Many foreigners and international buyers are always interested in buying a property in Italy. Especially with the pandemic situation, this has been a growing trend. As follows, a quick guide that gives an idea on how to proceed with professionals, for a safe and hassles-free transaction.
Thanks to Govonilaw – Lawyers in Sardinia for International Clients www.Govonilaw.com
HOW TO BUY A HOUSE IN ITALY
Real Estate Purchase Process in Sardinia, Italy.
1) THE TAX CODE
The Tax Code (in Italian, Codice Fiscale) is necessary for being able to purchase a property in Italy. This has to be requested from the Revenue Agency (in Italian, Agenzia delle Entrate).
2) OPENING OF A BANK ACCOUNT IN ITALY
When you want to buy a property it is useful to open a bank account in Italy both because it will make the payment procedures more streamlined, and because it will be necessary to have the bank domiciliation for the automatic payment of of the utilities (very appreciated by the foreigners or Italians who live abroad).
3) LEGAL DUE DILIGENCE
This is a crucial preliminary check on the property.
The legal due diligence consists in:
- Cadastral Compliance;
- Urban Conformity;
- Mortgage and Financial Compliance;
- Land registry check and Technical Compliance;
- Costs Estimation Check;
- Conformity with the regulation and Law;
- Verifying third-party rights;
- Property Title Check;
- Assistance with the notary and professionals communications.
If everything is good and the record and title are clean, also concerning the legal formalities of the property, the purchase will be smooth, otherwise if the chosen property has some issues, the lawyer can find a way to solve the issues.
This step facilitates a problem-free purchase.
4) PROPOSAL OFFER
When a potential buyer, after having visited several properties, decides to proceed with the purchase of one of them, consider the best price and send to the seller a PROPOSAL OFFER (in Italian, Proposta d’acquisto).
The proposal offer must be drafted (usually it is valid for 7-15 days), while the communication of acceptance can be given verbally.
Once the seller signs the proposal, accepting the price offered, he agrees not to sell the property to any other buyer until a certain date. This is done to protect the buyer from the possibility of losing the purchase of the property.
5) THE PRELIMINARY CONTRACT (EVENTUAL STEP)
This is an eventual step, because it’s possible to directly go to the notary for the final closing.
Once the proposal is officially accepted, the economic terms and the legal clauses are part of the preliminary contract (contratto preliminare) that is necessarily drafted by a lawyer. We do it in-house.
The preliminary contract is the agreement with which the parties mutually undertake the stipulation of a subsequent final contract (notarial deed). However, it must be clear that the proposal offer, if stipulated and accepted, already creates a legally binding relationship between the parties.
6) THE NOTARIAL DEED
The notarial deed consists in the final act of the real estate sale negotiation. The Notary is the public official that must do the closing, this is mandatory by law. The notary is chosen by the buyer.
COSTS FOR THE PURCHASE of a property in Italy
The costs for the purchase of a property in Italy are between 10-20% of the purchase price. It depends on the fiscal aspects of the transaction, that’s one more reason to be well assisted by professionals.
• Commission for the real estate agency
In the event that you buy a house through a real estate agency, the commission due to the agency is around 3% of the purchase price + 22% VAT.
Once the communication to the proposer of the acceptance of the proposal by the owner of the asset has taken place, the deal is to be considered concluded for the agency pursuant to art. 1755 Cod. Civ. with relative right to commission.
Generally, 3% + VAT is recognized by both the seller and the buyer.
• Indirect taxes: Registration tax – Mortgage tax – Cadastral tax
The “declared cadastral value” c.d. “Price value” in the deed represents the tax base on which these three taxes are applied, usually lower than the market value of the property. But the rule of “cadastral value” is not applicable to all trades; in fact, for example, if the buyer purchases not as a “private”, but as a “company”, the tax base will be given by the commercial price of the property.
The amount of these three fees to be paid varies depending on the type of property and the “characteristics” of the buyer and seller:
A) Trading subject to proportional registration tax (ie those in which the selling party is: a private person; or a company that has neither built nor renovated the building; or a company that has built or renovated the building from over 5 years and in place does not exercise the VAT option):
1. Registration tax
– first home: 2% (on the cadastral value);
– second home: 9% (on the cadastral value if you buy a private one or to calculate on the declared price if a company is to buy or a natural person who buys as a sole proprietor or a professional);
>> Registration tax can never be less than € 1,000.
2. Fixed mortgage tax: 50 euros;
3. Land registry tax: 50 euros.
b) Sales subject to VAT (ie those in which the selling party is: the company that has built or renovated the building for less than 5 years; or the company that has built or renovated the building for more than 5 years and in place exercises the VAT option):
– first home: 4% (always to be calculated on the declared price in progress);
– second home: 10% (to be always calculated on the declared price in progress);
– luxury building: 22% (to be calculated on the declared price in progress);
2. Other Fixed taxes: registration, registry tax, mortgage tax, land registry tax, stamp duty, mortgage fee, transfer fee (that all together cost around one thousand euro.
• Legal Fees
Usually, legal fee is about 1,5-2%+ Taxes.
• Notary fees
Usually, about 1,5 – 2,5% of the property price + Taxes.
• Other expenses
For example: surveyor or architect; moving company, geologist.
2) OWNERSHIP/MANAGEMENT COSTS:
• IUC (single municipal tax)
It is a tax that includes 3 taxes: IMU (you do not pay on your first home unless it is a luxury home), TASI (tax on municipal services such as road maintenance, public lighting, etc.) and TARI ( waste, garbage). Who owns a property in Italy, whether resident or non-resident, is subject to IUC payment, the amount of which is divided into two / three tranches.
The IMU is applied to the cadastral value of the building plus 5%. The amount must be further multiplied by the coefficient corresponding to the cadastral category. The basic rate for second homes is 0.76%, but the municipality may decide to increase or decrease it by 0.3%.
The same argument is also valid for TASI. But it must also be considered that the sum of TASI and TARI cannot exceed 10.6%.
The TARI is instead calculated on the basis of square meters.
Electricity, water, heating, telephone, gas usually provide for the payment of a fixed plus a part to consumption and are paid every two months.
• Condominium fees:
If you buy a property that is part of a condominium, you will have to pay a condominium fee that will vary depending on the size and type of condominium.
Being assisted in the purchase of a property is one of the biggest event of someone’s life. If it is done abroad, for a non-resident, adding the different language and the different cultures, it is even more complex. For our experience buying assisted is a must. Sometimes even the seller doesn’t know about some issues upon the property. And usually, who wants to spend less, ends up paying more!