Guide to Buying a Property in Italy

The Italian property market is open to all types of buyers who come from those countries where an Italian citizen can enjoy the same purchase rights (reciprocity): individuals buying on their own behalf, corporate investors, trusts, SIPPs, etc.

It is difficult to give an accurate estimate of time scales for completion of this process and, as in other countries, this very much depends on factors such as the type of property, as there might be problems with the property which influences speed of obtaining financing. Some of the main issues related with buying a property in Italy are written out below.

1. The deed of sale, completion and payment

1.1 The deed of sale

The purchase deed must be in written form and must be certified by an Italian notary, who is an officer of the State.The notary verifies everything to see that the rights can be transferred and he determines whether the property can be taken under mortgage, charge or any other restriction. All of the contract points must be written in Italian. When the notary completes the procedure and “transcribes” the contract into the public register of the area the purchaser receives the rights of ownership.

1.2 Completion and power of attorney

If one of the purchasing parties does not understand Italian, there are two options for completing the transaction:
1) the entire contract must be translated into the other language and an interpreter must be nominated, or 2) the ones who do not understand Italian can give all the power to their attorney (this is generally used in a bilingual Italian/English version, however, other languages may also be used instead of English) to an Italian speaker. The  power of an attorney document can be signed either in Italy or abroad : 1) In Italy, it must be signed in front of a public notary, with two witnesses (at least one of them has to speak the language of the purchasing party) and an interpreter must be present; the witnesses and the interpreter must be either Italian or Foreign residents of Italy (it is considered better to select these people in advance since the notaries do not provide them); 2) If managed abroad, the power of attorney must be either signed in front of a Public Notary and then affixed with the “apostille” (this solution is not advisable unless the Public Notary is familiar with this procedure), or it should be signed and completed at the Italian Consulate.

1.3 Payments and bank accounts in Italy

Opening a bank account in Italy is very useful for two reasons:

a) The most common method of payment of the purchase price or of the remaining balance is the delivery of a banker’s draft (cashier’s cheque) on time of the sale deal. That is the time, when the vender formally hands over title of an owner and gives the keys to the property.

b) After you have purchased a property in Italy, you will have to make some regular payments for utilities and local taxes.

2. Finance

Up to about 70% of the value of the property can normally be financed by a bank, which will then register a charge on the property. The mortgage contract must be certified in front of a notary and so it is normal to formalize the mortgage and the sales contract at the same meeting with the notary.

3. Preliminary contract and other early steps

3.1 Preliminary contract

In Italy, there are situations, when the property is not ready for purchase or some important details have to be resolved or where the buyer does not have funds, which are immediately available, it is very common to sign a “preliminary contract”. The contract confirms that the seller is obligated to sell and the buyer is obligated to buy the property.

3.2 Confirmatory deposit

This is an agreement by which the sides establish part-price (called the “caparra confirmatoria” or confirmatory deposit) which can be kept by the seller if the buyer does not properly fulfill his obligations, or in a case of which the seller does not properly fulfill his obligations. In these cases the buyer may ask for return of the “caparra confirmatoria” plus an additional penalty which equals the sum of “caparra confirmatoria”. 

3.3 Purchase proposal (offer for purchase)

This is a written agreement under which the purchaser unilaterally commits himself to buy the property. The offer can include certain conditions or contingencies marked by the purchaser, who might, for example, bind his offer on the condition that the result of a technical survey is satisfactory. The offer must have an end date beyond which it is no longer valid, and only acceptance by the property owner to the terms of the proposal will trigger any obligation on the part of the owner.

3.4 Deposit

To show that his intentions are serious the buyer can leave an initial deposit. However, if the deposit is not in form of a confirmatory deposit, the vendor remains free to sell, which means that the buyer could lose the deposit in the event that he is unable to proceed with the contract.

4 Protection of the Intended Buyer

Italian law offers some protection to the Intended Buyer.

4.1 Preliminary Contract Registration

The buyer may decide to register the preliminary contract at the local registry (Agenzia del Territorio). Considering the registration, the buyer has a first right against any debtor of the seller who tries to assert his rights against the property under contract.

4.2 Warranty and insurance

The decreto legislativo №122 dated 20 June 2005 is a piece of legislation which grants protection to buyers of properties which are  still under construction. The builder is required to obtain a bank guarantee to cover its liabilities for any potential intervening rights of third parties which might affect the property, including bankruptcy.

5 Professionals required by a foreign buyer 

Notary – is an obligatory. The buyer has the right to choose the notary who will authenticate the purchase affair. His role is to check the accuracy of the documents which are put in front of him. The notary will always keep the original of the purchase contract but he can provide the owner a certified and valid copy.

Lawyer – if the subject of the sale is a straightforward property transaction, then a lawyer is not needed because the purchaser and seller will have the assistance of the notary. If, however, there is a preliminary contract, or works which are to be carried out on the property, certain restrictions affecting the property (mortgages, partial rights etc.), any other actions or necessary divisions of the property or foreign buyers or sellers, then it is better to employ a lawyer, and if possible, one who speaks the language of the buyer.

Public accountant – It is vitally important  to keep track of the innovations for the Italian tax system. Moreover, a public accountant is advisable when there is a need to dispose costs or shares under a management company scheme.

Surveyor – If the buyer decides not to get advice from a lawyer, it is at least advisable to obtain a survey report to check out the technical specifications and the town/city planning requirements/ restrictions. The surveyor, in addition, is in a position to check and direct works, etc.

Architect – Can be advisable if it is necessary to redesign the property, its interior, or any other matters of structure and design.

Geologist – For larger properties it is also advisable hire a geologist to check the ground and structure of the property.

6 Insurance

It is not necessary (in the sense of being a legal or compulsory requirement) to insure the property. It is of course better to have, and the bank will insist on this if there is a mortgage. Banks and insurance offices offer various policies in protection from a fire, theft, and damage to the property in exchange for a few hundred euros per year.

7 Inheritance

In the absence of an express choice relating to the applicable inheritance law, the Italian law will be applied to automatically protect certain categories of the heir. However, specific advice should be taken in each case of  some concerns.

8 Costs

1 – Notary: according to the national tariff and in proportion to value of the legal documents. For a property which costs about 500,000 euro the notary will cost around 3,500 euro.

2 – Lawyer: depends on national tariffs and can be proportional to the value of the property or can be on a fixed hourly basis.

3 – Accountant: accords to a professional tariff which can be proportional to the value of the property or can be on a fixed hourly basis.

4 – Estate agent: a percentage of the property price. Each party must pay, usually, between 2 and 5%, which is normally payable on the signature of the preliminary contract.

9 Tax implications

For individuals, the income tax rules vary depending on the country of residence. Accordingly there are no difficulties for an individual  to receive income solely from sources within Italy. However, if they receive income from abroad (when a foreigner buys a property abroad), a series of adjustments will have to take place to avoid the income being taxed twice in the state of the property as well as in the state of residence. In other words it is necessary to ensure that the income is not a subject for double taxation. It is necessary to note that residency is not the same as citizenship; in addition, when an individual has contacts with more than one country, it might happen that these countries consider the individual a resident so that each of them can levy taxes from him/her. To resolve any conflicts there is usually a bilateral treaty between the two countries which will determine residency and how tax is to be imposed.

9.1 Property taxes in Italy

When someone buys a property in Italy the first thing they must do is to ask the taxation authorities of the area (Ufficio dell’Agenzia delle Entrate) for a “Codice Fiscale” (taxation code) or, if the property is to be used for a business activity, a “Partita IVA” (VAT number).

9.1.1 Taxes are imposed at the moment of purchase When the vendor is a company or body which pays VAT (for instance a building constructor, or a development company which has carried out a restoration project in which they actually were owners of the property), in addition to the purchase price shown on the purchase deed, the buyer must pay:

– VAT of 10%
– Registration tax (fixed rate. The “fixed rate” is always equal to euro 168,00)
– Mortgage tax (fixed rate)
– Catastale tax (fixed rate)(this is the presumed income of land determined by a public office for the purpose of tax.).

With “prima casa” benefit for foreign buyers that have the intention to transfer their fiscal residence in Italy and if they are buying their first house in Italy
– VAT of 4%
– Registration tax (fixed rate. The “fixed rate” is always equal to euro 168,00)
– Mortgage tax (fixed rate)
– Catastale tax (fixed rate)(this is the presumed income of land determined by a public office for the purpose of tax.). In other cases (for example in a purchase from an individual or a business from that set out above) the taxes that must be paid are:
– Registration tax of 9%
– Mortgage tax 50 euros
– Catastale tax 50 euros

With “prima casa” benefit
– Registration tax of 2%
– Mortgage tax of 168 euros
– Catastale tax of 168 euros

In purchase deeds relating to the purchase of building sites or agricultural land the registration taxes are 8 and 15% respectively instead of 7%, plus Mortgage and Catastale taxes.

The taxes (registration, mortgage and catastale) are paid to the notary at the moment of registration of the purchase deed.

10 Periodic taxes

IRPEF (Imposta sul Reddito delle Persone Fisiche – Income tax). In Italy a house always produces income, even if the house is used solely as a residence of the owner, and even if the house is not used at all. The taxes are calculated on the basis of the reddito catastale (the presumed income of land determined by the local authority for the purposes of tax- similar to rate-able value), to which you apply a rate which depends on the total or overall rate of the income of the person. If the property is rented, the tax will be based on the perceived rental value, which will also have an impact on the IMU while the tax for removal of refuse will in this case be paid by the tenant. The tax is therefore based on a mathematical calculation. This tax is not due in the case the discounts, which are allotted only for “prima casa”. TARSU (Tassa rifiuti solidi urbani – Local refuse removal tax). This tax must be paid to the local authority, depending on where the property is situated.