In Italy, a first distinction must be made between property rights and real rights weighing on real estate.
Ownership grants the titleholder an exclusive power of enjoyment and use of an asset. Ownership is the most complete of all real rights but it does bear a few limits, as for neighbourly relationships and legal distances.
Purchase of real estate: there are different ways to purchase real estate in Italy, they are categorised as follows:
- By an originary deed: which determines the birth of a new right.
- By a derivative deed: which determines the succession of an already existing right that belongs to another subject.
- The condominio: the equivalent of a condominium, composed by both privately owned units and common areas (lifts, swimming pools, plumbing systems, etc.). Unless otherwise stated in the deed, the common areas belong to all co-owners and maintenance expenses must be shared.
- The time-share real estate: in Italy, a time-share real estate is an economic operation aimed at ensuring the owner a power of enjoyment on real estate, usually part of a touristic/residential settlement, over a predetermined and generally invariable period of the year.
THE PURCHASE OF REAL ESTATE
The sale of real estate is a contract that involves the conveyance of immovable property in exchange for consideration. The contract will necessarily involve two parties, a seller and a buyer.
In Italy, ownership is established not when the price has been paid or the asset delivered but when the agreement is regularly sealed; contracts for the sale of real estate comply with this rule when they have been drafted in writing, are complete and have been signed.
Moreover, real estate deeds must be transcribed in the Land Registry, through notarial act.
The purchase of time-share real estate entails the sale of a single or several single units transferred to one or more individuals, who acquire the right to enjoy them for a limited amount of time. There is specific legislation regulating this area.
The purchase of real estate located in a condominium entails the sale of assets, which the owner will enjoy privately, while sharing the condominium common areas, such as lifts, swimming pools, etc. There is special legislation regulating this area as well.
WHO CAN PURCHASE
Generally speaking, the enacted legislation allows the purchase of assets by foreigners (natural and legal persons), following the distinction listed below:
- foreign citizens, not regularly sojourning: they can purchase real estate only if there is an international treaty to allow it or if there exist a condition of reciprocity to this matter, between their Country of origin and Italy, that is to say that an Italian citizen can purchase a home in their Country;
- foreign citizens, regularly sojourning, said foreign citizens’ stateless family members with a regular residence permit themselves, who've been residing in Italy for less than three years: they can purchase a property, without the need for verification on the above mentioned condition of reciprocity, if they are in possession of a regular residence permit for specific reasons or residence card.
- EU citizens, SEE Countries citizens (Iceland, Liechtenstein and Norway), stateless or political refugees, residing in Italy for more than three years: there are no special requirements to proceed to the purchase.
THE BANK SYSTEM
In order to apply for a mortgage loan the applicant must be in possess of the mortgaged property cadastral data and must submit a copy of the purchase commitment, which will be signed by both parties.
In the majority of cases mortgages are issued for a maximum of 60% of the property commercial value, which will be assessed by the bank’s surveyor.
CLOSING THE SALE
a) The Purchase Proposal
Generally speaking, the purchase proposal is irrevocable and its duration is 15 days.
Should the seller not accept the purchase proposal, the buyer will have the right to get the deposit back, with no penalties or interests.
The same rule will apply, should the buyer back out of the sale for reasons of legal nature.
b) Preliminary Inspections
It is necessary to conduct a number of inspections prior to entering a contract for the sale of immovable property, in regards to the asset’s legal condition:
- inspections to verify third party rights weighing on the property (e.g. Previous mortgages, still pending on it);
- inspections to verify the cadastral and urban situation;
- inspections to verify that there are no restrictions, impeaching or influencing the deed (e.g. pre-emption rights in favour of third parties);
- inspections to verify potential obligations or rights, tied to the condominium that the units may be part of.
c) The Preliminary contract and The Deposit
- The preliminary contract: an actual contract whereby the parties engage in the sale; this represents the promise to sell and purchase in the future and does not mark the final transfer of property.
Generally speaking, the future buyer pays a deposit when signing the preliminary contract (from 10 to 30% of the full price). The contract can take the form of a public deed or an authenticated written private agreement.
- Authenticated private preliminary agreement: it legally binds the signatories but it’s not enforceable against third parties, which means that the property can be sold to a third party notwithstanding the preliminary agreement and even though this would constitute an illicit act and entail the payment of damages by the perpetrator.
- Public deed: when the contract is authenticated by the notary it’s protected by additional guarantees, as opposed to the private agreement.
In fact, only a public deed can be transcribed and therefore enforced against third parties, not to mention the right to auction the property off in order to recover the deposited money; such right belongs to the future buyer only and it works as if there had been a mortgage in his favour on the property.
- Preliminary contract for property yet to be built (so called “sale on paper”): when purchasing property in construction from a building company, the law provides for specific guarantees in favour of the signatories:
- the builder is under the obligation to provide the future buyer with a bank guarantee to cover all sums paid before concluding the deed;
- the preliminary agreement must be highly detailed, including an enclosed copy of the building project and technical documents pertaining to the construction.
- the builder is under the obligation to provide the buyer with a ten-year long insurance when the deed is completed.
e) The Purchase
The “rogito” is the deed authenticated by a notary, which determines the transfer of property from the seller to the buyer. The content of the preliminary agreement, however, is merely a list of obligations, as it’s the earliest engagement to complete the sale.
On the other hand, the rogito marks the actual transfer of ownership from the seller to the buyer, including all the attached legal and fiscal obligations.
The documents that must be brought to the notary are:
- Documents concerning the parties:
- ID (and residence permit for non EU citizens), social security code and, if need be, marriage certificate.
- Documents concerning previous deeds:
- The “atto di provenienza” which clarifies the purchase procedure (succession, sale, etc.)
- Documents concerning the property:
- The urban planning certificate;
- Land subdivision authorisation (in case of purchase of an empty lot);
- Conformity certificate;
- Land Registry;
- The Condominium set of rules (if the property is a unit in a condominium);
- Documents concerning the plants and systems safety, architectural barriers, etc.;
- Documents concerning environmental issues.
Payment details (check, bank transfer). The new anti money laundering require the parties to declare on the deed how the price has been paid, including all deposits and installments as well.
Taxes and expenses arising from the purchase of property in Italy must be taken into account:
- The notary expenses (if the price is € 300.000, the notary's honorary is going to be € 1750,00 + IVA);
- Stamp duty (€ 230,00).
If the seller is a private citizen he must pay:
- The Land Registry fee which amounts to 9% of the property cadastral value, stated on the deed; such tax drops to 2% if the real estate is the first purchased house or if the building is of historical or archeological interest;
- The mortgage registration fee which amounts to € 50,00; no exceptions apply if the house is the first one purchased by the buyer;
- The cadastral registration fee which amount to € 50,00; no exceptions apply if the house is the first one purchased by the buyer;
If the seller is a legal person (company or enterprise) he will be subjected to the following taxation:
- The payment of IVA (unless the company is exempt). For the purchase of the first house, if it’s going to serve as the buyer’s home, the IVA amounts to 4% of the full price, instead of the ordinary (not a first house buyer) 10 to 22%.
- The Land Registry fee which amounts to € 200,00; no exceptions apply if the house is the first one purchased by the buyer, but only if the company is exempt from the payment of IVA, in which case the fee amounts to € 50,00;
- The mortgage registration fee which amounts to € 200,00; no exceptions apply if the house is the first one purchased by the buyer, but only if the company is exempt from the payment of IVA, in which case the fee amounts to € 50,00;
- The cadastral registration fee which amount to € 200,00; no exceptions apply if the house is the first one purchased by the buyer, but only if the company is exempt from the payment of IVA, in which case the fee amounts to € 50,00;
In Italy, additional expenses arise from the ownership of immovable property, the potential profit one might make out of it (leasing) and the owner’s nature (natural or legal person).
Taxation on the earnings made off ownership of private property will be calculated on either the cadastral rent (shouldn’t the property be leased) or on a basis of calculation amounting to 95% of the rent.
Art. 152 s. 2 of the Dpr n. 917/86 provides that non-residents with no stable organisation in Italy are subjected to income taxation following the rules laid out for the different categories of earnings (land income, capital, etc.), regardless of whether they are natural or legal persons.
The foreign owner must fill out an income declaration form (Modello Dichiarazione dei Redditi).
Art. 6 of the OECD (Organisation for Economic Co-operation and Development) provides for the above discussed earnings to be subjected to the Italian taxation system, when made off property located on Italian ground and it does not envisage an exclusivity clause, which means that the Country of residence is entitled to impose taxation upon such earnings, if so provided by its own legislation.
Immovable property is also taxed by the District. The “Imposta Municipale Unica” (IMU) can be imposed on any property located on Italian ground and must be paid by any individual exercising a “real right” over the property in question (usufruct, use, etc), whether he is a resident or not. The District has been granted the power to change the amount charged as follows:
- for a first house buyer: 4 per thousand (the District may increase or decrease said value by up to two percentage values);
- for all other property: 7,6 per thousand (the District may increase or decrease said value by up to three percentage values).
The so called TASI is a levy on indivisible municipal services which can be imposed on any construction (excluding only agricultural land) and must be paid by the individual exercising any ownership rights over the property. The tax rate is one per thousand.
The buyer will face additional expenses, should he decide to resell the property within five years from purchase. The levy on the plus value can be calculated off the general “Irpef” tax rate or, alternatively, off a substitute levy which amounts to 20%.
- National Council of Notaries: http://www.notariato.it/it/
- Italian Revenue Commissioners: http://www.agenziaentrate.gov.it/wps/portal/entrate/home
- Map of cadastral and mortgage services: http://www.agenziaentrate.gov.it/wps/content/nsilib/nsi/ceat
- Confedilizia: http://www.confedilizia.it/compravendita.html
Santosuosso & Associates
Serena De Stefano (Campagnola Advisers)