Table of contents
- About this guide
- What information do i need before buying a second-hand property?
- And what if it is a new property?
- What legal and financial obligations do sellers have towards the buyer?
- What is a preliminary contract?
- What is an atto pubblico?
- When may a contract for purchase be legally withdrawn?
- What fees, taxes and charges do i pay when buying a property?
- Obtain a codice fiscale
- Property taxes in italy
- Iva (vat)
- Imposta di registro (registration tax)
- Imu - imposta municipale unica (single municipal tax)
- Imposta ipotecaria (land registry tax)
- Imposta catastale (cadastral tax)
- Plusvalenza (capital gains tax)
- Spese condominiali (condominium fees)
- Other charges
- Valuation of the property
- Checking the land registry
- The notary
- Inscription of new title on the land registry
- Removal of the previous mortgage from the registry
1. About this guide
Welcome to the Advocate Abroad® guide to purchasing a property in Italy! This property guide will give you an overview of the conveyancing process in Italy, including information on both your and the seller's legal rights and obligations as well as pitfalls to avoid.
Of course, no guide can take the place of independent legal advice. Throughout this guide you will find customer reviews of the Advocate Abroad English-speaking lawyers in your area of Italy.
You are guaranteed that all of the officially registered and regulated professional members of the network conform to strict protocols and standards for legal services. Now, on with the guide!
2. What information do i need before buying a second-hand property?
There are a number of legal issues that need to be considered when buying a property in Italy. In particular, when facing a Property purchase the vendor is legally obliged to provide the following documentation:
- Registry information regarding the property
- Receipt of payment of the most recent IMU tax bill
- Certification by the Community of Owners of the building or complex, signed by the Secretary on behalf of the President, confirming that the community payments relating to the property are up to date
In addition, the buyer should be careful to confirm the following:
- Name of the current owner of the property
- If there is any mortgage or other charge over the property
- The physical property conforms to the description
- That the land is correctly zoned for building
- The buyer should also make sure there are no sitting tenants in the property
3. And what if it is a new property?
Before buying a new property it is advisable to confirm the following:
- The existence of a project license in which the relevant technical department confirms that the building project has been carried-out in accordance with the original approval originally issued by the town hall.
- That the license of first occupation has been issued.
- The certificate of habitability of the properties should be available.
- Inscription in the property registry of the urbanization along with the necessary insurance for purposes of dealing with any defects in the building work.
- That any sums advanced (via instalments) for the purpose of purchasing a property ‘off-plan’ are protected by bank guarantee.
When a public notary is appointed it is his duty by law to check every item listed above; however, it is advised NOT to enter a transaction without the assistance of a solicitor.
4. What legal and financial obligations do sellers have towards the buyer?
The vendor of the property has the following legal obligations:
- To conserve the property until it is handed over to the purchaser.
- Transfer the property.
- Make good certain defects or deficiencies in the property.
- To pay certain costs and taxes.
If there are any defects in the property known to the seller and which may have not been communicated to the buyer, the buyer may possibly rescind the contract or claim damages instead. There is an eight day time limit from the date of discovery in which to exercise this right.
Unless there is agreement to the contrary, the purchaser is obliged to pay the costs relating to the drawing up of the deeds of transfer as well as those costs necessary to effect the transfer of the property – this would include notary costs. Any capital gains tax that is due will be payable by the vendor.
5. What is a preliminary contract?
Assuming that all of the preliminary checks determine that the property is as stated and can be purchased safely, the purchaser may need some time to put together the funds necessary to complete the purchase. The process for buying Property in Italy provides for this by use of a ‘preliminary’ or ‘deposit’ contract.
Effectively this is a contract-to-contract and normally stipulates that before a stated future date, the property will have passed from the seller to the buyer.
Should either side fail to complete there are penalties. The buyer will forfeit the deposit and the seller must return the deposit and pay to the purchaser a penalty equal to the amount of the deposit ie return twice that amount.
6. What is an atto pubblico?
The final deed or ‘atto pubblico di compravendita’ as it is known in Italian is the title by which the property passes and the buyer’s new title is registered in the local property register.
The signing takes place in the office of the public notary who is a type of official registrar who must witness the contract signing in order for it to be legally binding. On the day of the signing all interested parties meet in the office of the notary - this may include a representative of the bank if a mortgage is required.
The deed is read aloud by the notary and the parties then present their identification after which the deeds are signed by the vendor, the purchaser and the notary. At this point the monies for the purchase are handed over, usually in the form of a bank-guaranteed cheque.
7. When may a contract for purchase be legally withdrawn?
The reasons for which a contract may be rescinded are normally included in the contract itself in order to protect the parties to the contract. The following would however be the main reasons for rescinding a contract for the purchase of property:
- Failure to fulfil obligations under the contract.
- Loss of the property.
- Failure to pay.
- Hidden charges (over the property) or defects.
8. What fees, taxes and charges do i pay when buying a property?
Whether you are buying or selling a property in Italy there are a number of costs associated with the process. A number of these you will expect if you have been through the process in another country, but some you will not. In this guide the main charges will be covered and the party that is usually responsible is the buyer (unless otherwise indicated).
However, it should be borne in mind always that the concept of freedom to contract is a cornerstone of Italian law and the parties may always assume or forfeit whichever responsibilities they wish with regard to payment of the costs and taxes incurred when transferring property in Italy.
9. Obtain a codice fiscale
Before being able to do, well almost anything in Italy (and certainly to purchase a property) you will need to apply for a fiscal code, similar to the Social Security Number (SSN) in the USA or the National Insurance Number in the UK. In Italy, this is arranged at the Agenzia delle Entrate.
It typically involves arranging an appointment date at the relevant location, nowadays often over the internet and then queueing with others who get the same date to get a copy of the form that needs to be signed and presenting a valid identity document.
10. Property taxes in italy
While Italy is famous for it’s landscape and sunny weather, undeniably it is a world-beater when it comes to taxes! They are literally everywhere you look and it is easy to get confused by the endless acronyms.
Here we highlight the principal property taxes in Italy that you are likely to come across when buying a property. In general the principal taxes or charges in Italy can be grouped as follows:
- IVA (VAT)
- IMU (Imposta Municipale Unica)
- Registry Costs (Imposta di registro)
- Mortgage Duties (Imposta ipotecaria)
- Cadastral Tax (Imposta catastale)
- Capital Gains Tax (Plusvalenza)
- Property Management Fees
- Other Charges
You may prefer to leave all this tax-stress to an English-speaking accountant in Italy.
11. Iva (vat)
The purchase of a property from a registered company attracts a VAT of 10% of the listed value of the property, or 2% if the property is for personal first residence.
The buyer of the property pays the tax at the time of the purchase of the property and the notary is responsible for passing it on to the government. However, VAT is not due if the property is bought from a private person.
12. Imposta di registro (registration tax)
Buying Property in Italy attracts a Registration Tax of 9% on the cadastral value of the property, (which is almost always far lower than the actual market value); if you are buying a house as first personal residence, you are entitled to a tax cut that brings the rate down to 2%.
In both cases, the minimum payment is 1.000 euro. When the deed is subject to IVA (see the above paragraph) the Registry Tax will be a 200 euro flat rate.
13. Imu - imposta municipale unica (single municipal tax)
This is a property charge that is similar to Council Tax or rates in the UK. The IMU may be paid in one or two installments.
If it is paid in two installments, the payment must be made in June and December, but if it is paid in one installment, it must be made before 18th June. IMU is not due on the first residence house, unless it is a luxury property (big villas, castles, etc.) Care should be taken when buying a property given that the purchaser should pay for only those months of the year that they own the property.
If the previous owner has paid for the full year then they may claim return of that portion which they will not use. The amount payable is expressed as a percentage of the ‘cadastral’ value of the property. The catastral value is the value of the property expressed in Euros as appears in the “registro catastale”.
The tax payable is determined by multiplying the cadastral value by a coefficient or percentage that oscillates between 0.20% and 1.06% The rate varies across Italy because it is set by the town councils rather than the central government.
14. Imposta ipotecaria (land registry tax)
It is based on the cadastral value of the property as it is written in the deed of sale, the rogito. If you are buying Property in Italy, say your new Italian house from a private seller, there will be a flat rate tax for the Land Registration of 50 euro. However, if the seller is a company that is VAT registered, the property tax rate will be 200 euro.
15. Imposta catastale (cadastral tax)
The imposta catastale tax in Italy is similar to the Land Registry tax in the amount to be paid, is also based on the cadastral information in the property deed. Just like the previous tax, it is also fixed at 50 euro on purchase transactions from private, and 200 euro when buying from registered entities.
16. Plusvalenza (capital gains tax)
If the sale of a property takes place within 5 years from the purchase, if there are capital gains, such gains are subject to taxation. The seller may choose between:
- Ordinary taxation: the capital gains from the sales, can be added with one’s other income received, at the taxable amount (base imponibile) of the personal income tax (IRPEF). The amount of the tax will depend on the brackets and the consequent rate.
- Separate taxation: alternatively, capital gains are subject to an income tax of 20% on the increase of the value.
17. Spese condominiali (condominium fees)
Italy, similar to other mainland European countries has a much higher proportion of apartment style properties than in the UK or Ireland. When multiple proprietors share common parts of a property such as the lifts in the building, porter facilities, the building edifice, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities.
Accordingly each proprietor is required to contribute financially to the upkeep by way of a community charge, known in Italy as “spese condominiali”. The amount payable varies from building to building or urbanization to urbanization but will also be determined by the property owned within the building (some properties are larger than others and therefore should pay a larger share).
When buying Property in Italy an important point to note is that the purchaser of a second-hand apartment within a building or community assumes the debts and pending community charge for the previous and current years. For this reason the seller is required to present the purchaser with a certificate of proof of payment of the community charge unless the purchaser has expressly waived this requirement.
18. Other charges
In addition to the main taxes and charges outlined above it may be necessary to make provision for other ancillary charges such as rubbish collection and water rates.
If a community charge is being paid then this will most likely include the charge for collection of rubbish but if the property is a separate building such as a villa in its own grounds, then such charges are paid separately.
19. Valuation of the property
This will usually be a requirement of the financial institution that may issue the mortgage although they will insist that you, the buyer, must pay.
The person carrying out the survey must be certified by the Ministry of Finance under the Law Regulating the Mortgage Market (Ley 41/2007). The minimum amount chargeable for the carrying out of a valuation is €208 and will ultimately depend upon the following factors:
- Not all surveyors or survey companies charge the same.
- Where the property is located.
- Will the surveyor need to charge expenses (mileage etc) to reach the property.
- Does the surveyor need to access technical information (plans etc).
20. Checking the land registry
To ensure that the particulars of the property are correct i.e. the identity of the current owner(s), the mortgage charges and any other encumbrances that currently exist on the property and the existence of any court judgments affecting the property etc it is necessary to check with the land registry at the local town hall where the property is located.
This is always done by the notary, or during negotiations before a notary is appointed, or by a technician or solicitor chosen by the buying party.
21. The notary
While strictly speaking it is legal to arrange for the transfer of a property in Italy via a private legal contract, for any new property title to be registered in the public Property Registry, it is necessary to complete the transfer of the property by public deed or “atto pubblico”.
Failure to register the title would permit an unscrupulous vendor to sell the property to a third party who, upon registration of their title would be entitled to retain the property, while you - the poor earlier purchaser - would be left chasing repayment from a (probably) long-gone seller. Also, failure to register a purchaser’s new title on the Land Register and thereby remove a prior title would allow the possibility of embargos being place on the property due to debts relating to the prior owner.
From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public deed. The procedure involves the drawing-up of the deeds of transfer by a public notary. This is an independent official who oversees the process and ensures that the proceedings take place according to the law and that the documentation is verified.
The amount charged by the notary is prescribed varies in function to the price of the property.
22. Inscription of new title on the land registry
Once the property has been transferred it is advisable to register the new ownership details with the public property register.
Apart from not being able to obtain a mortgage without doing so, failure to register can cause multiple problems in the future with regard to future property transfers, inheritances, defending title against third parties etc.
23. Removal of the previous mortgage from the registry
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register and the cost is normally attributable to the seller, who sells ‘free of encumbrance or charge: It is best practice even though the mortgage has been paid off following the sale of the property.
The charge will still appear on the register and its removal incurs a number of charges, notably notary and registry charges. The process involves obtaining a certificate from the financial institution that issued the mortgage that the mortgage has been discharged.
This certificate is then presented to the notary who draws up a public deed to that effect. The deed is then presented to the registry for inscription on the property register which thereby removes the mortgage charge from the property.
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