We have put together an overview of the major points which will assist you in understanding the laws, the documentation and procedures regarding the purchase of a property in Italy.
It should be made clear that non Italian citizens are in no way treated any differently by the law than an Italian citizen. There are no special deals or taxes for non Italians. The main difference between taxes on the purchase of the property and the ongoing rates and council fees is determined by the owner's place of residence. Once there is an agreement on price between the buyer and seller we proceed with the following steps:
The first part of sealing the deal is the COMPROMESSO. This a private contract between the buyer and the seller in which all the details of the final contract are laid out, all the terms and conditions, methods of payment, what taxes and extras are to be paid, dates for the making of the final contract and any other details are discussed. We recommend that this be done with the assistance of a Public Notary. Once this is signed, he will make a title search that there are no loans, liens or other impediments such as right of way on the property, that the property is the exact one that is for sale and that all permits and permissions for the building are in order. In this contract, the full price being paid for the property is stated.
Payments at the Compromesso.
A deposit of usually one third of the full price of the property is paid. This is not held in Escrow but goes directly to the owner of the property. If the purchaser then defaults on the contract, they lose the deposit. If the seller defaults, they have to refund the full amount of the deposit plus an equal amount to the purchaser. This is called a "Caparra Confirmatoria". This makes the penalty for default an equal amount for both parties.
Payment of the Real Estate Agency fee is also made at this point. For our Company, this is 3% plus IVA (VAT) on the full price of the property.
The final contract has to be made in front of the Public Notary. This is the contract which is registered in the property registration office (Ufficio Catastale and the Conservatoria dei Registri Immobiliari) and is the one that is recognized as the contract on which all government taxes and fees are calculated. After the signing of this contract there is a period of approximately three weeks before the new owners receive this document. This document is the equivalent of a Title Deed and is the document of ownership of the property.
At the signing of this final contract the balance of the purchase price is paid to the seller. The Public Notary's fee is paid and the payments of the government purchase tax and registration fee are paid.
For a Property with no agricultural land
If you register that the property you purchase is to be your main place of residence i.e. that you will live in this property for more than six months and one day per year, then the government purchase tax (imposta) will be 2% of the registered value if you buy from a private individual and 4% IVA of the declared price if you buy from a Company.
If you purchase the property as a second or holiday home then the purchase tax will be 9% of the registered value if you buy from a private individual and 10% IVA (VAT) if you buy from a Company.
For a property with agricultural land
If the property has agricultural land you will need to give a value to that land at the Final Deed based on the average market value of the area. On that value the purchase taxes will be 12% no matter if you buy as a first or a second home.
Capital Gains Tax has been abolished in Italy if you sell your property after five years of ownership. If you are not resident and you sell the property before five years you will pay capital gains tax on any profit.
You pay an annual tax IRPEF (Imposto sul Reddito della Persona Fisica)
Compared to most countries, local taxes in Italy are low. You pay a tax called IMU which is on average 0.6% on the registered value of the property (this is paid in two installments a year), depending on local tax regulations. There is a local rubbish collection tax (Rifiuti Solidi Urbani). There are water rates if you are connected to a mains water supply.
It is possible to obtain a mortgage for up to 80% of the purchase price of a property in Italy, however there are certain procedures that have to be followed as the system of ownership is different as for example in the USA or UK.
In Italy, when you purchase a property you do not receive a certificate of Title of ownership. Your documentation of ownership is your purchase contract and this is held by the public notary and is available only on the orders of a Judge. It is therefore a long process for a bank to foreclose on a property if the owner fails to meet the required mortgage repayments. Because of this, the banks require in depth details of income and liabilities of the applicant. This whole process for obtaining a mortgage can take 3 months before full approval is obtained.
We therefore recommend that if you intend to buy a property in Italy and think it may be advantageous to take a mortgage on the property you make a preliminary application that will give you some idea of what your particular circumstances would allow you to borrow. In this way you will have a good idea of what you can spend so you will know in which price bracket you can search for your dream home.
Sellers here will not hold a property or sign a preliminary purchase proposal that is subject to loan approval. It takes too long and they risk losing another buyer. We are happy to put you in contact with some of our affiliated partners, all of whom are specialized in mortgage advice for overseas clients. We hope that this information has given you an insight into the procedures and implications of buying a property here in Italy. We are here to assist you in every way, before during and after the purchase of your home here in one of the most beautiful parts of the world.
We look forward to being of assistance!
These notes are prepared for the guidance only of interested parties. The information is given without responsibility on the part of the agents or their clients and neither the agents nor their employees have any authority to give any representations or warranties whatever in relation to this document. Alfa Immobiliare Real Estate will not be liable in negligence or otherwise for any injury or loss arising from the use of these particulars.