Aside from the purchase price, what other costs need to be factored in, when evaluating the purchase of a property in Italy? There is no straightforward answer to this as it depends on many variables, e.g., is the buyer eligible for first-home tax benefits? Is the seller a private individual, company or a developer?
The following is in any case an outline of some of the main costs to take into account.
The Notary’s fees are normally based on the value of the property. Generally speaking, around €3,000.00 plus VAT for a property worth up to € 500,000, and around €4,500 plus VAT for a property worth up to €1M.
The estate agent’s commission comes to around 6%, which in Italy is divided equally between both the buyer and seller. Under Italian law, the estate agent must act in the interest of both buyer and seller and therefore has the right to receive a commission from both parties. This amount is generally due at the time of signing the preliminary contract or purchase deed.
Legal fees are also generally in proportion to the value of the property (1-3% depending on the necessary activities) but can also be agreed on an hourly basis.
The surveyor’s fees can likewise be charged in accordance with the value of the property or an hourly rate. Ensure that the survey covers all the necessary activities.
Transfer taxes (registration/land registry/cadastral taxes)
The transfer taxes are paid by the buyer and depend on various issues such as whether the seller is a private individual, company or developer, whether the buyer intends to take up residency, whether the property in question is classed as a luxury property or is for residential or other use.
Here are four of the more common scenarios:
• In the case of a “first-home” purchase, there are two possibilities, if you purchase from a private individual, you will pay 2% registration tax calculated on the (lower) cadastral value, plus €100 for land registry and cadastral taxes.
• If instead you buy from a developer, you’ll pay 4% VAT on the (higher) sale price, plus €600 registration, land-registry and cadastral taxes.
• If you are not eligible for the first-home tax benefit, and you purchase from a private individual, you’ll pay 9% registration tax calculated on the cadastral value, plus €100 land registry and cadastral taxes. If instead you purchase from a developer, you’ll pay 10% VAT on the sale price, plus €600 for registration, land registry and cadastral taxes.
• The “cadastral value” is a value obtained by multiplying the “cadastral income” (rendita catastale). The “cadastral income” is a value expressed in euro and given by the Tax Office to all properties by means of a calculation that takes into account surface area, location, number of rooms, etc.
Requirements to be eligible for the “first-home” tax benefits:
– You must be a resident in the municipality where the property is purchased or become one within 18 months.
– The property must not be classed as a luxury property.
– You must not own another property for residential use in the same municipality or have full ownership in any Italian town of a property purchased benefitting from the first-home tax reduction. If so, any such property must be sold within one year of the purchase.
– If a property is purchased with the first-home benefits, it cannot be sold within 5 years of purchase. If this occurs, the balance of the taxes that were previously saved must be paid, together with interest. If not paid by the end of the year, a penalty equal to 30% will be added. Alternatively, it is possible to sell the property without losing the tax benefit, provided a new primary residence is purchased within one year of the sale. In this case, there would be a tax credit available, equal to the amount already paid the first time, so only the difference between the two is due.
The transfer taxes are paid to the Notary at the time of signing the final purchase deed. The Notary will then forward this amount to the Tax Office.
Be sure to factor in all the costs related to a mortgage, if one is required. To give a general example, for a loan of around €100-150,000, consider approximately €1,000 for the loan application, €1,200 for the Notary, a tax equal to 0.25% of the financed amount for first-home buyers, or 2% if not eligible for the first-home buyer discount, €200 yearly for the insurance cover with the lender.
The above are generally more one-off costs, so what are some of the ongoing expenses?
IRPEF (Imposta sul Reddito delle Persone Fisiche – Income tax). This tax is only payable in the event rental income is earned from the Italian property, full details of which will need to be provided in the relevant income declaration submitted yearly.
IUC(Imposta Unica Comunale – Single Municipal Tax). This tax actually comprises three different local taxes, all of which paid to the local authority:
IMU(Imposta Municipale Unica – local authority tax). Similar to council tax and not charged on the so-called “first home” (except for luxury properties);
TARI(Tassa Rifiuti – local rubbish tax). A minor tax calculated on the basis of the size in square meters of real estate units and volume of waste.
TASI(Tassa sui Servizi Indivisibili – local tax for municipal services). A tax for municipal services such as lighting, road maintenance, etc. If a property is rented for a long period, the tenant will pay TARI and a part of TASI.
Utility bills are generally issued once every two months and include a small fixed fee, plus utilities used. Residents can again in this case take advantage of reduced rates. Gas bills could range from €500-1000 yearly and electricity from €300-800, depending on type of house, size and use. Phone including internet, around €300 yearly.
If the property you wish to purchase is part of a larger complex with shared communal areas such as swimming pool, gardens, driveway, etc. then bear in mind that you will be required to also pay condominium expenses. These expenses also vary depending on the type and size of communal areas.
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Article by Kate Taylor
Additaly – Real Estate & Consulting
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