Taxes & fees when buying real estate
Taxes & fees when buying real estate
With the purchase of a property, the buyer incurs various taxes (tasse) and fees (imposte). These are among the highest in all of Europe! Even before signing a preliminary contract (contratto preliminare), you should carefully check the exact amount of all applicable taxes and fees and ideally have them confirmed in writing.
Taxes
In addition to the one-time property transfer tax, as well as annual property tax and income tax, in some cases VAT must also be paid when acquiring a property in Italy.
Attention!
In Italy, the property itself is liable for all outstanding tax debts (debito d’imposta), even if they concern the previous owner. To reduce this risk, Italian real estate law requires the seller (venditore) to provide an express declaration that he has declared the property in his last income tax return (imposta sul reddito), otherwise he is liable to the buyer (acquirente). Therefore, make sure before signing the purchase contract that you obtain this document from the seller.
Property transfer tax
The one-time property transfer tax (imposta sugli acquisti immobiliari) consists of registration tax (imposta di registro), mortgage tax (imposta ipotecaria), and land registry tax (imposta catastale). It is due upon signing the purchase contract at the notary.
The property transfer tax is extremely variable, since in Italy not only the type of property (private or commercial, land with or without building permit, agricultural land) and type of future use (primary residence or not) are distinguished, but also the type of seller (private individual, company, construction firm).
The basis of assessment for the transfer tax is the sale price stated in the contract. For the sale of residential property between private individuals, since 01.01.2006 the usually much lower cadastral value can also be used as the basis. This value is then multiplied by a fixed coefficient depending on the intended use of the property (115.5 for primary residence; 126 for secondary residence).
Calculation of the tax base for transfer tax:
The cadastral value of a property is €800.
As a primary residence: €800 × 115.5 = €92,400
As a secondary residence: €800 × 126 = €100,800
Value-added tax
When purchasing new buildings directly from the construction company, VAT (IVA) is also added. Here too, the amount of VAT depends on whether you use the property as a primary residence or otherwise, and on the type of property.
Income tax
If you generate income from renting or leasing your property, the taxable income is calculated as 85% of the gross rent. Please note that in Italy even owner-occupied property is subject to income tax (IRPEF – imposta sul reddito delle persone fisiche). In this case, the income tax is based on the cadastral income. This means that even as a foreign property owner you are obliged to file an Italian tax return! Income tax is paid in two installments: June 30 (first installment) and November 30 (second installment/balance).
Property tax
In addition to income tax, an annual municipal property tax (IMU – imposta municipale unica) must be paid. Property tax is paid in two installments: 50% by June 16 and 50% by December 16. For uninhabitable properties, property tax is reduced by 50%. The cadastral income (rendita catastale) of the property serves as the basis for both, but the IMU varies from municipality to municipality and depends on size, location, age, condition, and status (categoria) of the property.
These features are recorded in a notarial deed (rogito) filed at the land registry office. If the property is used as a primary residence, property tax is waived, unless it is a luxury property (cadastral categories A1, A8, A9).
Fees
Other fees incurred when buying a property include notary fees, legal fees, agent’s commission, as well as other costs for any surveyors or architects consulted. Remember that all these services are subject to 22% VAT.
Notary fees
The notary’s fee is highly variable, but roughly between €3,000 and €4,000 plus 22% VAT. Since a large part of the notary’s work consists of the same steps regardless of the purchase price or scope of the contract, the lower the purchase price, the higher the relative cost. The notary’s invoice also includes transfer taxes, any additional services you have requested, and other expenses made on your behalf. The notary’s fee is usually due at the time of signing and can be paid by check on the spot or a few days later by bank transfer.
Legal fees
Especially for high-value properties, it is not uncommon for a lawyer to be involved in handling the purchase. Depending on the agreement, the lawyer charges about 1–2% of the purchase price stated in the contract, or a fixed fee based on workload.
Agent’s commission
There are no fixed rules for agent’s fees. In principle, however, the agent receives a certain percentage of the sale price from both the buyer and the seller. In the Lake Garda region, a commission of 3–4% is common. To avoid unpleasant surprises or disputes, it is advisable to set the commission at the start of cooperation with an agency.
Surveyor
The relatively low cost of a surveyor is definitely worthwhile given the amount you are investing in a property at Lake Garda.
Further information on Italian tax law
Capital gains tax
Please note that for properties resold within 5 years, a capital gains tax for the seller is due! This is levied on the profit (plusvalenza) between purchase price and resale price. The seller can choose either to pay a flat 26% or to have the gain included in income tax.
Repayment of transfer tax
Buyers who acquire property as a primary residence at a reduced tax rate and resell it within 5 years must repay the difference in transfer tax and VAT. However, if another primary residence in Italy is purchased within one year of the sale, no repayment is due.
Anti-money laundering law
According to Italian anti-money laundering law (normativa antiriciclaggio), cash payments and cashier’s checks above €3,000 are strictly prohibited (with exceptions only for retailers and tour operators selling goods and services up to €10,000 in cash to foreign tourists). For the real estate market, there are no exceptions: the flow of funds must be declared in the purchase contract (dichiarazione giurata) and can only take place via bank transfer or cashier’s check. Note: As of July 1, 2020, the limit for cash payments is reduced from €3,000 to €2,000. Violations are punishable by fines of up to €50,000.
General tax liability in Italy
If you move your primary residence (residenza) permanently to Italy or work there for more than 183 days, you are automatically subject to Italian taxation on your worldwide income.
In Italy, tax is a self-assessment obligation (Bringschuld), meaning the taxpayer (contribuente) must calculate and pay it on time without receiving an official tax assessment (cartella delle tasse). Since late payments are often punished years later with heavy fines and interest (interessi di mora), it is highly recommended to consult an Italian tax advisor (commercialista) to handle this for you.