Property Purchase Process | Property Purchase Costs | Mortgage Finance

Overview

In Italy, investors must bear the following costs when buying property:

Taxes

Transfer taxes
VAT – for new-build properties only

Legal fees

Notary fees (including cost of conveyancing and land registration)
Independent legal advice

Bank charges

Mortgage arrangement fee
Currency transfer costs

Moving costs

Cost of moving (e.g. removals, transport, etc.)
Expenses relating to changing the names in utility contracts (connection if required)
Contents and building insurance

Other costs

Real estate agency fees
Surveyor report
Translation

Exact costs will vary by region and by type of property. However, as a general rule you should allow up to 15% on top of the purchase price to cover additional buying costs.

In certain cases, Italian law provides tax benefits for the purchase of real estate. These benefits can also apply to foreigners if they meet the necessary criteria.

Taxes:

Transfer taxes

The purchase of resale property in Italy is subject to several transfer taxes:

Registration tax or stamp duty (imposta di registro)
Mortgage tax (imposta ipotecaria)
Land survey tax (imposta catastale)

For properties on the urban building register these combined transfer taxes come to

10% of the purchase price stated in the notarised contract

which breaks down as follows - registration tax 7%, mortgage tax 2%, land survey tax 1%.

However, if the property is to be your main home (prima casa), registration tax is reduced to 3% and you only pay nominal mortgage and land survey taxes of €129 each; this applies both to urban and rural properties. For your property to qualify as your main home, you must take up residence in the property within 18 months of completion and not sell it or move away from the area (i.e. the geographical area administered by the local council or comune) within 5 years. If you break either condition, you will have to repay the 8% difference and pay a small fine. Prima casa discount does not apply if the house is classed as a luxury (di lusso) property in the property register (rendita catastale).

If VAT applies, registration, mortgage and land survey taxes are all reduced to €129 each.

The purchase of new-build property in Italy is subject to value added tax (imposta sul valore aggiunto or IVA) at 10%. This is reduced to 4% if the property is to be your main residence but rises to 20% if the property is classed as luxury.

If you buy off-plan (i.e. a property that has not yet been constructed), the developer will request that 10% VAT on the purchase price is declared before the notary on completion. Where an investor buys real estate from a legal entity, VAT is charged at 20%.

You can obtain more information on paying VAT on Italian property from the local VAT office (officio provinciale imposta sul valore aggiunto).

Legal fees:

Notary fees (including the cost of conveyancing and land registration)

Once you've signed the final “rogito” contract, the notary's fees are due. Notaries' fees will cover the costs of conveyancing and entering the change of ownership in the local land registry (catasto). Notaries' fees are usually paid for by the purchaser and as a result buyers can insist on choosing the notary.

Notaries' fees are fixed by law on a sliding scale based on the declared purchase price, ranging from €1,400 to €3,000 plus additional expenses. However, in practice notaries have a large scope for discretion when fixing their fees and some are more expensive than others. As a general guide, allow 1% of the declared price for notary's fees but it's always worth asking for a cost estimate in advance. And if you feel you have been overcharged after the event, you can have the bill assessed by the professional body of Italian notaries (Consiglio dei Notai).

The charge for entering the property sale in the land register is also collected by the notary although this cost is negligeable.

Independent legal advice

Notaries must remain impartial according to Italian law and therefore you should appoint an independent legal representative to ensure your interests are protected. This will involve independent legal advice throughout the whole purchasing process and also legal searches prior to signing the preliminary contract. For example, a notary won't verify the accuracy of statements made in the final contract and therefore cannot protect you against fraud. A notary will also rarely point out possible pitfalls in a contract, offer advice or volunteer additional useful information.

Additional legal fees should come to 1-2% of the property's value, depending on the challenges involved in the purchase.

Bank charges:

Mortgage arrangement fee -
If you are taking out a mortgage, you will need to budget for the one-off mortgage arrangement fee your lender charges. These are normally around 1% of the value of the loan. However, there is considerable fluctuation and the arrangement fee can sometimes be added to the value of the loan rather than being paid up front. Set up costs for Euro mortgages tend to be higher than sterling mortgages. You should consult with your lender to confirm the likely costs.
Currency transfer costs -
Another important cost to bear in mind if your mortgage is in foreign currency (for example, euros) and/or if you are buying in stage payments (as is the norm when you buy off-plan) is the cost of transferring money from sterling into the foreign currency and bank account. There will be charges associated with any bank transfers between accounts, quite possibly from both the sending and receiving banks. There is also the cost of buying foreign currency and you should also take into account the potential for exchange rate fluctuations which could significantly alter the size of your debt. You should contact your bank for further details and it may be worthwhile to use a currency specialist.

Other costs:

Real estate agency fees -
In Italy , estate agents' fees are split between the buyer and seller. They usually come in at between 3-6% of the purchase price.
Surveyor report -
The local “geometra” will conduct a survey of the property on request. Costs will vary from €500 to €1,000 depending upon the scope of the survey.
Translation -
You will need to cover the cost of translation both of written documents and conversations; it's rare for Italian notaries to speak English.

Special situations and exceptions:

Agricultural (also known as rural) real estate is subject to a far higher tax rate than property and land which is classified as urban. Instead of paying 10% in transfer taxes (as applies to urban real estate), you will have to pay around 18% of the taxable value of the property in transfer taxes if you are buying agricultural real estate. However, the taxable value of agricultural real estate is usually very low. Also, if the property is to be your main home (prima casa), registration tax is reduced to 3% and you only pay nominal mortgage and land survey taxes of €129 each.

If you purchase land rather than a completed residential property, VAT is levied at 16% (although if the real estate is subject to tax benefits, VAT will fall to 4%). If you go on to construct your own property you will then have to pay construction tax.