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An episode in Abruzzo of House Hunters International with Abruzzo Rural Property real estate agency.

Abruzzo episode will premiere in the USA on Wednesday, January 15th, 2020 at 7:00PM EDT on HGTV. Read more.

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How to Calculate Taxes and Costs when Buying Property in Italy.

Posted by on in Taxes in Italy

 Many people from abroad in the last few months have asked me this question: What other expenses shall I expect on top of the price of the house?

You will be relieved to know it’s straight forward enough. You should expect to pay for:

  1. Transfer taxes and stamps
  2. Notary fees
  3. Agency fees

Transfer taxes:

Let’s start with the trickiest one, the transfer taxes. Transfer taxes include: registration tax, the cadastral tax, mortgage tax.

  1. The registration tax is payable for purchase of properties for personal use (not business or companies), is usually a standard amount of 1.100,00 Euro’s (one thousand one hundred Euro).
  2. The ‘Cadastral Rendita’ is a taxable value calculated by the government for every building in Italy.

Cadastral Rendita(1): Cadastral meaning an official record of the land and property used for the basis of taxation; Rendita meaning revenue.

The Rendita is used to determine the amount of taxes due at the time of purchase and later to collect the amount of taxes that have to be paid yearly(2). Be aware that these calculations are not based on the price of the house, they are based on the Cadastral Rendita.

In the event a client decides to buy a house and wishes to know the transfer cost for the house they wish to purchase, we can request this information from a public Notary who is able to supply a full estimate. The notary will use the Cadastral Rendita (the recorded taxable value) to calculate the transfer tax.

The Cadastral Rendita is then multiplied by a fiscal standard of 126. In order to make the total calculation, the Notary will take the recorded 'Rendita X 126' followed by the percentage, according to the type of purchase: 9% for a holiday house, 2% for a main residency.

For example: a client, John, wants to buy a holiday home, the house is priced 35.000,00 Euro (thirty five thousand Euro’s).

The ‘Cadastral Rendita’ of the house in question is 69,72 euro (sixty nine Euro’s seventy two Cents). The amount of transfer taxes that John will have to pay at the purchase is calculated as follows:

69,72 x 126 = 8.784,72 x 9% = 790,62
(seven hundred ninety Euro’s and sixty two Cents)

  • 69,72 is the Rendita (the Rendita is not related with the purchase/selling price)
  • 126 is the standard amount given by the government
  • 9% is the percentage that applies for holiday homes

If John makes an offer of 20.000,00 (twenty thousand Euro’s) and the offer is accepted, the amount of taxes he will have to pay will not change because the ‘Cadastral Rendita’ is always the same, it does NOT depend on the purchase price.

However if John decides to buy the house, not as a holiday home, but as his main residency(3), the amount of transfer tax will actually be reduced because the percentage will change to 2%:

69,72 x 126 = 8.784,72 x 2 % = 175,69
(one hundred and seventy five Euro’s sixty nine Cents)

Therefore, it is important to understand that the transfer taxes are based on three given figures:

  1. The Cadastral Rendita
  2. 126 = a standard amount
  3. A standard percentage: 9% for holiday houses and 2% for main residency

Try and remember that the Transfer taxes are not based on the purchase price of a house.

How is the Cadastral Rendita determined?

The Cadastral Rendita is determined by two elements:

  1. Dimension of the house and land: the dimension is calculated on the bases of the rooms, the square meters and the volume that are on record.
  2. Estimo / Evaluation: the evaluation depends on the area where the house is located and the type of property.

This means that the Cadastral Rendita will not be the same for properties on the market at the same selling price.

Notary fee:

The second important fee to pay at the purchase is the Notary fee: the Notary fee is usually an amount between 1.000,00 up to 1.500,00 Euro (one thousand to one thousand five hundred Euro) asking more for expensive or luxury properties. This amount will include all cadastral, legal, historic checks, including mortgage checks or any outstanding debts on the property.

Here below an example of an invoice with the figures you should expect from a notary’s estimate.

Taxes

Notary fee
and notarial taxes

 

Cadastral, mortgage
and registration tax

1.655,00

Notary fee

1.480,30

Stamps

16,00

Cadastral
and mortgage checks

200,00

Notarial Archive tax

67,50

Cassa Nazionale Notariato

283,50

Consiglio Nazionale
del Notariato

27,00

1.738,50 1.990,80

Amount subject to VAT

1.990,80

VAT 22%

1.990,80 x 22% = 437,98

Amount not subject to VAT

1.738,50

Total

4.167,28

Agency fee:

The third fee is the agency fee(4). In Italy agency fees are paid by both the seller and the buyer. Make sure that you confirm the percentage that your agent charges before you begin your property search so that you know exactly how much you can afford.

If you are buying a house that is priced above 100.000,00 Euro (one hundred thousand Euro), as the buyer, you should expect to pay the 3% or in some cases the 4% of the final price. If the house you are buying is priced below 100.000,00 Euro (one hundred thousand Euro) the agency fee you should expect to pay is not a percentage but a fixed minimum price which is usually 3.000,00 Euro (three thousand Euro). On top of the agency fee VAT at 22% will always apply.

* Notes:

  1. Cadastral Rendita is a fiscal value used to determine the value of a property in order to calculate transfer taxes and annual tax (IMU); it also determines the cadastral value of a property in order to calculate the taxes to be paid in case of donation or inheritance.

  2. The annual property tax for holiday homes in Italy is called IMU. If you are buying as a holiday home you will pay the IMU tax that is due twice a year, in June and in December. If you are buying the property as a main residency you will not be required to pay any annual tax on your property.

  3. Residency means that you will live in the house for more than 185 days a year. You have 18 months to become resident in Italy from the date of your house purchase. If it is your intent to become a resident, you will only be charged two percent stamp duty at this stage. Should you not become resident within 18 months, then the government will require the outstanding seven percent.

  4. In Italy the agency fee is payable at the completion of the preliminary contract (Art. 1755 C.C.); in some cases the real estate agency can agree to be paid at the final deed of sale.