Whatever your reasons for buying a property abroad this is probably the first time that you have bought a property in Italy. We have put this guide together to help you understand a little more about the process of buying in Italy.
This guide is aimed at providing some basic information about buying in Italy and tries to answer the majority of the common questions that we are asked about. Although we hope that you will find it useful it is important to remember that it doesn’t cover all legal issues involved and certainly isn’t a step by step DIY guide to buying in Italy. It is still recommended that you seek advice from a professional before proceeding – after all we do this every day and have been doing so for many years and therefore know all the tricks and pitfalls that you may come across.
We also know the practical solutions to the problems that exist and also know how Italian Law interacts with UK law.
Buying property in Italy faq’s
Is the legal system in Italy the same as the UK?
No, they are very different, but there is an interaction between them when you buy a property in Italy. That is why the best person to advise you on your purchase in Italy is somebody who understands both Italian and UK law.
Do I need a lawyer to help me buy in Italy?
Surprisingly this is the most common question that we get asked. No, you don’t – just like you don’t necessarily need a lawyer when buying in the UK. However, in reality you would always use a lawyer when buying in the UK so what is so different about buying in another country where you probably don’t have experience of buying before? For further reading.
I have been told that I don’t need a lawyer but need a Notary. Is this true?
The Notary is necessary in Italy but tends only to get involved at the end of the transaction. His role is to carry out some checks at the end, attend to the signature of the title deed and register the property. He doesn’t normally advise on whether the contract is OK to sign, whether you should pay the deposit, who should own the property, and so on.
I have heard that there are problems with buying property in Italy. What is the situation?
Certainly there are potential problems when buying in Italy, just like there can be in any country including the UK. Most of the potential problems that you read about can be avoided by using common sense and by instructing an independent lawyer to advise you on the purchase. We often see people with problems with their property and they invariably tell us that they didn’t use a lawyer or used the lawyer given to them by the seller or estate agent.
Are the costs more in Italy than in the UK?
Yes, the total costs in addition to the purchase price are higher than you will be used to in the UK. It is therefore important to factor these into your budget from the beginning.
The total cost of buying in Italy is higher than in the UK. As a rough rule of thumb you should budget for something in the region of 8% of the value of the property for properties of euro 200-400k. However, for more expensive properties, the percentage is lower. This should cover all legal fees, Notary fees, taxes and so on. If you are taking out a mortgage the cost will be slightly higher as there are normally additional bank costs and further costs for the professionals (solicitor, Notary) involved in the organization of the mortgage deed. You may be asked to sign a purchase offer and pay a small deposit (typically around €5,000). If the seller accepts your offer, you will then be committed to buy or, alternatively, you forfeit the deposit paid. It is important that any document you are asked to sign, including estate agency agreement, is checked by your solicitor in advance.
After that you would work towards a preliminary contract and typically pay around 10% - 20% of the price. That contract commits you to buy the property. On a new property you may have to make periodic payments throughout the course of construction. The balance is paid upon signature of the title deeds and registration.
There are two ways of financing your purchase in Italy through a mortgage.
The first is to release equity from your UK assets to buy the property in Italy. The second is to mortgage the property in Italy.
Each has advantages and disadvantages but getting it wrong can cost you dearly so take advice on this.
If you wish we can put you in contact with mortgage brokers either in the UK or in Italy. We do not receive a commission for doing so and are not tied into a particular broker – we simply recommend them because they have given our clients good service in the past.
Obtaining a mortgage in Italy depends on the Italian Bank. If you are buying a property in Italy that already has a mortgage on it, it is quite simple to cancel that old mortgage and have a new mortgage registered at the Land Registry.
It also may be possible to take over that mortgage from the current owner. For further reading.
If you are buying a property we would always recommend that you obtain an independent survey. If you obtain a mortgage, the valuation carried out for the mortgage company will only look at whether the property is worth the amount you have negotiated. Any defects in the property which do not affect the value will not normally be shown on the report.
An independent survey will examine the property’s compliance with building regulations, permits, and necessary registrations. It may also verify the condition of the structures and will highlight any important problems that could affect the property value. Advice on future maintenance may also be included. The survey should reduce the chance of discovering any nasty surprises with the condition of the property once a purchaser has bought the property. If there are any defects, the survey will help the buyer negotiate the price or require certain works to be carried out before the property is purchased. Your lawyer may need to insert specific conditions into the offer or preliminary contract to best protect your interests. The survey may also reveal that certain works have been carried out or highlight rights that are necessary for the property which we can investigate before the property is purchased.
Buying any property involves a lot of money.
When you are converting from one currency to another the difference between one exchange rate and another can literally make a difference of thousands of pounds on your purchase.
Do not underestimate the difference that a good exchange rate can make.
In some instances clients who have sold properties have made more money on the exchange rate difference than they have on the sale of their property.
We are not banks or currency dealers, but would recommend that you investigate the cheapest way of sending your money abroad. Currency dealers have increasingly sophisticated products. You can agree rates for the future. You can get them advising you when to buy or agreeing to buy for you when the rate hits a certain level. You can even agree a fixed rate for longer periods of time if you make regular payments abroad (for example for a mortgage or moving your pension money).
We work with Smart Currency Exchange who can give you a good exchange rate for your purchase and whom we have known for years. We will normally receive a commission for introducing them to you. This does not cost you anything more as they are simply paying us part of what they make. This commission is costed into our overall charges for providing our services.
Powers of attorney
A Power of Attorney is a document which allows somebody to do something on your behalf.
As the title deeds are signed before a Notary in Italy, clients often prefer to grant a Power of Attorney to a trusted individual to sign the title deeds on their behalf.
This has several advantages;
You can avoid an unnecessary trip to Italy just to sign the title deeds.
Signing title deeds is not particularly exciting and most people prefer to use their time off enjoying the property rather than signing pieces of paper.
It normally works out cheaper than you going out to Italy to sign.
You should only give a Power of Attorney to somebody that you trust as they allow that person to do things legally on your behalf.
In Italy Powers of Attorney have much wider faculties than we are used to in the UK and often have very general clauses in them “just in case”. We try and limit the Powers of Attorney down as much as possible whilst still allowing the person appointed the freedom to do what you need them to do.
We charge £400 plus tax to draw up a Power of Attorney and translate it into Italian. On top of that, you will have Notary fees, foreign and Commonwealth Legalisation fee (£30 per document), translation stamp duty tax in Italy and often Courier fees. For further reading.
Fractional Ownership is not a new concept and has been around for many years – although back then we called it Co-ownership.
Put simply, Fractional Ownership is where several people buy a property together. This can be members of a family, friends, work colleagues or even complete strangers.
You buy a share in the property and also share the running costs.
The best Fractional Ownership schemes are those where the cost of buying is closest to the value of the actual share in the property – i.e. the ones where there are not huge margins built into the sale.
Timeshare is a type of Fractional Ownership but Fractional Ownership is not necessarily Timeshare as there are strict definitions as to what Timeshare is.
Codice Fiscale (Italian Tax Code)
The Italian Tax Code (in Italian, codice fiscale) is your Tax Identity Number in Italy.
There are several times when you are likely to be required to produce your Italian Tax Code;
- When you buy a property
- Opening a bank account
- Dealing with the utility companies
- Taking out insurance
- Dealing with the tax authorities
- Buying or selling shares, bonds and stocks
- Buying a car
You can either apply for your Tax Code personally or through us. Our fees for this come to euro 250 plus taxes per person.
Who should own the property?
This is probably one of the most important decisions that you can make. Getting this right can save you thousands in costs and taxes. Getting it wrong can be an expensive mistake.
The way that you would buy a property in your home country is not necessarily the best way to buy in Italy so don’t assume that you can adopt what you have done here to your purchase in Italy.
There are many options – ranging from personal ownership to company ownership but there is no “one size fits all” solution that works for everybody.
Your circumstances and priorities are different from the next person. We are able to look at your circumstances and your priorities and advise you who should own the property based on that information. The solution may not necessarily be immediately obvious.
When deciding on the best form of ownership we would need to take into consideration both Italian and UK tax and also a range of other circumstances such as your plans for the property in the future. For further reading.
Residents Association (Condominio)
If you are buying in a building or a complex then there will be a Community of Owners. We would need to make sure that all Community charges have been paid up to date before you buy.
Water and Electricity
It is important to check that there is a connection and that the charges are paid up to date.
If you are buying a new property, we will need to check that the property has the appropriate Habitation Certificate which allows the services to be connected.
Land Registry (Agenzia del Territorio)
Almost all land and properties in Italy are now registered.
We would obtain a search at the local Land Registry for office copy entries (Visura) which will state who the registered owner is and whether there are any charges on the title.
Town Hall (Comune)
Checks should be made at the Town Hall to make sure that all Council Taxes (IUC) have been paid up to date. It is also possible, by means of a survey, to carry out Town Hall searches to discover if the property has the necessary building permit and complies with local planning and building regulations.
Just like back home you will need to arrange to have the utilities and services in your name and often have to set up a direct debit at your Italian bank to pay the bills. You also need to inform the local Council and the Residents Association that you own the property.
Changes in the laws in Europe that were introduced in August 2015 allows you to draft a Will where you can elect the law of your nationality to regulate your worldwide inheritance.
Italian inheritance laws are very different to those that you are used to in your home country. In Italy, you cannot leave your assets to whomever you wish: the Italian Law in fact grants a share of your assets to your closest relatives.
We can advise you on the various different options regarding your Italian Will. It is possible to have two wills – one in Italy covering your Italian assets and one in the UK covering your other assets. Both Wills need to be drafted carefully to make sure that they do not revoke each other.
You can leave your assets in Italy to somebody with a UK Will but this doesn’t make sense – the cost of the subsequent inheritance will be more and it is possible that you will inadvertently cause inheritance tax problems.
The cost and extra complications of leaving no Will at all is great and should be avoided.
Whilst as a foreigner you do not have to follow the same rules that Italian people do in terms of who you have to leave your property to, (unless you are resident in Italy at the time of your death and haven’t made a Will) it often makes sense to do so as this can save your beneficiaries huge amounts in tax.
For those who want to have a Will disposing of their assets in Italy, you can: (i) Sign a Will in front of an Italian Notary Public, it costs overall around euro 1,000-1,500, plus taxes per person; (ii) Sign a Will which can be prepared and signed in your local area or at our offices – without the need to go to Italy. The testator needs our assistance to ensure the Will contains all the necessary legal requirements to be valid and can arrange for the receipt of your Will by a Notary Public in Italy.
We charge £400 plus VAT per person to assist the testator to draft a simple Will. On top of that there are Italian Notary fees, for the receipt of the Will. The Italian Will can be signed in the UK or Italy. For further reading.
Since August 2015 changed significantly the way that inheritance legislation works within Europe.
Previously when applying Italian and UK Inheritance Laws, when you died your property would have to be shared among your heirs according to the Italian inheritance laws. Italian inheritance law reserves a share of the assets of the deceased person to some of his closest relatives, even in the presence of a Will disposing differently.
Under the new EU Regulations providing that you are not resident in Italy or leave an Italian Will you can arrange for the law of your own nationality to apply to your assets rather than Italian Law which may be less flexible than that which you are used to.
Inheritance tax on property or assets in Italy, where applicable, still has to be paid in Italy. The property or assets also have to be declared back in the UK although due to Double Taxation Laws you can offset the tax paid in Italy against the tax payable in the UK.
The rate of inheritance tax payable in Italy will depend on two things;
- The relationship between the person who died and the beneficiaries
- The amount that each beneficiary receives (below a value of euro 1M the tax is not due - as of 1/2016)
The heirs have to pay tax on the inherited properties:
- In general, 3% on the Cadastral value of the property (normally much lower than the market value)
After you buy a property in Italy there are ongoing obligations that you need to meet;
It makes sense to insure your property and contents.
Council Tax (IUC—Imposta Unica Comunale comprised of IMU, TASI and TARI)
This is normally paid annually (or each semester) in one (or two) lump sums by 15th June (and 15th December). The amount depends on the location, size and cadastral value of the property. Non-payment of IUC can lead to legal proceedings being taken against you and an embargo on the property.
You will be responsible for the utility charges – electricity, gas, water, sewerage, rubbish collection etc. from the time that you buy the property.
Community Charges (Spese condominiali)
You should pay these otherwise the property can be confiscated and auctioned in order to settle the debt.
An annual tax of €100 must be paid by television owners.
If you are non-resident you must declare any income you have earned in Italy. This applies even if you receive this income by renting out to people from your home country and the money never touches Italy. If you do not receive any rent from the property you do not have to pay any income tax. However, it may be necessary to submit the relevant Tax Declaration. You will also normally have to declare any income in the country where you are tax resident but can normally offset the tax paid in Italy through Double Taxation Treaties.
The taxes that you pay when you buy a property in Italy will normally depend on whether you are resident there or not.
Tax residence is a determined by a number of factors;
How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.
Is your main home there? If it is then you are likely to be tax resident there.
Is your main economic interest there? If so you are likely to be tax resident there.
If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country.
Do not be tempted to have selective amnesia when it comes to declaring taxes. The authorities in both Italy and the UK are clamping down on people who do not do things properly.
Sometimes you should declare something for tax purposes in one country and also in another. Italy and the UK have a Double Taxation Treaty which means that you don’t normally pay tax twice and can offset the tax paid in the other country against the tax that you would otherwise pay in your home country.
The calculation of Taxes in Italy is quite complicated and we do not have the space here to provide a detailed explanation.
However, in general, the transfer taxes when you buy a residential property are as follows, calculated on the cadastral value of the property which is, in general, much lower than the transfer price:
- when you buy from a developer you must pay 10% VAT (22% if the property is registered as luxury). If you take up residency within 18 months from the purchase and it is your “first home” (prima casa) in Italy, VAT is 4% and a fixed rate of euro 504 for the other taxes
- When you buy from private or a company not considered developer, you must pay 10% transfer taxes (7% imposta di registro, 3% imposta ipotecaria, 1% imposta catastale). If you buy a “first home” you have to pay 3% imposta registro and a fixed rate of €400 for the ipotecaria and catastale taxes
Transfer taxes are normally paid to the Notary who calculates the amount and transfers the payment to the Tax Office.
Capital gains (Plusvalenza), a tax based on the increase in the value of the property since the last transfer, is applicable only if the property is re-transferred within 5 years from its purchase. The rate is 20% on the capital gain to be calculated by the Notary and checked by your lawyer.
….Fees and taxes
We charge 1.25% of the purchase price subject to a minimum of £1,500 + VAT. If the property title is defective or unexpected additional work is required then there may be additional charges.
We would inform you before incurring this cost.
Our charges include;
- Legal advice on the terms of your offer to purchase
- Liaising with the seller, the estate agent, the Notary Public in Italy
- Organizing the purchase contracts
- If requested, dealing with the surveyor and draft the contracts according to his report
- Arranging and assisting you (or signing by means of a Power of Attorney) at the signing of the purchase offer, preliminary contract and title deed
- Double check (the Notary is in first instance responsible for this) the good title to the property
- Arranging all payments related to the property (purchase price, notary’s fees, taxes, estate agent, etc.
- General hand holding and advice throughout the transaction
|Agente immobiliare||Estate Agent|
|Agenzia del Territorio (Conservatoria)||Land Registry|
|Agenzia Immobiliare||Estate Agency|
|Atto di compravendita||Purchase contract|
|Avvocato||Lawyer or solicitor|
|C.F./Cod. Fisc. (codice fiscale)||Italian Tax Code|
|Camera da letto||Bedroom|
|Canone di Locazione||Rental Income|
|Condominio||Community of owners / Residents Association|
|IUC (Imposta Unica Comunale)||Council Tax|
|IVA (Imposta sul Valore Aggiunto—currently 22%)||VAT (Value Added Tax)|
|Luce||Light (but often refers to electricity)|
|Offerta/proposta di acquisto||Purchase offer/proposal|
|Permesso di Costruire||Planning permission|
|Polizza di assicurazione||Insurance policy|
|Procura||Power of Attorney|
|Valore Catastale||Official value of the property|
|Vendita / compravendita||Purchase / Buying and selling|
|Visura||Land Registry Search|
Buying in Italy checklist
|1||Decide what you are buying, where and why. If necessary take advice on this.|
|2||Instruct us as your independent lawyer.|
|3||Look at the cost of buying. Fix a budget. Stick to it.|
|4||Investigate finance and think about how to finance deposit.|
|5||Learn about the process of buying|
|6||Look at who should own the property.|
|7||View properties / choose a property. Be honest with the estate agent about what you are looking for – that will save a lot of time for you and them.|
|8||Survey and valuation|
|9||Send any contract to us to check prior to signature.|
|10||Speak to currency dealer about getting the best rate for your purchase|
|11||If it is a purchase offer pay a small fee|
|12||Lawyer carries out checks on the property and advises you on whether it is safe to proceed with the full purchase contract|
|13||Payment of Full purchase deposit|
|14||Lawyer deals with purchase|
|15||If you are moving to Italy arrange removal company|
|16||Arrange Tax Code|
|17||Arrange Power of Attorney if needed|
|18||Arrange insurance – contents / buildings / health|
|19||Signature of title deeds and registration at the Land registry|
|20||Make an Italian Will and review your English Will|
|21||Arrange for Fiscal representation|
|22||Enjoy a well deserved holiday in your new property|
Why use Judicare?
We have an experienced Italian legal team comprising Italian lawyers and English lawyers who have studied Italian law.
We are Solicitors
We are a UK based firm of Solicitors regulated by the Solicitors Regulation Authority and who specialise in international legal issues.
We understand both sets of laws
Because we understand both sets of laws we understand the difficulties that come when two sets of laws meet. This is particularly important when it comes to issues involving ownership, taxation and inheritance.
We are members of AIPP
The Association of International Property Professionals was set up to improve standards of professionalism in a largely unregulated overseas property market.
Our Italian team has many years of experience dealing with a whole range of legal issues with Italy.
We speak your language
You need a lawyer who can speak your own language. More importantly you need somebody who can explain and discuss often complicated issues in terms that you understand.
We are independent. We are not allowed to act for the buyer and the seller at the same time. We are not linked with any Development Companies, Builders or Estate Agents.