If you’re thinking of investing in Italian real estate, perhaps for your own private residence or as an investment, you’ll need to consider a number of costs that are associated with buying your own piece of Italian soil. In addition to the cost of the property, you will find that there are a number of other costs that need to be taken into consideration when committing yourself to an Italian home.
The fees that come with purchasing an Italian property are usually payable upon the completion of the sale and can range between 9 – 15 percent for a non-resident, although it has been known that there might be fees of up to 20 percent on luxury properties.
The fees that are associated with purchasing Italian real estate can be sub-divided into several different categories, here we shall take an in-depth examination of the commonly known and the likely costs involved.
Property Registration Tax
This is the largest additional fee associated with purchasing an Italian property; it varies between 3 to 10% of the declared value. Registration tax is payable upon completion and is dependent upon whether the purchase is a first home or second one, if it’s a new home, or if you’re a resident of Italy and can be broken down further:
- Buyers of new properties don’t pay registration tax but must pay VAT;
- On your first home, you’re eligible for a reduced tax of 3%. The property must be your principal home for residential use and it mustn’t be classified as a ‘luxury’ home;
- The registration tax for non-residents and those buying second homes is 7%;
- If you’re buying an agricultural property, you must pay tax at 10%.
Land Registration Tax
All property purchases in Italy are subjected to Land registration tax and the amount that will be paid will depend upon whether you’re purchasing your first home, additional home, a new home or if you happen to be a resident of Italy.
For those that are residents and are purchasing their first property, there is a minimal fixed fee of €168 (approximately $205, or £145). However, for those that are non-residents of Italy or those purchasing a second home, then there will be a 1% Land Registration Tax that is payable based on the declared price of the property.
Value Added Tax (VAT)
Buyers of new properties must pay VAT (IVA), which is levied at 4% for first home resident buyers, at 10% for second home and non-resident buyers, and at 20% on luxury homes (please contact us to find out what is classed as a ‘Luxury Home’).
VAT may be included in the price by the builder or developer. If you build your own home, you pay VAT at 4%; if you buy from a company, you must pay VAT at 20% irrespective of the type of property.
Property Mortgage Fees
If you’re considering taking out a mortgage to help with the purchase of a property in Italy, then you will need to consider the additional costs that are linked to an Italian mortgage. Italian lenders charge an ‘arrangement fee’ for establishing a loan; this is usually set at 2% of the loan amount.
In addition to the ‘arrangement fee’ there will be a mortgage tax of €129.11 ($158 or £113) for Italian residents that are first time home buyers, otherwise, there is a 1% mortgage tax that will be applied to the loan. Lastly, there is a 0.25% fee that is payable to the notary for registering the charge against the property at the land registry.
The majority of mortgage lenders in Italy will apply an ‘administration fee’ of approximately 1% of the loan value. If you do indeed take out a mortgage in Italy then you will need to make sure that you take out insurance cover with the lender of your choice, this covers against fire, lightning strikes and gas explosions. This insurance is a one-off payment of 0.21% of the property’s value and will be valid for 20 years.
To purchase an Italian property you will need to use a Notary and the fees involved will vary between 1 to 2.5% of the declared value of the property. The cost of a notary is based on a property price list prepared by the Bar Association and varies according to the town council (and is subject to 22% VAT). The notary fee is payable when you sign the final contract and is one of the last fees that are applicable.
There are widely varying estimates and everything is up for negotiation, but expect to pay;
- €2,000 ($2,440 – £1,750) for a property costing €50.000 ($61,000 – £43,700) up to
- €3,500 ($4,270 – £3,060) for property costing €500.000 ($609,660 – £437,000) might be typical.
The fees for conveyancing, which is usually performed by a lawyer, are usually from 1% to 2% of the declared price of a property or a fixed fee, depending on the amount of work involved. Legal fees are subject to 22% VAT.
Estate Agent’s Commission
The fees that are paid to the estate agents in Italy are differently structured when compared to the UK and the USA where the vendor is responsible to pay the estate agent that was responsible for the sale of the property. In Italy, however, both the seller and the buyer of the property have to pay the estate agents fees equally. Generally, the estate agents fees will be between 3 to 8% of the properties valuation plus VAT at 22%.
The costs of connecting your home to the utilities will vary depending on if you’ve purchased a new home or a resale home. If you’ve purchased a new home then, you would usually need to pay the gas, electricity and water companies to create suitable connections and metering for your personal usage. If you’ve bought a resale home, you will have only pay for the cost of new contracts.
As with any move, whether it is a local one or one that sends you around the other side of the world there can easily be additional fees that are applicable, such as moving costs, inspection fees, and pet moving costs. If you’re looking to have additional work to the property that you are considering to purchase then, there will be architect fees, surveyor and building costs associated with the properties transformation.
Before signing a preliminary contract, check exactly what fees are payable and have them confirmed in writing. If you’re a resident, the fees associated with buying a property in Italy can be offset against income tax.
As with any property purchase, in any country in the world there will always be additional costs, however, some countries will have different costs than others. We have provided a detailed list of costs that you will have to consider when purchasing a property in Italy, if you have any further questions please do contact us.