Buying property in Italy
Italy is well known for its red tape, and this of course can include property transactions. This does not mean that the system is any worse than others : in fact, despite the cogs of the bureaucratic machine moving more slowly it is in some ways a safer environment in which to buy property. There are three steps involved in buying a property in Italy : Certain legal precautions can be followed throughout each stage to protect your interests and ensure that your purchase goes through smoothly. The following points give you a basic overview of all the necessary steps and precautions you need to take when buying property in Italy.
• Buying
property: technicalities
•
The Deeds
• The
Final Contract (Rogito)
• Solicitor/Lawyer
• Fees
• Property
Tax
• Italian Mortgages
• Capital
gains
• Living
costs
Buying property : the technicalities
Most Italian properties are freehold and a deposit of around 10% is usually accepted and is paid to a Notary. If the vendor decides not to sell after signing the preliminary contract, they must pay double the deposit back. It is wise to check to wording of the deposit : a "penitenziale" means you will only lose your deposit if you withdraw from the sale, while a "confirmatoria" would mean that the seller could take legal action to force the sale.The Contract
The notary issues a certified copy of the deed of sale and registers the original document with the land registry, which makes you the legal owner of the property.The Deeds
There are two kinds of deeds in Italy: a private deed and a public instrument (the latter provides more protection and costs more money). When a property is bought by a private deed and is subsequently found to have a charge against it, such as a mortgage, the notary is not responsible. When buying by public instrument you can seek legal action against the notary for professional misconduct.Solicitor/Lawyer
You will need to hire the services of a lawyer/solicitor to draw up your initial contracts and instruct the notary.Fees
The total fees for buying a property in Italy are usually between 10-20% of the purchase price. Registration tax/stamp duty should be 10% of the declared price for urban property, up to 17% for agricultural property, with a reduced rate of 4% for first time buyers. If you are planning to become a resident you should do so before purchasing your home in Italy.The declared property sale figure should also agree with the official value in the Land Registry, which is usually over half the purchase price. Notary fees vary depending on the price of the property and are higher in percentage on cheaper properties. They are generally around 4% of the declared price. A surveyor's fee will vary according to the price of the property and will be upwards of £180.00. The real estate vendor's fee, who pays it, varies considerably, although it's usually about 2% of the purchase price, a buyer contributing about 2% of the purchase price and the vendor about the same. VAT is payable on new homes from 9-19% depending on the registries rating and is included in the price.
Property tax
Income tax - called IRPEF is high in Italy and ranges from 10-60%. Non residents must submit a tax return stating the details of their Italian property, even though there's no tax to pay if no income is derived from rental etc. The standard rate of VAT is 19%, with reduced rates to a minimum of 4%. VAT is payable on new properties at 9% for non-luxury property and 19% for a luxury property. Local community tax, or "rates" called ICI (pronounced "eechy") is paid by anyone who owns the property or land in Italy, whether they are resident or not. It is levied between 0,4% and 0,7% of a property's value: the actual rate being decided by the local authority depending on the size, location, class and category of the property itself. If a property is unfit for habitation it could qualify for a 50% reduction. ICI is paid in two installments June and December.Italian Mortgages
These are available from Italian banks but can be lengthy to approve, and you can usually obtain better terms from foreign financial institutions with borrowed amounts against your purchase price of 80%. Remember to declare any funds brought into your Italian bank. Maximum loans from Italian banks on property are usually around 50-60% of the buying price for second homes and nearer 75% for your main residence.Real estate Italy : general information :
Outside money used to buy property should be officially documented in the case that the proceeds need to be repatriated.Capital Gains
There is no capital gains tax except on accrued gains pre-dating 1993 when property is sold up to the year 2000. It is payable to local authorities and depends on profit levels ranging from a few percent to thirty. It is also not applicable for your primary residence sale.
Living costs in Italy
Living costs in Italy differ greatly between the prosperous north and central regions of Italy, and the relatively poor south. The cost of living in the major cities is similar to Britain, France and Germany, although generally Italy has a slightly lower cost of living than northern European countries. Luxury goods, such as cars, can be expensive. Alcohol is less expensive.Proposal of Purpose (The Offer)
Because you need time to organise 1/3 of the total price payable at the "Compromesso" (PRELIMINARY PURCHASE) you can immediately sign a Proposta irrevocabile d'acquisto – an irrrevocable purchase agreement – which is signed by the buyer and seller when you have agreed the price, and which identifies both parties, the property in question, and gives an expiry date for signing the Compromesso. When you sign, you pay a deposit for the equivalent of 10% (this can vary) of the agreed price, this can be either held by the agency, and returned to you when you sign the compromesso or cashed by the vendor and used as part of payment on the property.If you change your mind you will fortfeit the deposit, as the owner will have effectively taken the property off the market for a certain period of time. If the sale does not go ahead in the specified date through no fault of your own, then your deposit will be returned to you.This is the stage where you can arrange for a surveyor (Geometra) to organise a survey on the property and carry out the searches.
Preliminary Purchase ("Compromesso")
The preliminary contract (Compromesso) commits both parties to the sale. This contract establishes the terms and conditions of the final contract (Rogito) and details price, date for completion, the nature of the property and guarantees from the seller. It may also include any other relevant legal details.You will be expected to pay a deposit at this stage (Caparra) which is usually 1/3 of the purchase price. It is important to note that if you withdraw from the sale after signing the Compromesso, you lose your deposit. However, if the seller withdraws, he must pay you double your deposit.
