The purpose of this article is to make clear to foreign investors the taxes that must be paid when you buy real estate in Italy.
The three taxes that the buyer must pay to the Italian state in case of purchase of a property in the Italian territory are the transcription tax ( in Italian : imposta di registro ) the mortgage tax ( in Italian : imposta ipotecaria ) and the cadastral tax.( in Italian : imposta catastale). That is if the purchase is made by a private individual, I mean a person who is not a professional ; when it is acquired by a professional, such as a construction company, in this case the taxe to be paid by the buyer is the value added tax ( VAT : in Italian IVA ), but the other three taxes are calculated only on a fixed basis, as we will see later.
Beginning to deal with the three taxes mentioned above, their percentange is 7% concerning the “ imposta di registro ”, 2% concerning the “ imposta ipotecaria ”and 1% concerning, at last, the “ imposta catastale ”. In this regard, it must be said, first, that the percentages listed above all apply on the cadastral value, which is almost always lower, even much, to the sale price.
It is a very important point about the buying and selling of real estate in Italy.
We try to better understand this point with an example, making the case that you purchase a property at the price, correspondent to the market value, of € 420,000.00. Well, despite the fact that this is the price of purchase and that it is also precisely stated in the sale contract, the rates of tax aforementioned do not apply above the actual sale price ( € 420,000.00 ) but rather on the cadastral value. Therefore, the buyer must pay to the Italian state, at the time of the sale contract, the sum equal to the aggregate total of the three taxes (10%) only on the cadastral value : and this value will be, as it happens in practice, even a third of the market value and, so, in the proposed example, will correspond to € 140.00,00. Therefore in the proposed example the buyer will pay € 420,000.00 as purchase price, and € 14,000.00 as taxes, and the total cost of the business for him will be € 436,000.00 ( € 420,000.00 + € 10% € 140,000.00 ).Of course, if buyers want to know for sure in advance how much will have to pay as taxes, will be sufficient to inquire about the cadastral income of property to be purchased. The tax office in Italy gives, for each property within its territory, a cadastral income : this income, multiplied by a coefficient, determines the cadastral value of the property for the purposes of application of “ imposta di registro ”, “ imposta ipotecaria ” and “ imposta catastale ”. The rates aforementioned of these three taxes, 7%, 2% and 1%, relate to the assumption of normal real estate investment : otherwise, in the case of a person who purchases a property as a principal residence, the “ imposta di registro ” will be 3 per cent instead of 7 per cent ( always applied on the cadastral value), while “ imposta ipotecaria ” and “ imposta catastale ” will be paid both at a fixed rate of € 168,00.
Different is the case, as we have said at the beginning, when you buy in Italy by a professional like, for example, a construction company : in this case the buyer, as in many other European countries ( e.g. France ), will have to pay the value added tax (VAT), which, unlike the other three taxes considered, is applied on the actual purchase price stated in the contract of sale. In the case involving precisely the purchase of properties the percentage of the VAT has a reduced rate of 10%, while when it comes to luxury real estate the VAT has the ordinary rate of 21%. As in the case of “ imposta di registro ”, “ imposta ipotecaria ” and “ imposta catastale”, even for the VAT you have to pay there is a difference in the case that a property is bought as a principal residence : in this case in fact the duty rate will be 4% instead of 10% .
Anyway, as those who buy from a company are obliged to pay the VAT at the rates mentioned above, for this reason the “ imposta di registro ”, “ imposta ipotecaria ” and “ imposta catastale” will be paid at a fixed rate of € 168,00.
( Avv. Pier Luigi Cantini )