How easy is it to complete a real estate transaction in Italy as a non-citizen and what are the typical costs involved?
It is easy to complete a real estate transaction in Italy for both non-citizens and non-residents.
The real estate transaction is usually assisted by both an attorney and a notary. The attorney is responsible for structuring the transaction from a legal and contractual point of view, while the notary must handle all the formalities connected with the execution of the notarial deed by way of which the property title and rights are transferred from the seller to the purchaser.
It is mandatory for a non-citizen to seek and obtain an Italian Tax Identification code (codice fiscale) prior to entering into a real estate transaction. The identification code may be applied for directly or through a properly appointed proxy.
It is customary, although not obligatory, for the seller and buyer to sign a preliminary contract known as a “contratto preliminare di compravendita” or “compromesso” which sets out essential details of the agreement, such as the purchase price, payment terms, financial sources and, most importantly, the purchase completion date.
A variety of fees (also called closing or completion costs) are payable when you buy a property in Italy. These vary considerably according to the purchase price, whether the property is new or old, whether the purchaser is buying via an agent or privately, and whether it has employed a lawyer or other professionals.
The fees associated with buying property in Italy may include transfer tax, land registry tax, value added tax (VAT), notary and estate agent fees, and mortgage completion costs. Transfer taxes may range from 3 per cent to 10 per cent. If you purchased property from a building company, VAT will most likely apply in lieu of registration tax.
Both the seller and the buyer pay broker fees, which range form 1 per cent – 3 per cent depending on the value of the real estate being purchase. If the real estate is than resold after more than five years, full exemption on capital gains tax applies.
The full exemption applies if the high net worth individual resells the real estate after five years from the date it was purchased. If the five year period has elapsed on the date it is resold, then the real estate sale transaction qualifies for the capital gain tax exemption under reference irrespective of the fact that property was initially purchased as residential or investment property.
Conversely, if the high net worth individual wishes to sell the real estate prior to the five-year term expiring, then the high net worth individual must prove that the property has been used as their own private house in order to qualify for the capital gain exemption under reference.