The Italian real estate market offers many investment opportunities, making the so called Stivale – literally “The Boot”, due to Italy’s shape – one of the best places to purchase property. If you are thinking of buying a house in Italy but you do not have a clear idea of the costs and the taxes involved, and you are wondering whether there are any incentives that might apply to you, this article will provide you with an overview of the information you need to know. Please note that this article focuses specifically on real estate transactions between individuals. Real estate transactions between individuals and construction companies will be discussed in another article.
An insight into the costs involved in purchasing a property
When purchasing a property, the buyer will need to bear the following costs regardless of whether he or she is an Italian citizen:
- mortgage (if applicable),
- registration and cadastral taxes,
- the cost for the surveyor to verify the structural conditions of the property (if necessary),
- the notary’s fees – these are paid to the notary who ensures that the purchase complies with all real estate laws and regulations. The notary’s fees vary depending on the type of property which is being purchased and its location.
- Additionally, both the seller and the buyer need to pay the real estate agent’s commission fees if a real estate agency is involved in the transaction. This fee is usually around 2-3% of the purchase price.
Both the notary’s fees and the real estate agent’s commission fees are subject to VAT. The standard VAT rate in Italy is 22% and it is payable on sales of goods or services.
Taxes and incentives
The taxes to be paid on a property in Italy vary depending on whether the property purchased is the buyer’s first or second house. In particular, there are a number of tax breaks that apply to individuals who purchase their first house.
As a general rule, there are three taxes that a buyer needs to pay when purchasing a property:
The “Imposta di Registro”: this tax amounts to 2% of the property’s cadastral value [1]if the property is the buyer’s first house in Italy. On the other hand, it amounts to 9% if the property is the buyer’s second house. However, an exception is made for Italian citizens residing abroad, who are registered with the AIRE and who buy their first house in Italy; in fact, they only need to pay the 2% tax even if they decide not to reside in the property full time. Foreign citizens are entitled to first home benefits if they establish their residence in Italy in the same municipality where the property purchased is located within 18 months from the purchase date. In order to access the benefits, the property should be classified as habitation and it should not be a luxury property as luxury homes are subject to the 9% tax.
- The “Imposta catastale” (Cadastral tax or land registry tax): this is a fixed tax which amounts to €50.
- The “imposta ipotecaria” (mortgage tax): this too is a fixed fee which amounts to €50.
There are many incentives that are available to purchasers who meet the requirements set by Italy’s Revenue Agency, the so-called “Agenzia delle Entrate”. For instance, the “first home” bonus for individuals and couples who are younger than 36 years old includes a number of tax breaks to encourage young people with an average income below €40,000 to purchase a property that will become their primary house. This bonus allows for the exemption on mortgage and cadastral taxes and it makes it easier to access the guarantee fund (“fondo garanzia[2]”) for first homes. The bonus also includes other benefits, such as:
- a 50% reduction on notary fees;
- a tax credit (on deeds subject to VAT) equal to the VAT paid.
The “first home” bonus for individuals who are younger than 36 years old is valid for deeds signed between May 26, 2021 and December 31, 2023.
With regard to foreign citizens, it is worth pointing out that whether or 
not a foreign citizen who does not reside in Italy can purchase a property in Italy is based on the so-called “reciprocità”, i.e., the reciprocity conditions between Italy and the country of which the individual is a citizen.
In conclusion, if you are considering purchasing a property in Italy, it is important to have a good understanding of the costs and the taxes involved in the purchasing process. As explained above, these may change depending on whether the property you choose to buy in Italy is your first or your second house and on the type of property that you have chosen to purchase. In addition to this, it is also important to have a good understanding of the tax incentives and benefits which might be available to you.
If you wish to learn more about the purchasing process and you would like an expert’s assistance, do not hesitate to contact our bilingual team of real estate experts at info@italianrealestatelawyers.com. We will be happy to help you purchase your “Casa Dolce Casa”!
[1] The guarantee fund was introduced by the Italian government in 2013. Its purpose is to replace the guarantees which are often expensive, and which a bank requires to disburse a loan.
[2] The cadastral value of a property is the tax value of a property. In other words, it is a piece of information that is used to calculate a number of taxes that are linked to the purchase and sale of real estate.
