Everything you need to know about taxation, guarantees and duties for home buyers in Italy
Via dei Colli Immobiliare assists the client from the moment of the first contact until the deed of sale is completed. And so much more.
We respond promptly to your requests, we jointly identify the properties that meet your needs, we accompany and assist you during the viewings, obtaining all the documentation related to the home, we conduct due diligence searches, we mantain communication with the seller. We support you during the negotiation process, we draft an offer to purchase and preliminary contract, we guide you in the fulfilment of formalities related to the purchase (such as obtaining an Italian Tax Code and the opening of a Bank Account, requested for non-residents in Italy), we offer advise in selecting a Notary and we assist you at the closing.
The purchasing process in Italy is normally subject to three stages:
Once the right property has been selected, the first step, for those who are preparing to buy a home, is to fill out a written offer to purchase. Italian sellers are generally not so willing to enter into negotiations without having a written commitment from prospective buyers. Indeed, in the Italian real estate business practice, there are two alternative ways of conducting a negotiation: the first one involves carrying out the negotiations “around the table”, eventually signing a document which summarises the agreements reached; the second, certainly more frequent when the buyer is not Italian, entails submitting a formal offer to purchase to the seller. With the offer to purchase, the promissory buyer communicates his/her offer to the seller, including payment methods and conditions, period of validity of the proposal, time to complete the final deed, any conditions precedent or resolutive (ex: offer valid on the condition that a mortgage loan is granted to the buyer) and any other aspect which is considered important. To strengthen the commitment, a sum of money is deposited, in most cases considered a confirmatory down-payment (“caparra confirmatoria”, pursuant to article 1385 of the Civil Code) and typically between 10,000 and 20,000 euros. This amount is entrusted to the agent – by non-transferable check made payable to the seller or through deposit on the agency’s escrow account – who will take care to hand it over to the seller if the latter accepts the offer, within its deadline. An offer to purchase accepted in writing by the seller makes the parties contractually bound.
The preliminary sales agreement is a reinforcement of the offer to purchase, if this latter has been done; it is a contract between the two parties that obliges the promissory buyer and the promissory seller to draw up the final deed within a certain period, under the agreed conditions. In the preliminary contract it must be indicated, in addition to the details of the parties: the description of the properties for sale, the details of the previous title deeds, charges and easements on the property, the details of the building concessions or works completed in amnesty, details on the energy performance certificate, the price agreed for the sale, the payment conditions and any suspensive / resolutive conditions. The amounts paid by the buyer (20-30% of the total, as a rule) normally are a confirmatory down-payment (“caparra confirmatoria”); the non-complying party is therefore obliged to pay the sum in question to the other party as a compensation (the promissory buyer will lose the down-payment, whereas the promissory seller shall give back double the money received), who has the alternative right to ask the court for the forced execution of the contract. The preliminary contract must be in writing and is subject to registration; it can be drawn up either in the form of a private writing, directly between the parties also with non-simultaneous signatures, or in the form of a public deed / authenticated private contract, in which case it must be drawn up by a notary and signed in his/her presence.
The deed of sale of a real estate property is a public deed that must be in writing and handled by a notary public, in the presence of the purchasing and selling parties or of the attorneys appointed by them. For the validity of the deed, which incorporates the elements already identified in the preliminary contract, it is necessary to report the entire town-planning and building history of the property, which shall be perfectly compliant to the norms, and some original documents need to be attached to the deed: certificate of energy performance, certificate of land zoning if a piece of land is transferred, land/building registry plans, which shall represent the factual state. The real estate sale is normally carried out on a lump sum basis; therefore the price is determined globally and not per square meter. The delivery of the property to the buyer is generally immediate, unless otherwise agreed (in this case it is a sale with mandatory effects); the seller must guarantee the buyer from hidden defects (defects known to the seller and hidden on purpose) and from eviction (the claim on the object of sale by third parties). The buyer must pay the amount agreed upon at the place and at the time of delivery, unless otherwise agreed. Sometimes the payment to the seller is made by the notary who was previously transferred by the buyer the necessary funds; in the case of purchase connected to a mortgage loan, the bank will pay part of the sale price directly to the seller, sometimes after waiting for the so-called consolidation of the mortgage, which takes 10 days from the moment of the registration of the mortgage in the real estate register.
Taxation on Real Estate
We can divide property taxation in Italy into three macro-areas: taxes levied at the time of sale, annual taxes, and taxes on capital gains from sale.
The sale of a property is subject to certain taxes, all to be borne by the buyer, as is the case with the notary’s fee. In the case of the purchase of a real estate unit from a private individual or a non-construction company, the buyer will have to pay to the notary, who acts as tax collector for the State, 3 different types of taxes:
- Registration tax, equal to 9%
- Mortgage tax, fixed amount (50 euros)
- Cadastral tax, fixed amount (50 euros)
- Tax filing, stamps, other fixed taxes, about 450 euros
In the case of purchase of a home from an individual or a non-construction company, the above taxes will be calculated on the basis of the cadastral value of the property (“price-value”) ; the cadastral value is a function of the cadastral income associated with the property and, in our areas, is typically between 20 and 50% of the market value. To calculate the cadastral value of residential properties, the cadastral income resulting from the Land/building register records should be multiplied by 126 in the case of a second home and by 115.50 in the case of a “first home” (Prima casa). If the buyer can make use of the benefits offered by the “first home” (with the obligation to transfer residence within 18 months from the purchase), the registration tax is reduced to 2% and the other two taxes are paid at a fixed rate of 50 euros each. It is not possible to buy as “first home” properties included in the “luxury” category (cadastral category A/1, A/8, A/9). In case of purchase from a construction company, the above taxes will be paid as a fixed tax of 600 euros, and to the price of the property shall be added a 10% VAT (4% if first house). Regarding the purchase of land, the applicable tax (on the value of land declared at completion) is equal to 15% for agricultural land (plus 100 euro of fixed taxes) and equal to 9% for building land (plus 100 euro of fixed taxes).
IMU: property owners (owners, usufructuaries, emphyteus, owners of rights of use and housing) are required to pay municipal property tax, with rates ranging from 4 to 10.6 per 1000, to be applied to the revalued cadastral value of the property. The IMU must be paid in 2 instalments, in June and December.
Garbage tax: is paid annually to the municipality: the amount depends on the size of the property, intended use and number of dwellers.
IRPEF: real estate must be included in the tax return for individuals, whose presentation is mandatory for those who produce income in Italy. IRPEF has progressively increasing rates as the tax base increases. Income associated with buildings must be included in the income from land (from land or buildings). In the case of buildings, it is necessary to distinguish various situations:
if the property is let, the annual rental income must be reported, with a deduction of 15%
in other cases, the cadastral income has to be reported
Rental income: as an alternative to the inclusion of rental income within the income tax return, it is possible to opt for the substitute tax (cedolare secca) at 21% on rental income; in the case of renting at a controlled rental rate, the cedolare secca is lowered to 10%. In the case of short-term rentals for tourism purposes, the substitute tax is 26% and it will be the intermediary (e.g. Airbnb, booking, etc.) who will have to directly operate said withholding tax from the amount due to the owner, thus acting as a tax substitute towards the Italian state.
An individual who earns a capital gain from the sale of a building is required to include it in his or her income tax return – or pay a substitute tax of 26% (as of 1 January 2020) – if the sale took place less than 5 years from the purchase; however, capital gains on real estate used as a main residence for the majority of the time elapsed between purchase and sale are not taxed. Capital gains on real estate received by donation or inheritance are also not subject to income tax. Capital gains on building land, on the other hand, are always subject to tax and must be included in the tax return.
Buying real estate in Italy is a very controlled process and there are many documents that must be produced and verified; this gives a great guarantee to the buyer, compared to what happens in many other countries
First of all, the property must conform to the cadastral plans filed with the Land Registry Agency and the registration of the property with the land registry must also be correct; it is not possible to sell a property that is irregular in these two respects. The registry of all real estate in Italy is held by the Agenzia del Territorio, a body of the Ministry of Finance that includes within it the Land Registry offices (Catasto) and the Title Register of Real Estate Records (Conservatoria dei Registri Immobiliari).
The Land Registry office, subdivided into the Land Registry and the Buildings Registry, is the inventory of all immovable property existing on the national territory, with an indication of the relative tax value (cadastral income, dominical income and agrarian income) associated with each of them. The documentation produced by the Catasto, instrumental to buying and selling real estate, consists of:
- Layout plan
- Cadastral floor-plans of the buildings
- Cadastral inspection entry (by name or by land parcel and subaltern)
The cadastral information is accessible electronically and we provide our customers with a copy of all these documents.
Since the deeds of sale of unauthorized buildings are void, it will also be the responsibility of the seller to present to the agent and to the public official (the notary) the documentation proving the actual town-planning regularity of the building and in particular:
- Copy of building permits issued by the municipality (building consents) or of the permission in an amnesty
- Copy of the last architectural plans approved by the municipality
- Certificate of occupancy, issued by the municipality
- Certificate of land zoning, issued by the municipality, in case the object of sale is a land
- Certificate of conformity of the installations
- Certificate of energy performance
The real estate agent will take care to assist the parties, up to the notary deed of sale, in the verification of the cadastral compliance, as well as in the verification of building and town-planning compliance of the property, collecting all the necessary documentation and examining it.
The information regarding the ownership of the property and the presence of constraints, mortgages or other liens, can be obtained from the title origin of the property (previous sale, donation, succession, allocation or other title) and from inspecting the Title Register of Real Estate Records, also electronically. . Via dei Colli carries out the necessary checks at the Title Register of Real Estate Records, even before the task is passed to the Notary.
Requirements regarding the buyer
The buyer who is not resident in Italy, before purchasing, must obtain the taxpayer’s code. This may be applied for either at the Italian consulate / embassy in your country of residence, or by proxy through us or through the Notary. The purchaser is also required to present, before purchase, a marriage certificate, if married. The opening of a current account in Italy is not mandatory, but it is certainly recommended, in order to then manage the payments of the various utility contracts.
The real estate agent is obliged to keep a register of customers and transactions; Via dei Colli will then ask you some information on the origin of the funds used for the purchase and on your profession, as well as all your personal data and a copy of your identity documents.
Due to the differences between Italian public notaries and their common law counterparts, potential foreign buyers may be confused about the notary's duties in real estate transactions. In the United States, for example, notaries do not possess any of the legal powers they are granted in Italy. Instead, American notaries have only the power to administer oaths, obtain witness statements or depositions, recognise and attest signatures and certify copies. Because of their limited role, American notaries are often employees performing various tasks. Italian notaries, on the other hand, are highly qualified professionals authorised to provide a range of regulated services and generally engage in private practice despite their public position.
The notary is a public official who works in all areas of law, including family, inheritance, property, companies, rural economy, local authorities and others. In Italy, notaries are present in every significant moment of life.
The Notary is authorised by the Italian State to draft and authenticate documents, agreements, contracts and other instruments, as well as to collect and settle the relevant taxes/stamps. The Notary must ensure that the law is always respected, acting as a super partes professional and answering for any errors and omissions.
Despite having public powers, the notary operates on an autonomous professional basis. Paid for by buyers (not taxpayers), the average cost is 1% of the value of the property purchased.
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