How to purchase a property in Italy: the complete guide

How to purchase a property in Italy: the complete guide

Concerning the actual purchase of a property, it is worth knowing a number of factors peculiar to Italy. The Italian legal and tax system may be unfamiliar and the forms used for the transfer of property may be different from what you are used to. ItalianChoice.com can help you through this process, and therefore make it smooth and stress free. Don’t be scared of the process; it’s easier than it sounds.

At the outset, it should be noted that the estate agent selling the property, in Italy, represents both buyer and seller and his/her aim is to reach a mutually favourable deal.

There are no restrictions placed upon non-residents willing to purchase a property in Italy, whether they are from the European Union or elsewhere.

There are at least three important steps in the purchase of an Italian property: the Proposta Irrevocabile d’Acquisto, the Contratto Preliminare and the Rogito.
The first two steps could be avoided, but in this case while all the paperwork to prepare the Rogito is being done by the Geometra (a kind of surveyor) and the Notaio (Public Notary), the vendor may decide to sell to someone else and the buyer has no legal recourse. Therefore, without the first two contracts, you cannot claim any rights of purchasing the property at the agreed price. Hence we strongly suggest making use of all the three instruments when willing to purchase your property.

PROPOSTA IRREVOCABILE D’ACQUISTO (optional).
Although not obligatory, the Proposta Irrevocabile d'Acquisto (irrevocable purchase agreement) is a sort of preliminary intention to buy by which you can reserve a property for purchase; It's simply a proposal to the seller.
When you sign this first agreement, you pay a deposit by cheque in any currency for the equivalent of usually 2000/3000 euros, which is not cashed immediately but rather is held by the notary or the agency, and returned to you when you sign the Compromesso. This amount shall be given back free of any penalty or indemnity, in case the seller does not accept the offer.
This agreement is signed by buyer and seller when both have agreed upon a mutually acceptable price. This initial agreement identifies both parties, the property in question, and gives an expiration date for signing the compromesso.
In the offer, the seller has to give some guarantees to the purchaser, such as: availability of the property, that it is in order with the building regulations in force and that all taxes have been paid.

If the buyer changes his or her mind, the buyer will then forfeit the deposit, since 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 the buyer, then the buyer's deposit will be returned to him/her.

Before any sale can be completed there are a number of searches and inspections to be carried out on the property. Those responsible for these inspections are the Geometra (Local surveyor) and the Notaio (Public Notary). If these searches reveal any problems regarding the sale of the property, then the sale cannot be completed. Usually these inspections and searches take two to three weeks to carry out.
Inspections carried out by the Geometra:
§ The property matches the Land Registry definition.
§ The property was not built without planning permission.
§ Any work or extensions done have received approval and have had the relevant taxes paid.
§ The owners as listed in the Property Registry Office are the same as the owners as stated by the vendor.

If the parties are satisfied with the results of these searches the next step is the signing of:

CONTRATTO PRELIMINARE aka COMPROMESSO.
This is a legally binding and private contract between the signatories that details all terms and conditions of the actual purchase of property.
This preliminary agreement will contain the following:
» Identification of the parties: full names, place and date of birth, passport number, nationality, codice fiscale (tax identification number). In the case of companies which are selling, they must provide their partita IVA (VAT number) and their legal registration number.
» Indication of the location of the property in question (town and province).
» Identification in Land Registry Office or urban areas, this identification is achieved by citing the register sheet, the units of property or parts thereof. In the case of segments (frazionamento) of property, the seller must undertake to obtain at his expense, their identification in the national register. Such action must take place before the final sales agreement (Rogito) with the notary.
» In the case of land and/or for portions of buildings, the agreement must be accompanied by a map from the register, which will be signed by both parties.
» Verification of the seller's title to the property.
» Verification of whether any limitations exist to the title, for example judiciary or bank obligations, inheritance or property rights, rights to pre-emption (first choice of purchase) or any other limitations that reduce or in some way curtail the right to full title of the property. The seller must commit him/herself to eliminate such limitations prior to or simultaneously with the final sales act.
» Identification of all servitudes that might weigh on the property (roads, trails, pipelines etc that are located on the property to be purchased) and those from which the property should benefit (access to water from nearby natural sources or wells, rights of passage, and rights to access to pipelines etc).
» Building licenses issued after 1967.
» Building licenses in the process of being issued: in the case of purchase of a building to be constructed, agreement to purchase and total payment must be conditional on the issuance of the required license.
» The sales price, indicating the amounts paid at signature (or at various successive moments) and the balance to be paid at the time of the final sales act. The initial payment (anticipo) should be identified as the down payment (caparra confirmatoria).
» The date established for the final sales act. This must be at least 30 days after the private sales agreement.

We recommend that this contract be done with the assistance of a Public Notary who will perform a title search and insure that there are no loans, liens, or other impediments such as rights of way on the property, that the property is the exact one that is for sale and that all permits and permission for the building are in order. Once the agreed deposit has been paid (the deposit amount can vary between 15% and 50% of the sale price depending on the property and the negotiated percentage agreed upon between the Purchaser and Vendor) and the Compromesso has been signed, both parties are bound to complete the purchase of the property as designated in the Compromesso. Should the Purchaser back out of the contract, he or she will lose his or her deposit. If the Vendor fails to fulfil his or her obligations as specified in the Compromesso, he or she has to repay DOUBLE the deposit amount to the purchaser. This is called a "Caparra Confirmatoria". It makes the penalty for default an equal amount for both parties.
The agency fee is payable when the compromesso is signed (between 2 to 5%, usually 3%).

Before the final contract is made the Notary will run the last remaining searches and inspections to be carried out on the property:
§ The vendor is the legal owner of the property and is entitled to sell the house.
§ There are no debts or mortgages on the house.
§ There are no written liens or burdens.
§ The vendor is aware that they must declare any outstanding private agreements regarding the property. For example if the vendor has agreed to allow a neighbour to build or extend within the minimum lay down by Italian law or has given a friend a right of way across the property.

ROGITO/ATTO NOTARILE.
The final contract must be signed and finalized in the presence of the Public Notary. The Notary represent the Italian government. He is a public officer who serves as an impartial witness to the signing of documents and to the acknowledgement of signatures on documents.

The rogito is the contract which is registered in the Property Registry Office (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 is the equivalent of a Title Deed and is the document of ownership of the property.
It is necessary for the Vendor and the Purchaser (or their nominated representatives) to be present at the signing of the Final Deed. The Notary is bound by law to read aloud the contract to the interested parties. Prior to the actual signing, the balance of the purchase price is handed over to the Vendor. The Deed is signed by the Vendor and by the Purchaser and is then countersigned by the Notary.

If the buyer or seller cannot be present, it is possible to organize a power of attorney. If the buyer wishes to be present but the notary considers that he/she does not understand Italian well enough to completely comprehend all details of the contract, then an official certified translator is required or the agent can sign on the buyers’ behalf with a power of attorney.

The Power of Attorney can either be prepared or signed before the Notary while the Purchaser is still in Italy, or alternatively, at the Italian Consulate in the Purchaser's country of residence.
Another option is that the document can be drawn up and then emailed/faxed/sent to the buyer. Next, the buyer needs to print it off and sign it in the presence of a solicitor. The buyer then needs to send or take it to the Foreign Office in his/her country (for example: in Dublin for Ireland; in London for the UK) who need to stamp it (small fee of around £5 /9 euros payable) and it is then sent to the agency in Italy.

The purchase taxes and notary fees due, are payable when you sign the final contract and are collected by the Notaio.

ALL THE COSTS INVOLVED
- The Notary's honorarium –> This fee is set by the government and is therefore non-negotiable. It amounts to approximately between 1 to 2.5% of the total declared value of the property, with a minimum charge of approximately 1,000€ (the charges do vary between cases based on different amount of work involved for the notary). Notary's fee is reduced by 20% when the dwellings are sold between private parties.
- The Geometra's fees –> depending upon what work is involved usually between 250 and 500€.
- Translator Fees (if involved) –> for formal translation of the Rogito, typically around 350€.
- Bank Charges –> if a money transfer is involved.

CADASTRAL VALUE (Valore Catastale) and DECLARED VALUE
Under Italian Law, a property has a legal value also known as Valore Catastale (Cadastral Value).
The Cadastral Value is a statutory value placed on the property by the Government and it is generally substantially less than the actual purchase price. It is the value used to work out annual possession tax.
In many cases the taxes due on the purchase of a dwelling are calculated on the Cadastral Value of the property (Valore Catastale) and not the purchase price, i.e. on the value stated in the Land Registry which is usually much lower than the actual price paid. (See below for different scenarios)
The Cadastral Value of land is extremely low, unless it is valuable land like building land.
The amount of taxes payable is, therefore, a lot less than it appears at first sight in most cases as well as the Notary’s honorarium (based on the declared value).
The declared value of a property is the amount you declare in the Rogito (Title Deed) as purchase price.
You’re supposed by law to declare the full price paid to the vendor, in reality most of the people would declare the minimum Cadastral Value. You may often find lots of sellers that will require to under declare the price paid. This custom is in place for various reasons, originally was to decrease the taxes due (taxes on purchase were due on declared value) but mainly it is to generate or spend cash money; it is very common in Italy to work with large amounts of cash.

HOW TO DETERMINE THE CADASTRAL VALUE (Valore Catastale)
The Cadastral Value is obtained multiplying the cadastral revenue (revalued of 5%) by the following coefficients:
- 110 for Prima Casa dwellings
- 120 for properties belonging to the cadastral categories A, B and C (excluded A/10 and C/1)
- 60 for properties belonging to the cadastral categories A/10 (offices) and D
- 40,8 for properties belonging to the cadastral categories C/1 (shops) and E

CAPITAL GAIN TAX
Before we get to the tax on purchasing let's see taxes on selling.
Since Italy's 2006 Budget approval the capital gain tax on properties has been introduced in Italy but only for properties sold within five year from the purchase.
Capital gain made from selling properties within five years of the purchase is taxed at 12.5% and don’t need to be listed in the Annual Income Return. Loopholes: Properties bought under the Prima Casa status are exempt from this tax.

Capital gain made from selling a property after five or more years from the purchase is exempt from any capital gain tax.

All in all is good news because before there was no direct capital gain tax but to fully comply with the law you were supposed to list the capital gain from properties sold within 5 year from the purchase in Personal Annual Return (IRPEF) at an average rate of 38%-43%. A direct taxation at 12.5% is then quite fair and it's much simpler for non resident because they don't have to deal with the bureaucracy of Italian Annual Returns.
Although the average buyer usually keeps the property for five years of more, in this case nothing is change: capital gain tax free (either direct or indirect).

TAXES ON BUILDINGS PURCHASING
There are mainly four possible scenarios for payment of taxes, even though most of the purchases will fall under the first or the third one. There can be some tax loopholes as you will read below.

First Scenario – Dwelling and pertaining estates (including luxury dwellings) purchased from a private person, a non-developer company or a developer company (in this case after 4 years from works completion (new or restored) )
§ Imposta di Registro (Registration Tax): 7% **
§ Imposta Ipotecaria (Mortgage Tax): 2% **
§ Imposta Catastale (Land Registry tax): 1%**

** If the buyer is a private party the taxes due are calculated on this case not on the purchase price but on the Cadastral Value

Second Scenario – Dwelling and pertaining estates purchased from a company or business
§ Imposta di Registro (Registration Tax): 168€
§ Imposta Catastale (Land Registry Tax): 168€
§ Imposta Ipotecaria (Mortgage tax): 168€
§ IVA (VAT): 10% (20% on luxury dwellings) **

** The VAT due is calculated in the declared value (which should be law be equal to the purchase price)

Third Scenario – Dwelling and pertaining estates purchased under the status of Prima Casa (main dwelling) from a private person, a non-developer company or a developer company (in this case after 4 years from works completion (new or restored))
§ Imposta di Registro (Registration Tax): 3% **
§ Imposta Ipotecaria (Land Registry Tax): 168€
§ Imposta Catastale (Mortgage tax): 168€

** The taxes due are calculated on this case not on the purchase price but on the Cadastral Value

Fourth Scenario - Dwelling pertaining estates purchased from a company or business under the status of Prima Casa (main dwelling).
§ Imposta di Registro (Registration Tax): 168€
§ Imposta Catastale (Land Registry Tax): 168€
§ Imposta Ipotecaria (Mortgage tax): 168€
§ IVA (VAT): 4%**

** The VAT due is calculated in the declared value (which should be by law equal to the purchase price)

Prima Casa Status
In these last two scenarios (third and fourth) the buyer can claim a much lower tax rate in accordance with the fulfilment of both property and buyer’s requirements.

» The property requirements are: the dwelling must not be a luxury dwelling (see below); located in the town/village where the buyer is resident (residency or domicile) or willing to become resident within a span of 18 months from the rogito; if abroad for business the purchaser’s employer is based on the property’s town/village; located in Italy if the buyer is an Italian expatriate listed in the AIRE database.
» The Buyer’s requirements are: he/she must not own, even if in partnership or in usufruct, any property in the same town/village of the property willing to purchase; not be the owner not even in partnership or usufruct of a property in the whole country bought already claming the Prima Casa benefit; must declare in the Rogito to comply to all the requirement (perjury are sanctioned 30%).

Being in the position of claming the Prima Casa (main dwelling) benefits can open a few loopholes aside from the significant saving on the amount of buying taxes.

A dwelling bought with such benefits cannot be sold within five years (the benefits will be lost therefore you’d need to pay the difference between the full taxes balance and the reduced one you paid plus a sanction of 30%). You neither lose the benefits nor pay the sanction if within one year of the sale you’ll proceed to buy another dwelling under the Prima Casa status. In this case even more interesting is the fact that you can claim back the taxes paid on the previous Prima Casa, thus drastically reducing the taxes due once again (for example if you paid 5,000€ on the first purchase and on the second one the taxes due are 7,000€ you’ll only pay 2,000€). If you’re in a credit situation, you won’t get any cash refund but you can use your credit against the IRPEF (Personal annual income tax).
It is interesting to note that the income made selling a dwelling with the Prima Casa status is exempted from the capital gain tax (12.5%).
The fiscal revenue of a dwelling in Prima Casa status also is exempted of IRPEF.
The IRPEF is the Personal Annual Income tax and is paid yearly by all the people subject to it, usually only permanent residents.

TAXES ON LAND PURCHASING
When it comes to purchase of land, there are as well different possible scenarios. The fours major scenarios are as follows. (There are other few benefits for farmers but these are not worth discussing here.)

First scenario – Non agricultural land sold by a private person or a company
§ Imposta di Registro (Registration Tax): 8% with a minimum charge of 168€
§ Imposta Catastale (Land Registry Tax): 2% with a minimum charge of 168€
§ Imposta IpotecariaCatastale (Mortgage tax): 1% with a minimum charge of 168€

Second scenario – Agricultural land if the buyer is a non farming body (company or person)
§ Imposta di Registro (Registration Tax): 15% with a minimum charge of 168€
§ Imposta Catastale (Land Registry Tax): 2% with a minimum charge of 168€
§ Imposta Ipotecaria (Mortgage tax): 1% with a minimum charge of 168€

Third Scenario – Agricultural land where the buyer’s main job is farming (2/3 of his/her income and 2/3 of the working time) or a the buyer is an agricultural co-op (partners keep 50% and devote 50% of the time to the agriculture)
§ Imposta di Registro (Registration Tax): 8% with a minimum charge of 168€
§ Imposta Catastale (Land Registry Tax): 2% with a minimum charge of 168€
§ Imposta Ipotecaria (Mortgage tax): 1% with a minimum charge of 168€

Fourth Scenario – Building land sold by a company or business
§ Imposta di Registro (Registration Tax): 168€
§ Imposta Catastale (Land Registry Tax): 168€
§ Imposta Ipotecaria (Mortgage tax): 168€
§ IVA (VAT): 4% or 10% or 20% (based on the type of planning permission the Notary will charge the appropriate rate)

LUXURY DWELLINGS/ESTATES
“Luxury dwellings” are defined as all the estates built on a planning permission released after August 1969 and which have the following characteristics:
» They are built in areas bound to, by city plan and other bodies (accepted and approved), “villa” or “private park” or to be more precise, estates qualified by those bodies as “luxury”.
» They are developed on areas where the city plan and other bodies (accepted and approved) planned a housing scheme typology of uni-family estates with the specific limitation of plots no less than 3,000 m² except for agricultural/farming areas even if residential estates building is permitted.
» Dwellings part of building estates which have a built volume over 2,000 m³ and realized on plots where the built volume is less than 25 m³ every 100 m² of building surface.
» Uni-family dwelling with a pool with a surface equal or over 80 m² and tennis courts with a drained background surface equal or over 650 m².
» Buildings composed of one or more rooms that form a dwelling with a total surface over 200 m² (except balconies, terraces, storage cellars, attics, stairs and car places) and having corresponding uncovered areas of at least six time the covered area.
» Uni-family dwellings with the total use surface of over 240 m² (except balconies, terraces, storage cellars, attics, stairs and car places).
» Dwellings part of estates or being an estate developed on an area bound to residential housing where the cost of covered and pertaining land exceed of one and half time the cost of the sole building.

» Dwellings or single estates units that have more that four of characteristics among the following list:
§ Total useful apartment surface over 160 m² (except balconies, terraces, storage cellars, attics, stairs and car places).
§ Covered or uncovered terraces and balconies when their total use surface is over 65 m² in service of solely one urban real estate unit.
§ Elevators: when there is more than one elevator per stair; every elevator more counts as a characteristic if the stair services a dwelling fewer than seven stories.
§ Back stair: when it’s not prescribed by law, regulations or imposed to prevent fires and injuries.
§ Freight or service elevator: when it services fewer than four floors.
§ Main stair when:
a. the walls are coated with valuable materials for an average height over 170cm.
b. the walls are coated with valuable crafted materials.
§ Net free storey height over 3.30 m unless the any building code prescribe higher minimum height.
§ Main entrance doors to the apartments from internal stairs:
a. made in valuable wood or solid wood plated.
b. made of carving or intarsia wood.
c. C. with valuable decorations attached or burned in.
§ Internal windowing: as per A, B and C of the previous characteristic even if honeycomb, in case their total surface is over 50% of the total apartment surface.
§ Floors made, when the total surface is over 50% of the total apartment surface:
a. in valuable materials.
b. with materials crafted with valuable materials.
§ Walls: when over 30% of their total surface is:
a. made with valuable materials and craft works.
b. coated with valuable fabrics and other valuable materials.
§ Ceilings: if made with decorated cassettoni (wooden ceiling divided into deep cavities) or stucchi (crafted plastering) dragged on-the-spot or hand painted except the little outlines of detachment between walls and ceilings.
§ Masonry pool (indoor or outdoor) when service an estate or housing estates of less than 15 dwellings.
§ Tennis court when service an estate or housing estates of less than 15 dwellings.

Purchasing Taxes summarization

Purchased from	Tax type	Tax rates	Tax rates
		Prima Casa	Others

Private vendor, non-developer company, developer company (after 4 years from works completion (new or restored)	Registration Tax	3%**	7%*
Private vendor, non-developer company, developer company (after 4 years from works completion (new or restored)	Mortgage Tax	168€	2%*
Private vendor, non-developer company, developer company (after 4 years from works completion (new or restored)	Land Registry Tax	168€	1%*


Developer Company	IVA (VAT)	4%***	10% (20% if luxury)***
Developer Company	Registration Tax	168€	168€
Developer Company	Mortgage Tax	168€	168€
Developer Company	Land Registry Tax	168€	168€

* If the buyer is a private party the taxes due are calculated on this case not on the purchase price but on the Cadastral Value
** The taxes due are calculated on this case not on the purchase price but on the Cadastral Value
*** The VAT due is calculated in the declared value (which should be by law equal to the purchase price)

TAX AND FISCAL INFORMATION DISCLAIMERS

IMPORTANT: Please read this disclaimer carefully.

Information on this web site should not be regarded as a substitute for professional legal, fiscal, financial or real estate advice.

It is not the intention of ItalianChoice.com to provide specific fiscal or legal advice, but rather to provide users with information to better understand the Italian system in order to purchase a property located in Italy. As legal advice must be tailored to the specific circumstances of each case, and laws are constantly changing, nothing provided herein should be used as a substitute for the advice of competent counsel.
Specific legal and fiscal advice can be provided, at cost, in partnership with professional, qualified and certified lawyers for answers to your personal questions.

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