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Taxes on the purchase of a property in Italy

Real Property Tax in Italy

All property deals in Italy are taxable. This tax is always paid by purchaser. Its amount does not depend on the person who purchases it- it's the same for citizen, foreigner with residence permit or without. Taxes for all nations- Russians, Germans, Frenchmen- are the same.
The amount of tax rate does not vary with object's location. You may buy a flat in central Rome or apartments in a small town on the seaside- percentage, requested by the state, will be the same.

The factors that affect property tax amount in Italy

1. Primary or secondary property

Tax for purchasing primary and secondary properties is calculated differently. If you choose new building, then the VAT (value added tax) will make 10% and will be calculated on the basis of the amount shown in the sales contract.

Note: property sellers always state the value excluding VAT in the advertisements. That price is NOT final. In Italy you can bargain not only with private proprietors, but with developers as well. So, after you agree upon the final price, you can estimate the amount to be added as taxes.

If you are buying secondary flat or house in Italy, then registration tax is going to be 9% and will be calculated off the object's cadastral value. In practice, it is 20-40% lower then market price.

How to find out cadastral value of the real property? It can be calculated, using data from cadastral documents; once the choice is made, your realtor will request for notary to check their relevance and name the real cadastral value of an object. That way, you will know the property tax amount before signing the preliminary agreement.

In odd cases cadastral value may be higher than selling one. This happens if for whichever reason the seller is selling the property very cheaply. State tax will still be calculated based on cadastral value, in other case, the deal will be monitored closely, to exclude possibility of tax evasion by lowering price.

2. Standard and elite property

In Italy on primary market buyers of elite real property pay 22% VAT off the price stated in the sales document.

In order to label property as elite, many conditions must be met- including location, footage of the house, the area size, presence of the swimming pool, etc. In our case, "elite" is not just an epithet used by sellers, but rather a specific category in cadastre. All residential property belongs to A-category, while elite one has addons, such as - A1, A8, A9.

Important: you will know, whether property is categorised as elite, and, therefore, is taxed at a higher rate, at the stage of choosing, BEFORE signing any documents.

Expenses of secondary property buyer in Italy

Below are the current 2017 tax rates and state taxes.

Registration tax (Imposta di registro) 9% off cadastral value
Cadastral due (Imposta Catastale) €50
Mortgage due (Imposta Ipotecaria) €50

Note, that mortgage due in Italy is paid by all of the property buyers, and not just by credit users. The name of the fee is linked to the checks, that are performed during ownership transfer.

Example of calculating tax for secondary property

You choose 2- bedroom flat (overall area approximately 70sq.m) at the secondary market, it's located in the central district of Trieste (Friuli-Venezia Giulia region). Price in the sales agreement states €65 000, cadastral value -€43 000.

Registration tax €3 870
Cadastral due €50
Mortgage due €50
Total €3 970

Expenses of new building buyer in Italy

Below are the current 2017 tax rates and state taxes

VAT  (IVA) 10% off the object's price in sales agreement
Cadastral due (Imposta Catastale) €200
Mortgage due (Imposta Ipotecaria) €200

Example of calculating tax for new building

You find a flat in a new complex,  located 100 meters away from the beach in the town Citta Sant’Angelo (Abruzzo region). Developer requests €145 000. You bargain and agree upon €5 000 discount.

VAT €14 000
Cadastral due €200
Mortgage due €200
Total €14 400

Very Important: in both cases, apart from taxes and state fees, purchaser pays the notary's fees. Normally it is 1-3% of the selling price. The lower it is, the higher the percentage.

View of Trieste

How to lower costs of buying property Tax exemption Prima Casa

In Italy, there is a legal way to lower the tax on buying property from 2 to 4 times, that can also be used by foreigners. We are talking about tax exemption called Prima Casa.

Buyers of the first main residential property have a right to that exemption - the citizens and foreigners with residence permit alike. You can take advantage of it once per lifetime.

Taking Prima Casa exemption into account, the tax on buying property will be:

Secondary property 2% of the cadastral price
Primary property 4% of the market price

You may also take advantage of this exemption if you don't have a residence permit, but are going to get it in the near future. In that case, you notify your notary of it, and they calculate the taxes, while taking Prima Casa exemption into consideration.
Next, you get 18 months to issue a residence permit. If you did not manage to get residency by the deadline, simply pay the difference of taxes and any surcharges. In case you fail to get it and notify about not having it, you might end up with great penalty charges.

Note: buyers of elite property do not have the right of Prima Casa exemption.

How to pay tax when buying property in Italy

The tax amount is known to the buyer before signing preliminary contract. You can transfer the funds in two ways. First way- is to transfer them to your own bank account in Italy. Second- you transfer it to notary's account, where the funds will be frozen until the deal is made.

Taxes are paid during signing of the agreement at the notary's. Before the deal, buyer and realtor go to the bank and prepare notarized cheques for settling the deal with seller and notary. Notary's cheque consists of tax amount and the notary fee.

That way, buyer doesn't have to go to the tax office to pay the bills. That is notary's duty, and responsibility delivering payment to the state lies with the notary as well. If the buyer does not present the right payment amount for taxes, notary simply will not sign the agreement, and the deal will not be officially registered.