Whatever your reasons for buying a property, this is probably the first time that you have bought a property in Italy. We have put this guide together to help you understand a little more about the process of buying in Italy.
This guide is aimed at providing some basic information about buying in Italy and tries to answer the majority of the common questions that we are asked about. Although we hope that you will find it useful it is important to remember that it doesn’t cover all legal issues involved and certainly isn’t a step by step DIY guide to buying in Italy.
We’ve also put together a guide to useful terms to know when buying property in Italy, including both the Italian terms and their English translations. You may also want to take a look at our Buying Property in Italy Checklist.
While we hope this guide helps to somewhat demystify the process of purchasing Italian property, it is still recommended that you seek advice from a professional before proceeding – after all we do this every day and have been doing so for many years and therefore know all the tricks and pitfalls that you may come across
We also know the practical solutions to the problems that exist and understand how Italian law interacts with UK law, so can help to ensure you meet all of the strict requirements of both countries’ laws.
For specific advice on buying Italian property tailored to your needs, please get in touch with our friendly, expert Italian property lawyers based in the UK.
Call: 01438 382 064 Email: admin@judicaregroup.com
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Buying a residential 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. For example, this status is granted to citizens of both the United States and the United Kingdom.
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 (a single house or a development for instance), if there are any problems with the property (if work needs to be done or there are any issues regarding building permission/planning regulations) and the speed of obtaining financing, if necessary. Some of the main issues relating to buying a property in Italy are set out below.
1. The purchase deed/ contract, completion and payment
The purchase deed or contract must be in written form and must be signed before an Italian notary, who is an officer of the State. The notary verifies that the rights can be transferred and whether the property is subject to a mortgage, charge or any other restriction. The jurisdiction (i.e. where any disputes are to be resolved) and the law of the contract must be Italian.
The full rights on the property pass at the time when the notary completes the procedure and registers the contract into the local land registry. If one of the purchasing parties does not understand Italian, the entire contract must be translated into the other language and an interpreter must be nominated. Alternatively, the party who does not understand Italian can give a power of attorney to an Italian speaker (in general, their lawyer). The power of attorney must be signed in front of a public notary in Italy or, as usually happens, in the country of the given party. A power of attorney may be useful for two reasons; firstly, only the power of attorney (and not the whole contract) needs to be translated and secondly, the parties do not need to attend before the notary.
The most common method of payment is the delivery of a banker’s draft (cashier’s check) at the time of the signing of the purchase deed.
If there are no complications, the meeting in front of the notary generally takes one to two hours. A lawyer can prepare the contract, but each notary has their own standard form which they prefer to use. The lawyer will therefore deal with the Notary’s draft and negotiate amendments, if necessary.
2. Mortgage
It is possible for the buying party to request a loan from a bank in Italy.
Up to approximately 70-80% of the value of the property can normally be financed by a bank, which will then register a charge against the property. The mortgage contract must be signed in front of a notary, and this is generally performed at the same time that the purchase contract is signed. As for the purchase deed, this contract can also be signed by means of a different power of attorney, given by the person taking out the mortgage (the buyer) to an Italian speaker, normally his lawyer.
An Italian bank account is also normally necessary to make this process simpler. It is generally fairly easy to open a bank account in Italy.
3. Proposal and Preliminary contract
3.1 Purchase offer
This is a written agreement under which the purchaser unilaterally commits himself to buy. The offer can include certain conditions or contingencies decided by the purchaser (e.g. that the property conforms with building permits and planning regulations).
Once the seller accepts the offer, this offer commits both parties in the same way as a preliminary contract (see below 3.3).
3.2 Preliminary contract
In Italy, particularly when the property is not ready for immediate delivery to the buyer (e.g. where the selling party is a developer or is carrying out restoration works) or in a situation where some important details have yet to be resolved (e.g. checking building permits) or where the buyer does not yet have the full funds available (e.g. a mortgage is required), it is very common to sign a “preliminary contract”. The rights on the property do not pass on signature of the preliminary contract, but from that point forward, the seller is obligated to sell and the buyer is obligated to buy. If one of the parties then fails to carry out its obligation i.e. the seller does not sell or the buyer does not buy, the parties have two options:
1. Ask an Italian judge to issue an order by means of which the party in breach must perform its obligation i.e. buy or sell
2. Keep the confirmatory deposit (the seller), or ask double the deposit paid (the buyer).
The “caparra confirmatoria” (confirmatory deposit) is an amount of money, normally 20-30% of the total price, paid to the seller by the buyer at the signing of the preliminary contract. Its role is to provide a penalty in the event one of the parties breaches the preliminary contract, i.e. the buyer does not buy or the seller does not sell.
4. Professionals required by a foreign buyer
- The Notary (Notaio) is mandatory in Italy. The buyer has the right to choose the Notary who will:
- carry out checks and certify that, at the time of the signature of the final purchase deed, the owner/seller has good title on the property and that the property is not affected by mortgages, restrictions, prejudicial registrations, etc.
- certify the identity and the signatures of the parties to the purchase deed
- register the deed at the local land registry
- pay the taxes related to the transfer on behalf of the buyers.
The costs of a Notary are normally determined by a national tariff, with minimum and a maximum for each activity. Having close relationships with many Notaries in Italy, we are able to negotiate good rates on behalf of our clients.
- Lawyer (Avvocato) – the lawyer drafts/checks and negotiates all the contracts involved in a property purchase: from the instructions to the estate agent, to the final purchase deed going through the offer of purchase and the preliminary contract, if necessary. In addition, organizes the purchase process in accordance with the needs of the client and the outcome of technical/legal checks. Given the above, it is strongly advisable to obtain the services of a lawyer and, if possible, one who speaks the language of the buyer.
- Accountant (Commercialista) – mandatory when the property produces an income e.g. if the property is rented out. It is strongly advisable in the event the buyer wishes to buy shares in a company owning a property e.g. if the property is run as a commercial/agricultural activity (B&B, agriturismo, etc). We have an in-house accountant who provides accounting services to many of our clients.
- Surveyor (Geometra) – It is strongly advisable to obtain a surveyor’s report to check the technical specifications and whether the factual state of the property conforms with the town/city planning records, requirements and restrictions. The surveyor is also in a position to check and direct works performed on the property.
- Estate agent – If required, an estate agent can be instructed. The fees of the estate agent are normally paid by both buyer and seller. Italian law states that the mediation fee is due if the deal is concluded as a result of the estate agent’s intervention. In absence of an agreement between the parties and the estate agent, the amount of this fee is determined by professional tariffs or local practice. To avoid unpleasant surprises, we advise clients to sign a written agreement with the estate agent, specifying the agreed fees, any expenses due, and relevant terms and conditions of payment, etc.
Costs
- Notary: according to the national tariff and in proportion to the value of the legal documents. For a property of Euro 500,000, the fees for the Notary will come to around Euro 2,500.
- Surveyor : according to a professional tariff which can either be in proportion to the value or on an hourly basis.
- Estate agent: a percentage of the property price or a flat-fee if the property is not of high value. Both the buying and selling party must pay, on average, between 2-4% each, generally due at the time of signature of the preliminary contract or the purchase deed.
5. Insurance
It is not compulsory to insure property in Italy. Of course, it is advisable, and the bank will require this if there is a mortgage. Banks and insurance companies offer various policies against fire, theft, and other damage to the property and to third parties, usually for a cost of around a few hundred Euro per year. We are available to deal with the insurance companies on behalf of our clients in order to find and negotiate the most suitable insurance policy.
6. Inheritance
When buying a property in Italy, please note that Italian inheritance law grants minimum percentage interests to certain categories of heirs (spouse, children, etc.), even if there is a Will which purports to allocate the inheritance in a different manner. Normally, in countries like the USA or UK, private international law states that, for immovable assets, the inheritance law of the country where the asset is situated is applied to the succession. In order to avoid frequent problems with the registration of these properties into the heirs’ names in future, we strongly advise all our clients to draft and register an Italian will, the content of which must be examined by a lawyer on a case by case basis.
7. Tax Implications
When you buy a property in Italy, the following taxes are due:
a. Property transfer taxes
In general, transfer taxes come to around 10% of the purchase price paid for the property. Given the above, in order to provide clients with the exact figure of the taxes due, it is necessary to receive all the relevant information.
If the buyer intends to take up local residency, the taxes come to 4% or 3% on the price of the property, depending on whether the seller is a company or private individual. To take advantage of this “prima casa” (first home) tax discount, the buyer must obtain local residency within 18 months from the date of the purchase deed. In addition, he must not have purchased other properties in any part of the country with this “prima casa” discount, nor must he sell the “first home” within a period of 5 years after the purchase date, unless he buys another property as his principal residence within a year from the sale.
Moreover, if the property is registered for residential use and the buyer is a private individual, the above taxes can be calculated on the “cadastral value” of the property, which is in general much lower than the purchase price.
The “cadastral value” is a value obtained by multiplying the “cadastral income” (rendita catastale) 110 or 120 times. The “cadastral income” is a value expressed in euro given by the Tax Office to all properties by means of a calculation which takes into account the surface area, the location, the number of rooms, etc.
For purchase deeds relating to the purchase of building sites or agricultural land, the registration taxes are 8 and 15% respectively, and not 10%.
All the above taxes are paid to the notary at the time of signing of the final purchase deed. The notary will then forward this amount to the Tax Office.
b. Periodic taxes
IRPEF (Imposta sul Reddito delle Persone Fisiche – Income tax). This tax is only payable in the event rental income is earned from the Italian property, full details of which will need to be provided in the relevant income declaration submitted yearly. When a person takes up residency in Italy, he normally pays taxes in Italy.
IMU (Imposta Municipale Unica – Local authority tax). This is a tax which has to be paid to the local authority in which the property is located (similar to council tax). However, it is generally much lower than the UK or US council tax on properties.
TASI (Tributo Servizi Indivisibili – Local services tax) + TARI (Tassa rifiuti – Local refuse removal tax). These minor taxes must be paid to the local authority in which the property is situated. Some local authorities provide discounts if the property is only occupied for short periods or if there is a sole occupier.
8. Residency
A foreigner can apply for residency in Italy. One of the requirements to take up residency is that the foreigner must live in Italy for no less than 6 months per year. Residency has tax implications:
- it gives the possibility to benefit for “prima casa” tax discounts
- it normally imposes the payment of all taxes in Italy, including those due for income received abroad. However, this must be examined on a case to case basis.
9. Transfer taxes in case of inheritance
A “declaration of succession” (dichiarazione di successione - the advice of an Italian lawyer will be strongly advisable in these cases) must be submitted within 12 months from the date of death of the owner/co-owner of immovable assets in Italy, at the competent Tax Office in which the deceased last had his residency. If the deceased did not have residency in Italy, the declaration must be presented at one of the Tax Offices in Rome.
The taxation rate depends upon the size of the assets to be transferred to the heirs. In general, 3% tax is applied on the cadastral value of the assets. For assets with a cadastral value greater than Euro 1M, another 4% (or 6% if the heirs are not the spouse or the children of the deceased) inheritance tax is applied on the amount exceeding 1M.
10. Visas – Permits of Stay - Citizenships
A Tourist Visa normally allows non-Italian citizens to spend in the EU (including Italy) 90 days every 180. However, it is always a good practice to request legal advice in relation to immigration issues in order to immediately clarify the perspectives and to act in compliance with the Italian immigration laws, once a property is purchased in Italy.
It is possible to provide such advice once your immigration lawyer receives relevant information on the current situation (citizenship/s, residency/domicile, source of income, etc.) and on your future plans (become resident in Italy, work in Italy, become Italian Citizen, etc.)
Call: 01438 382 064 Email: admin@judicaregroup.com