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The complexities of buying property in Italy

We have broken down some of the legal complexities involved when buying property in Italy, to help you have a better understand of what’s in store when considering a permanent move to Italy.

Written by Daniel Shillito on 18 December 2020

As exciting as the prospect of moving to Italy can be, for many individuals it can quickly dissipate into a stressful, confusing time, simply due to the Italian property market being more complex than most of us first anticipate. We have broken down some of the legal complexities involved when buying property in Italy, to help you have a better understanding of what’s in store when considering a permanent move.

Between Italy’s complex legal transaction methods and their unique tax system, it’s perhaps not only the language that acts as a barrier for foreign buyers.

The legal process

The legal process of buying an Italian property is mainly broken up in to three parts. These are:

The offer to purchase

This shows the confirmation of the initial interest from a buyer which can be verbal or written. The offer has an expiry date, by which time the seller must respond with signature they are willing to accept the offer price and initial terms. A small deposit from the buyer is usually expected upon acceptance by the seller.

This may have followed a Letter of Intent (LOI) that is sent to the seller in order to make sure they are happy with general terms before proceeding to a  formal offer via an the offer to purchase, however the LOI is not an essential step.

Preliminary Contract (Compromesso di vendita)

This contract establishes the final contract’s expected terms and conditions (date of completion, method of payment, price, sellers guarantees and any other relevant legal details).

Usually when this is signed and accepted, it is treated as a legally binding sale, and acknowledged as such by the expectation that a further deposit is now payable. This deposit could be made conditional upon checking all property documentation and ensuring the property is free from any third-party rights.

Completion (rogito notarile)

Both the buyer and the seller sign the rogito notarile (a definitive contract to facilitate the agreement to transfer title from seller to buyer from the date of the Rogito).

At this stage, the buyer must then pay the remaining balance of the initially agreed purchase price, with the addition of any mortgage if incorporated, notary’s fees and government taxes and registration fees. The vendor and buyer must both use the same Notaio (a public notary that represents the Italian government) although it is the buyer’s right to select the Notaio to be used. This could be important.

Any and all property transactions in Italy must take place in front of a notary (nataio) to allow the collection of tax on the sale, verify the identities of all parties involved and to ensure all sale documents are correct at the time of sale.

This also allows the notary to ensure that the new entries in the registry are correctly updated to show the new owner of the property.

Bank accounts

As a foreign buyer, unless you are able to travel there, opening an Italian bank account can become a very awkward hurdle in the process.

As a foreigner, it is extremely rare for an Italian bank to allow you to open a non-resident Italian bank account without being in person. The only way around this is to retain an Italian lawyer and give them Power of Attorney, which can be pricey.

However, if you find yourself to be already in the position of not being able to be present in Italy for the required 3-step legal process above, you will already have needed to invest in signing a special Power of Attorney to represent you before the notary anyway, making it quite the worthwhile investment.

An alternative to an actual bank account, you do have the option of transferring all necessary funds to a notary or trusted representative that can make payments on your behalf while holding them in an escrow account, at least as a short-term measure.

Fiscal Code

The Fiscal Code (Codice Fiscale) is a unique Italian tax code number, assigned at birth to Italians and upon request to non-Italians.

It identifies individuals in all their dealings with the Italian authorities. Having this code is a mandatory requirement to be able to participate in a very wide range of activities. Some of these include:

  • Buying or Inheriting property or signing property tenancy contracts
  • Obtaining Italian insurance policies
  • All Italian tax payments and filing
  • Opening bank accounts (foreign buyers included)
  • Applying for a mortgage
  • All types of Utilities company contracts

Your Fiscal Code can be attained through either an Italian tax office or at the Italian consulate within your home country and can take up to three weeks to receive.

Hidden Charges

Without argument, one of the most attractive elements of purchasing property in Italy is the relatively lower-priced property available and the variety of different types of property available compared to many other markets. But it is important to be aware that while property prices can be negotiated there are additional purchase costs and potentially hidden charges, meaning you will need to factor in those additional costs.

In Italy, registration tax (imposta di registro) is charged at 2% upon the Cadastral value of a property, but increases to 9% if you are buying as a holiday home or investment (and not for residing in Italy). There is also a mortgage tax on the value of any mortgage charged at 2%, however if used as a main residence, this is significantly lower, at 0.25%.

The Cadastral value is a local council (or Comune) calculated property valuation figure upon which most of the property’s tax charges are calculated. All properties are evaluated, based on location, quality, and size of the property, which allows them to be given an official Cadastral Value.

Please note, the Cadastral Value allocated by the Italian Inland Revenue to the property is often lower compared to the market value of the property.

Mixed in with legal, notary and possible real estate agent fees, the financials are worth analysing with a professional to ensure you avoid any nasty surprises before the ball starts rolling.

In association with

D&G Property Advice