Property
for Sale in Italy
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Buying Property Guide for Off Plan in Italy
Buying an off plan property in Italy is nice and simple.
There isn’t a stack of paperwork to sign like France,
and the tax laws are clear and attractive for investment.
To calculate the purchasing costs, you need to divide the
process in the “Front end” and the “Back
end”
At the front end how much you pay when you sign your preliminary
contract will depend on the payment terms of the developer.
For example you may have 50% upfront and then 50% on completion,
or 30% upfront and 70% on completion.
In most cases you will have to pay a solicitors fee upon
signing the preliminary contract which can be anywhere between
1% and 3%, depending on the solicitor. If you are paying
a solicitor who is not an expert in Italian Property it
is likely to cost you a lot more because he or she will
need to spend more time researching to make sure your title
is clean. It is also wise to use a solicitor who speaks
your native language.
Under Italian law if a developer is building off plan they
need to provide the customer with an Insurance Bond or Bank
Guarantee for their initial deposit. If the builder should
go bankrupt this insurance bond covers the full amount of
the deposit.
When you pay your deposit upon signing the preliminary contract
your money should be held in the solicitors Escrow account,
until you receive a copy of your bond.
All banks and insurance companies in Italy are guaranteed
by the Central Bank and so if the particular company who
has provided your bond goes bankrupt it is insured by the
Central Bank of Italy. What this means essentially is your
risk is much lower as you cannot loose your money should
the builder be bankrupt.
Before you reach the “Back end” ie. before
your property is completed and you can move in, you also
have the option of selling the property, as long as the
developer does not prohibit this in the preliminary contract.
From an investment point of view this can be very profitable.
Firstly if you sell before completion you are not required
to pay VAT, which is Italy amounts to 10%, the notary fee
which is in the region of 2%, and two other small Italian
taxes which come just under €400.
In Italy there is no capital gains tax if you sell before
completion, but should you be a resident of the UK or Ireland
those governments require you to declare any income you
make abroad.
If you intend to sell your property before completion, it
is also wise to have an avenue to sell it through. For example
will the developer resell it for you? And how does the developer
intend to do that? If there is a high supply in the market
it may be more difficult to sell your property. For example
in Northern Italy the market is more mature so it would
be more difficult to ‘flip’ a property then
the emerging southern market.
On completion of your property you are required to pay
the ‘closing costs’ mentioned above. You are
required to pay 10% VAT of the purchase price of the property,
alongside a notary fee and two other small Italian taxes
which will amount to roughly 2%.
The notary is a legal body in Italy nominated to complete
all the legal details in a completion of sale. The fee however
is not a standard 2%, it will often come down to the purchase
price of the property. For example if you are purchasing
a Villa for €500,000 the fee will be lower then 2%,
as €10,000 is too much to pay a notary for a single
property transaction.
Should you decide to sell your property within 5 years
of it being completed you a required to pay 12.5% capital
gains tax to the Italian government. If you sell it after
that 5 years, currently there is no Capital Gains Tax.
There is a dual taxation agreement between the UK and Italy,
and The Republic of Ireland and Italy which means in your
country of residence you are required to pay the balance
between the varying tax rates. For example if the rate was
20% in Ireland you would have to pay the extra 7.5% in Ireland
when you declare your income.
There is also no inheritance tax on property in Italy.
The particular law relating to this is called ‘Uso
Fruto’. For example if you put your sons name on your
title deeds along with your own, he does not have claim
to the rents generated or he cannot sell the property from
under you; however if you die the property is passed straight
on to your son tax free, as his name is already on the deeds.
Overall the risks in buying off plan property in Italy are very
low because your money is insured; so in comparison to many
of the other markets in Europe it is a much safer bet. Usually
the financial return on Off Plan property compensates for
the risk involved in purchasing something you cannot see
and touch yet. In Italy the risks are far lower then a country
that may not have an insurance bond or bank guarantee as
law; with the main benefit to the buyer being that the potential
returns are not affected by this reduction in risk, which
makes it a better investment overall.
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