How to buy property in Italy
Buying property in Italy is relatively straightforward. Hiring professional legal and technical advisors to perform the necessary checks on a property goes a long way to a hassle-free investment.
First steps to buy property in Italy
In some cases, buyers need to provide a formal written offer to purchase a property and put a deposit in escrow to secure it. Legal counsel is highly recommended as the offer, if accepted, might become a legally binding contract.
Once an agreement is reached, the buyer’s solicitor and/or surveyor undertakes the relevant searches so the preliminary contract, or Compromesso, can be drafted. The Compromesso doesn’t transfer the title but sets out the details of the sale and gives the seller time to gather documents and vacate the property before the agreed closing date.
The buyer usually provides a deposit of 20 – 30% at Compromesso, a process dealt with by a notary who registers the transaction. The buyer will need to have an Italian tax code for this.
Financing your property purchase in Italy
When looking to buy a property in Italy, it helps to have an Agreement in Principle – an agreement that sets out how much you are able to borrow from a lender. This can have a significant bearing on the acceptance of an offer and puts you in a strong position as a prospective buyer.
Some sellers won’t accept a mortgage clause within the purchase contract. In this scenario, speaking to a mortgage broker like Traverse International Finance, our chosen partner for mortgages in Italy, early on means they can include a mortgage clause within the Agreement in Principle.
In some instances, it’s possible to borrow up to 100% of the property purchase price using a combination of a mortgage and a Lombard loan. Get in touch with Traverse to discuss the financing options available to you.
Completion on an Italian property
Following Compromesso, the independent notary does a title search and prepares the final contract. Buyers can claim back twice the deposit paid if the seller has defaulted on the property’s mortgage payments, but a buyer would lose their deposit if they withdrew without a legitimate reason.
The final contract signing is witnessed by the notary. The purchaser then pays the outstanding balance and any other fees and taxes, while the notary pays stamp duty and other purchase taxes to the government on the buyer’s behalf.
Taxes and charges on property in Italy
Prospective foreign buyers should expect to spend between 10 – 12% of the purchase price when buying property in Italy. This is a combination of agent fees, property taxes, sales taxes (similar to VAT) and notary fees, as well as any potential extra costs, such as translation of documents.
Income tax is payable in Italy by all property owners on the theoretical rental income of the property during the year, although non-residents are only subject to it if the income exceeds a certain threshold.
The Imposta Municipale Unica, similar to the UK council tax, is collected by the local authority twice a year, and there are no capital gains taxes on the sale of a property if the transaction takes place more than five years after the purchase. Foreign property owners are advised to draw up an Italian will.