.
For foreigners the FISCAL CODE, can be done or in Italy with the “Agenzia delle Entrate”, by presenting an identity document, or it can be done at the Italian Consulate in the country of residence.
2) OPENING AN ITALIAN BANK ACCOUNT
In the event of a purchase it is essential to open a bank account in Italy not only to transfer there the funds for the completion (as the final payment normally happens in Italian bankers drafts) but also to get the various utilities paid automatically.
3) FORMAL OFFER OF PURCHASE
When a client, after having visited some properties, decides to go ahead and to buy one of those, the negotiation starts with an OFFER.
The offer of purchase (proposta di acquisto) must be in writing.
Then, if the offer has been accepted it can be verbally communicated.
Once the vendor signs it accepting the offered price this means that he undertakes not to sell the property to anybody else until a certain date.
This letter is to protect the buyer from losing the opportunity to purchase.
4) CONTROL AT THE CATASDRE, PLANNING OFFICE, CONSERVATORY OF PROPERTY REGISTER
Before formalizing the purchase it is essential to make these checks:
– Title of ownership: is the document that attests to the ownership of the property;
– Cadastre: so you can check if the property is duly registered;
– Planning office: to check if the property has a regular building permit;
– Conservatory of property registers: to see if there are mortgages on the property.
5) PRELIMINARY AGREEMENT OF SALE (Compromesso)
The Compromesso is drawn up and this is a legally-binding document which states the agreed sale price, the completion date (Rogito) and any information and rights the property has. [But it needs to be kept in mind that also the offer of purchase, once accepted, is legally binding.]
The Rogito is then drafted and it is usually executed 1 to 3 months after the execution of the Compromesso.
Once this contract is signed and a “caparra confirmatoria” (a deposit) of about 10% of the purchase price is paid, the seller may only withdraw if he pays back to the buyer the deposit plus an amount of money which is equal to the deposit itself.
Example: If you paid a deposit of € 5,000 you will get back all the money you’ve paid for the deposit € 5,000 + another € 5,000
Should the buyer wish to withdraw, he will lose his deposit in its entirety.
The non breaching party can either sue the other party for the specific performance of the preliminary agreement or terminate such agreement and seek damages.
Bear in mind that the deposit amount may vary on many factors. However, usually the lower the property price the larger the deposit and viceversa.
Sometimes it may happen that in place of the “caparra confirmatoria” the buyer pay an “acconto” which is a payment on account on the final purchase price.
There are two types of agreement: one is a public document, the other a private contract. The notary can both drawn up public documents or authenticate private deeds.
6) DEED OF PURCHASE (Rogito)
The deed of purchase, final contract or ‘atto notarile’ is usually signed after the compromesso – which is not mandatory as the definitive contract can be immediate – and only when all the documentation is available.
It is signed by both parties, the balance is paid and the property is officially transferred.
Following completion, the notary issues a certified copy of the deed of sale and registers a certified copy of the deed with the Cadastre (Catasto).
RUNNING COST OF YOUR PROPERTY:
1) Purchase Costs
The total fees for buying a property in Italy are approximately 10 to 20 per cent of the purchase price. Anyway, it may vary from case to case.
In case you rely on a real estate agency to find your dream home in Italy, you will pay a commission which is around 3% of the purchase price + VAT (I.V.A.) 22% of the fee.
Usually this percentage is not divided between buyer and seller, but each one has to pay a 3% + VAT (I.V.A.) 22% commission.
Once the deal is closed thanks to the intervention of the real estate agent, according to article 1755 Civil Code, he/she is entitled to a commission from both parties.
Registration Fee (Imposta di Registro) – Mortgage Tax (Imposta Ipotecaria) – Cadastral Tax (Imposta catastale)
These are the 3 main taxes you have to pay when you purchase your home in Italy in addition to other minor taxes.
The “cadastral declared value” of the property on the Rogito (deed of sale) usually represents the basis (base imponibile) upon which the these 3 taxes are applied, and it can be considerably less than the commercial value since the latest appraisals go back to many years ago. But the government is currently updating these values. However, the “rule of the cadastral value” is not always applicable. For instance, if the buyer purchases a property as a company and not as a private entity, the base upon which taxes are applied is represented by the commercial price of the property.
The amount of these 3 main taxes varies depending upon the type of property as well as the subjective characteristics of both the seller and the buyer:
A) Deeds of purchase stamped at the appropriate stamp duty = if the seller is a PRIVATE OWNER – REAL ESTATE AGENCY – DEVELOPER or RESTRUCTURING COMPANY that sells after 5 years from completion of work and opts out of the VAT regime:
1. Registration Fee:
– 2% for primary home (always applied on the cadastral value);
– 9% for second homeapplied on the cadastral value if the buyer is a private entityapplied on the purchase price if the buyer is a business entity € 1,000 is its minimum payment due.
2. Mortage tax: € 50 (fixed rate)
3. Cadastral tax: € 50 (fixed rate)
B) Purchase subject to VAT (Value Added Tax) = if the seller is a DEVELOPER or RESTRUCTURING COMPANY that sells within 5 years from completion of work or that sells after 5 years from completion of work and opts to charge VAT on the sale:
1. VAT (applicable on the purchase price agreed and stated in the act by the parties):
– 4% for primary home;
– 10% for second home;
– 22% for luxury home.
2. Registration Fee: € 200 (fixed rate)
3. Mortgage tax: € 200 (fixed rate)
4. Cadastral tax: € 200 (fixed rate)
Please note that all the taxes list above are valid as a general rule.
However, we strongly advice the potential buyer the quotation of that very property before buying it to be sure of the amount of taxes that will be due.
A fee is paid to the Notary for the preparation of the Rogito and generally only the buyer pays for the notary expenses.
But note that notary fees can also be requested for the preparation of the preliminary agreement of sale (and therefore not only for the deed) if the parties involved decide to also produce the compromesso with the notary in order to register a certified copy of the deed with the Cadastre.
This fee can slightly vary from town to town, and is on a scale related to the declared value of the property.
However notary fees are similar in every city, at least in terms of the notarial system.
A notary’s office in the centre of Milan for instance could obviously apply higher fees than a notary’s office located in a country town, but this would mostly occur when operating expenses are taken into consideration – which are higher in big towns and smaller in little villages – and not with regards to the notarial rate which always remains the same.
You can choose your notary.
They may include the help of a lawyer for legal issues; a surveyor or an architect for the property inspection; a translator and a moving company.
Also consider mortgage fees in case you need to establish a loan.
2) Annual Taxes on the Ownership of a Property
IUC (Imposta Comunale Unica)
It is an annual tax including 3 elements: IMU (it won’t be charged on primary homes unless it is a luxury home), TASI (tax on municipal services, such as road maintenance or street lighting and cleaning, etc.) and TARI (refuse/garbage tax).
All home owners, both resident and non-residents, must pay for these taxes.
The payment is divided into two tranches.
IMU is applied on the cadastral value of the property plus a revaluation of 5%. The result is multiply for the coefficient that for dwellings is 160.
The basic rate for second homes is 0.76%, but the municipality may decide to decrease or increase it by 0.3%.
Also TASI is applied in a similar way. Bear in mind that the total amount of TASI and TARI cannot exceed a tax rate of 10.6%.
TARI is calculated from the property square metres.
In case of renting out your property for a long period of time, the tenant will pay for TARI and a part of TASI (10%-30%).
We strongly advice the potential buyer to verify the exact rate applied by every municipality on each one of these taxes since it may vary from town to town, from case to case, and depending on different situations (e.g. introduction of new regulations).
Electricity, water, gas/oil etc for heating, phone: usually a small fixed fee every two months, plus payment for utilities used.
If you buy a property which is part of a group of properties which share some communal areas – gardens, driveway, swimming pool, tennis court etc. then you will be required to pay condominium expenses. They vary as to the type and size of communal areas on the property.