Cadastral and Zoning Compliance in Italy

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Italian Property: The importance of cadastral (land registry) and zoning compliance

We often meet people who find themselves in trouble because they didn’t seek legal advice about cadastral and zoning compliance when they bought their Italian property.

It is not uncommon to discover – some time after buying an Italian property, that the property is wholly or partially illegally.

A 2017 report by the Office for Italian Statistics (ISTAT), estimates that nationally, some 20% of Italian properties are illegal builds – more in the south of the country.
On top of this, many legally built properties in Italy harbour significant liabilities that are not compliant with the law. Even slight discrepancies in plans, such as distribution of internal spaces can expose you to civil or criminal repercussions.

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The minimum penalty for the seemingly most trivial of matters is at least Euro 1,000. This financial penalty is over and above professional costs to remedy the discrepancy.

Cadastral and zoning discrepancies  impact the future marketability of your Italian property

When you purchase an Italian property, due diligence checks regarding Cadastral and Zoning compliance are of the utmost importance. Ensuring your property complies with the law will save you time, money and stress in the long run.

Making sure your Italian property complies with the law isn’t just applicable to sales and purchases. It is also relevant for other cases such as, obtaining a mortgage, planning renovations, accessing tax benefits and subsidies and organising inheritance and asset division.

Cadastral compliance (legittimità catastale)

This term refers to the compliance between a property’s current condition and its registration in the Italian Cadastre. As such, it does not have a zoning relevance.

Italian tax authorities manage cadastral services. Entries in the Cadastre neither prove ownership nor property compliance with zoning legislation.

Zoning compliance (legittimità urbanistica)

Since July 2010 a deeds of sale must prove that a property complies with zoning and cadastral legislation. It is therefore compulsory to list in the deed of sale the various building permits used in order to build, extend or renovate a property.

For properties built prior to 1st September, 1967, exemptions may apply to omitting the property’s zoning history. After this date however, the deed of sale must list any renovation work.

Finally …

At De Tullio Law Firm we are specialists in Italian property and inheritance matters. Before signing any property-related paperwork, please get in touch with us. We are here to help.

 

You may also be interested in Buying Property in Italy

Italian EPC (Attestato di prestazione energetica )

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What is an Italian EPC (Attestato di Prestazione Energetica) ?

An Italian EPC (Attestato di Prestazione Energetica or APE) describes the energy characteristics of a property.

In Italy an APE is mandatory in order to sell or let a property.

When is an APE mandatory?

An APE is a legal requirement that came into effect on 1st July 2009 for property sales and 1st July 2010 for property lets.

Since January 2012, real estate advertisements must include a property’s energy performance index (value in kWh / sqm per annum).

In most cases, an APE is valid for 10 years. In order to maintain the validity of the Attestato di Prestazione Energetica, property owners must have their boilers serviced in accordance with requirements of the Italian law.

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How do you get an Attestato di Prestazione Energetica?

An APE can only be issued by a qualified professional called a,  “certificatore energetico”. Italian Regional administrations are responsible for training and accrediting technicians according to their own regulations.

At the time of writing, about half of the Italian Regions have yet to adopt their own regulations. Where a Region hasn’t implemented its own regulations, national law (Legislative Decree 192/05) applies.

The certificatore energetico is a technical expert with specific skills in the field of building and systems energy efficiency. For example, an architect, an engineer or a surveyor.

How is an APE issued?

An onsite inspection of the property is mandatory.

The certificatore energetico uses software to assess the characteristics of the property. This includes input about structural aspects of the building, walls and frames – both doors and windows. The inspection also takes into consideration the efficiency of heating, ventilation, air conditioning, hot water and energy production systems such as photovoltaic panels.

Based on all the input, the software calculates the property’s level of energy efficiency and the certificatore energetico issues the APE. In addition, the certificatore energetico submits a copy of the APE to the competent Regional authority.

You should keep your APE with your boiler manual and, when you sell or let your property, provide it to the new owners or tenants.

If you are buying a property in Italy, you should request its APE well before you sign a deed of sale.

How much does an APE cost?

There is no set fee. Costs depend on the location and the characteristics of the property. As a guideline, the price of an APE for an apartment varies on average between € 150 and € 250. For bigger properties such as villas, townhouses, shops and offices, the cost is higher.

Why do you need an Attestato di Prestazione Energetica?

As previously mentioned an APE is a statutory requirement.

Its main purpose is to evaluate the financial implications of energy consumption when buying or renting a property. An APE also provides recommendations to reduce energy consumption and costs.

Although, it may seem like just another bureaucratic process, the APE is a document that can help with marketability. Properties with lower energy consumption are more sought after when it comes to selling or letting them.

In addition, the Italian government offers green incentives for energy efficient new build constructions and renovations to existing properties that improve energy efficiency. For renovation-related incentives, you can use before and after APEs to prove that you have improved energy efficiency.

Avoid Attestato di Prestazione Energetica scams!

There have been a number of scams associated with APE issuance. Our advice is to make sure you check that your certificatore energetico has been accredited by your Region. Compare estimates in your area. Make sure that the estimate includes VAT, postal costs, expenses and any other additional costs. Be wary of excessively low prices or anyone who tells you that you don’t need an onsite inspection. And watch out for intermediaries who offer their own expert at an excessive price.

Finally …

An APE is also useful when obtaining a Certificate of Habitability for a property.

If you have any questions about an Attesto di Prestazione Energetica, or if you need support or help with getting an APE, we would always advise that you seek independent legal advice.

 

You may also be interested in What is an italian Energy Performance Certificate?

You may also like our info videos about Italian property law.

Force majeure clause in Italian contracts. COVID-19

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Force Majeure: “Act of God”

Does the  COVID-19 pandemic trigger a Force Majeure Clause in Italian Property Sales and Purchasing Contracts?

Also known as an “Act of God”, a Force Majeure clause in contracts is widely known, yet narrowly understood.

In general, a Force Majeure is an event that is beyond the control of either party to a contract. It prevents or hinder the performance of the contract.

Illness is a very unusual reason for causing a Force Majeure in contracts. However, the Coronavirus pandemic is not a common ailment. It has confined entire countries and restricted peoples’ movement and travel.

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Recent disruptions have seen an increased number of calls from clients concerned about their responsibilities and rights regarding Italian property contracts.

A particularly frequent question is whether a Force Majeure clause exonerates vendors and buyers from performing contractual obligations?

What happens to Italian property contracts during Coronavirus restrictions?

Art. 91, 17 March 2020 n. 18 (“Decreto Cura Italia”) legislation deals with the liabilities for non-performance of a contract.

A party to a contract, who fails to perform contractual obligations shall be liable to pay damages unless it can be proved that the non-performance was caused by circumstances resulting from a cause beyond control (i.e. a Force Majeure).

The same law includes containment measures that limit movement, designed to prevent the spread of the Coronavirus disease. Failure to comply with these measures is a criminal offence under Article 650 of the Penal Code.

The issue of containment measures, and the restriction of movement, represent an obstacle in terms of completion of a Deed of Sale. Not only for those who may need to move from one Italian Municipality to another, but above all for people involved in cross-border real estate transactions.

Such containment measures may make it difficult and/or impossible to complete a Deed of Sale with a notary public.

Remedies

Extensions

Parties may be able to negotiate an extension to the contractual time limit for completion of a Deed of Sale.

Non-authenticated private deed

In order to avoid missing a contractual deadline, parties can also complete the Deed of Sale by means of a non-authenticated private deed.

In line with art. 1350 of the Italian Civil Code, parties will need to repeat the transcription and authentication process at an ulterior date. This will be possible once restrictions ease. Failure to have a Deed of Sale authenticated and transcribed later could render the Deed of Sale null and void.

Power of Attorney

By conferring a Limited Power of Attorney,  you can have someone act on your behalf in Italy. If you opt for a Power of Attorney, it is important that you entrust your affairs to a reliable and competent person such as a lawyer. Appointing someone who does not have enough experience or with whom there may be a conflict of interests, is highly inadvisable.

Use a holding account to protect your property payment

Our advice would be that you only use a bonded holding account to protect the balance of your payment for a property sale in Italy. Not just during the pandemic but always.  Known as a, “Deposito Prezzo” in Italian. You can arrange this with a notary public, who will act as guarantor for your transaction.

I am negotiating a Preliminary Contract for a property. Can I get a force majeure clause?

If you are in the process of negotiating the sale or purchase of a property in Italy, you should make sure that you include a “Force Majeure” clause in the Preliminary Contract. The clause should take into account a wide range of events. Not only natural disasters and catastrophic events but also disease epidemics and pandemics.

Finally …

If you are buying a property and need legal advice because of the pandemic, our legal professionals are here to provide help and guidance.

Please contact De Tullio Law Firm at the following email address info@detulliolawfirm.com

You may also be interested in our article about conferring a Power of Attorney. You may also like our info videos.

Cura Italia Decree. March 2020

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Wide-ranging central bank and government policies and stimulus packages are supporting the economy during the COVID pandemic. The Italian government has moved quickly to activate a fiscal package to support businesses and individuals through the crisis. The measures introduced in the “Cura Italia Decree” take a three pronged approach. Firstly, they aim to reinforce the health sector through these difficult times. Secondly, they help alleviate the impact of the COVID pandemic on business in general and thirdly they support daily life for individuals and families.

Below we summarise some of the measures included in the Cura Italia Decree.

Cura Italia Decree. Suspension of payments

VAT registered companies and professionals with their fiscal domicile, registered office or place of business in Italy, whose turnover did not exceed €2 million in the fiscal year preceding the entry into force of the Cura Italia Decree, are eligible to defer the following payments:

– VAT (balance due on the VAT return and payment due on February 2020)

– Withholding Tax on employee / similar  income

– Social Security Contributions

These payments are now due by 31/05/2020 either in full or they can be made in 5 equal instalments starting from May 2020. No interest or penalties are applicable.

Cura Italia Decree. Suspension of obligations due between 08/03/2020 – 31/05/2020

 

  Previous Due Date New Due Date
VAT Return 30/04/2020 30/06/2020
TR Form 30/04/2020 30/06/2020
Esterometro (Jan./Feb./ Mar.) 30/04/2020 30/06/2020
Intra Form 25 monthly taxpayer or quarterly 30/06/2020
SSP Form 30/04/2020 30/06/2020
EAS Form 31/03/2020 30/06/2020

Dates for Income tax returns have not been extended and must therefore be submitted on 30/11/2020 and 30/06/2020 respectively.

There have also been no changes to income tax payment deadlines. That is to say, based on the self-assessment system, payments are due in June (30/06/2020) and November (30/11/2020) respectively.

Regarding companies, the Cura Italia Decree provides an extension for approval of financial statements to 180 days from the end of the financial year. In addition it allows for a deferment of tax payments. Given travel restrictions, annual general meetings to approve financial statements can move online via for example, video-conferencing.

  Date Income tax payments
Approval within 120 days from end of 2019 30/04/2020 (regular) 30/06/2020 – 30/11/2020
Approval within 180 days from end of 2019 28/06/2020 31/07/2020 – 30/11/2020
Approval within 180 days from end of 2019 (maximum add 30 days) 28/07/2020 31/08/2020 – 30/11/2020

IMU (property tax), payment deadlines also remain as is: 16th June, 2020 and 16th December, 2020.

Cura Italia Decree: Suspension of payments due between 2/3/2020 – 30/04/2020 for hospitality and leisure sector

The government has extended payments by one month for companies in the tourism-hotel sector with reference to VAT, withholding tax, social security contributions. However, these tax liabilities must be paid in full by 31/05/2020 or in 5 instalments from that date.

Cura Italia Decree: Payments to Tax Collection Agency (Agenzia Riscossione)

The Cura Italia Decree provides for the suspension of tax payments due in the period between 08/03/2020 and 31/05/2020 arising from bills issued by Tax Collection Agencies.

In addition, a suspension also applies to notices issued by the Italian Customs Agency as well as injunctions and further collection notices issued by municipalities or local authorities.

Furthermore, a suspension also applies to payments of facilitated settlement of tax bills (Rottamazione-ter). Instalments due in February will now therefore be payable on 31/05/2020.

Other liabilities

Payments on debts to other collection agencies (Agenzia Riscossione) including for instance INPS and Italian Customs that are payable between 8/03/2020 – 31/05/2020 have been deferred until 30/06/2020. However, suspension of payments does not extend to payment reminder notices from the Italian tax authority (Agenzia delle Entrate).

Other measures

A tax credit of 60% on rent for commercial premises (cadastral category C/1) for March 2020.

Companies can activate lay-off procedures. The Cura Italia Decree includes provisions in order to support employers who are facing a reduction or suspension of activities due to the Covid-19 emergency. This means employers can use a simplified procedure to apply for ordinary social security funds (cassa integrazione) for employees who were already employed by 23 February 2020. This support lasts for a maximum of nine weeks and, in any case, no later than August 2020.

In consideration of the lockdown of several economic sectors in Italy, additional indemnity payments for registered VAT self-employed entrepreneurs or professionals who do not benefit from specific social security coverage have been agreed. Payments of Euro 600.00 per month in lieu of income. Although procedures have yet to be announced, the payment of this allowance will be borne by INPS.

Requests for a suspension of first home mortgage payments is to be made to the relevant credit institution.

Finally …

While this summary does not provide an exhaustive explanation of the contents of the Cura Italia Decree, it aims to provide a brief overview of the measures that the Government has adopted. Although details regarding the implementation of measures are pending, each of the measures has specific requirements that will be implemented by provisions issued on a ministerial and regional level. Get in touch for additional information.

You may also like to read about how the pandemic has impacted the Italian property market.

You may also like to watch our info videos.

Italian Real Estate Agency Services

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An Italian real estate agency’s role is to connect vendors with buyers

The first step in purchasing a home in Italy is to look for properties that you like. For this, services of a licensed Italian real estate agency provide invaluable support.

An Italian real estate agency will facilitate property transactions. The agency will provide relevant information to buyers and vendors. However, Italian real estate agencies have no legal obligation to undertake searches of a technical or legal nature (due diligence).

Clearly, a lack of due diligence could in the first instance impact the transaction itself. Further down the line, if you didn’t conduct due diligence prior to buying, you might run into issues. You may discover the property lacks of full or partial planning permission or that renovations do not conform with building regulations. Crucially, a lack of due diligence may effect the future saleability of your property.

Italian real estate agencies in Italy are of course required to disclose information based on the principles of a professional duty of care. This implies an obligation to provide information on any circumstances or issues that potential buyers should know about. Imparting incorrect or false information to an interested party is illegal.

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Italian real estate agencies have a duty of care

In 2012, the  Milan Court of Appeal heard a case regarding an estate agency’s duty of care: ruling no. 307 filed on 27th  January 2012.

Clients of a real estate agency took them to court on the grounds that the agent had failed to provide relevant information on adverse encumbrances on a property the clients wished to purchase.

The clients sued the real estate agent for a refund of the €6,000 commission fee they had paid to the agency. They argued that the real estate agency had been derelict in their duty of care. The clients claimed that the real estate agency should have communicated the existence of two mortgage transcriptions on the property. They maintained they would not have signed a reservation offer or a preliminary contract had they known. Signing the latter triggered the commission payment to the real estate agent.

The court dismissed the case.

The onus is on potential buyers to conduct pre-purchase due diligence

In support of the court decision, the judge stated that legal searches did not form part of a real estate agent’s responsibilities. In other words, technical and legal investigations, including land registry, planning, zoning and mortgage searches on a property do not form part of a real estate agent’s remit.

What does the law say about the scope of Italian real estate agency services?

Article 1759 of the Italian Civil Code requires real estate agents to notify parties of all known circumstances concerning a property transaction.

In this case,  the real estate agency had done this. They argued that as they had no prior knowledge of the encumbrances, they could not have informed the clients of their existence. The real estate agency had only become aware of the mortgage transcriptions when the clients informed them. The clients had only learned of the encumbrances when they were about to complete the sale.

There was no evidence that the real estate agency had any knowledge of the mortgages. The judge ruled they had not wilfully omitted to advise the clients about the adverse encumbrances. The responsibility for ascertaining this information did not lie with the real estate agent but, with the purchaser.

Article 1176 of the Italian Civil Code states that performance of checks and searches related to a property is not part of the agent’s professional duty of care. Furthermore, estate agents are neither legally responsible, nor qualified, to conduct in-depth due diligence.

Anything pertaining to the legal and technical due diligence of Italian property purchases should therefore be handled by legal and technical professionals.

Real estate agents facilitate the search for an Italian property

However, Italian real estate agents do not provide due diligence services.

When buying or selling a property at home, most people wouldn’t dream of entering into a transaction without the assistance of a lawyer and a surveyor. These are the professionals who conduct legal and technical searches and checks. Yet all too often, we meet foreign buyers who have decided to rely on what an estate agent tells them about a property.

Finally …

The reality is that a property transaction in Italy is an investment. It can quickly become costly – both financially and emotionally if things go wrong. In addition, there are the complexities of the Italian legal, tax and administrative systems. On top of this, there are the language barriers.

Essentially, in order to avoid any problems and before you sign any paperwork, you should engage an experienced, independent lawyer. The need for legal advice is far greater for an overseas transaction than when buying property at home.

De Tullio Law firm specialises in cross-border residential and commercial property transactions in Italy. We recommend that before you sign any paperwork with an estate agent that you seek independent legal advice.

Get in touch if you feel unsure about anything property-related and need advice.

 

You may also be interested in How to get a mortgage in Italy

International Succession

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Foreign nationals with a second home in Italy are subject to international succession procedures

International succession pertains to the estate of a person who dies in a country other than that of their nationality or residence.

It is likewise applicable to someone who leaves movable or immovable assets in a country other than that of their citizenship or residence. If, for example, you are a foreign national who owns a second home in Italy, your estate will be subject to international succession procedures.

In August 2015 new EU regulations governing inheritance came into force. These regulations, known as Brussels IV, aim to simplify and accelerate international inheritance matters and make cross-border succession procedures more efficient. Prior to the introduction of Brussels IV, international succession laws differed from country to country.

Since its introduction, there have now been a number of cases regarding the interpretation of the new EU regulations. One such international succession case came to court in Salerno in 2018.

The case involves two brothers who co-owned three properties in Italy. In 2016 one of the brothers, an Italian citizen, died in New York where he was a resident. He died intestate meaning he didn’t leave a Will.

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One of the decedent’s six brothers is a co-owner of the three Italian properties. He took legal action to wind up the Italian property co-ownership. He subsequently filed an inheritance claim for his brother’s share in the property.

Article 24 paragraph 1 of EU Regulation 1215/2012 (so-called “Brussels I bis”) governs dissolutions of co-ownerships. It entrusts such cases to the court of the country in which the property is located. In this case therefore, Italy.

For international succession, to make life simpler for those you leave behind, it is crucial to have a Will

For estate divisions, the court in Salerno applied the Brussels IV regulation.

Article 4 of the regulation establishes that the jurisdiction which rules on the succession as a whole, is that of the country where the deceased was habitually resident at the time of death. However, Article 10 provides for subsidiary jurisdiction of courts in which the estate is located – if the deceased was a national of that country at the time of death.

Returning to the case in question. The court of Salerno considered that the deceased was habitually resident in the State of New York. It therefore ruled that the case should be governed by the law of New York State.

Adding to the complexity of this case, rules of private international law are also relevant. The rules governing New York private international law provide that the law of the place where the property is located applies to successions concerning immovable assets.

The judge has adjourned the case until parties produce U.S. regulatory sources. This is something of a landmark case. It sets a precedent inasmuch that judges have the power and duty to ascertain foreign regulatory sources of their own volition.

Although Regulation 650/12 aspires to harmonise international succession, in terms of effectiveness it is confusing and open to interpretation.

For international succession and division of estates, Italian inheritance law specifically provides for rights to so-called, “forced heirs”. Their inheritance quota is guaranteed.

However, in countries with common law systems, such as the UK and the USA, testators can rule on how estates should be divided.

Brussels IV allows testators to make a choice of law in their Will

Article 22 of Brussels IV allows individuals resident overseas to elect which country law should govern their inheritance.

Where individuals have multiple nationalities, they may elect to have any one of their nationalities apply to their Italian assets.

In effect, this means that you can avoid any jurisdictional confusion after your death. However, you need to take action by making, “Choice of Law Codicil” in your Will.

Finally …

If you are in the process of drafting, or reviewing, your Will, you should consider aspects such as foreign matrimonial regimes, usufruct, tax consequences, joint ownership structures and other foreign proprietary rights before deciding which law to apply to the devolution of your estate.

Should you need further information concerning the topic, our legal professionals will be happy to discuss your situation. Please contact De Tullio Law Firm at the following email address: info@detulliolawfirm.com

 

You may also be interested in Applying A Power of Attorney in Italy

Demolition order Italian Property. Voices of Experience

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Voices of Experience: “I’m fighting a demolition order on my Italian Property”

Involved in an ongoing legal case to get a demolition order reversed, our client offers insights and advice on how to safely buy an Italian property.

If you are facing a similar situation and need help or if you have a story you would like to share, please get in touch with us. You might also be interested in reading our practical guides and checklists.

“They say hindsight is a wonderful thing. If I could turn back time and buy my Italian property all over again, I would do it completely differently. The following explains why. I hope that what I have learnt will help anyone thinking of buying a property in Italy”.

How to avoid a demolition order? Take care when buying property in Italy

The fact is that buying Italian property can be risky. A 2017 report by the Office for Italian Statistics (ISTAT), estimates that nationally, some 20% of Italian properties are illegal builds – more in the south of the country. On top of this, many legally built properties in Italy harbour significant liabilities that are not compliant with the law.

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All this lies ready to catch out unwary purchasers, whose lives can become a nightmare. In the worst case, you could, like me, find yourself facing a demolition order and then find yourself investing a significant amount of money to fix problems. So, when buying property in Italy, you need to be very careful.

Back in 2005, I purchased a villa with a pool on the outskirts of a beautiful small town in southern Italy. It was love at first sight, the Italian dream. Admittedly, something of an impulse purchase. At the time, I asked the estate agent if there were any issues with the property and whether I needed to get some independent legal advice or a survey. He said not, so I didn’t. The sale went through very quickly and smoothly. I used the same notary as the vendor and estate agent and within weeks I was the proud owner of the villa.

A demolition order makes an Italian property unsellable

In 2015, I developed a few health issues. I decided to downsize and put my villa on the market.

Enquiries slowly trickled in and occasionally the estate agent brought potential buyers to have a look at the place. One couple, who really liked the property, hired a lawyer to check all the details. To my horror, they discovered that the property had no planning permission whatsoever. I had no idea that for a decade, I’d owned an illegally built property. Obviously, the couple’s lawyer warned them off buying the property.

At the time, I thought it must be some sort of mistake; an oversight at the local authority or a problem with the land registry. After all, how could the previous owners sell a property without planning permission? However, when I went to my local town hall to investigate, it transpired this was the case. Worse was to come.

To cut a long story short, after a protracted and very complex process, the whole situation eventually led to the local authority issuing a demolition order on my villa in 2018. I can’t tell you how many sleepless nights this has caused me.

I have a house that is unsellable and am having to spend thousands of Euros to get the demolition order reversed and remedy the situation so that I can at last sell up and move on with my life.

To buy property safely in Italy, exercise more caution than you would at home

Buying property in Italy can be safe. However, to buy a property that is both fully legally compliant and to make sure you aren’t taking on any legal liabilities, you need to exercise far greater care than you would at home.

Illegal buildings are not unusual in Italy. They are ticking time bombs potentially subject to a demolition order

There was a lack of a cohesive approach to building controls and regulations during the Italian building-boom of the 1970s and 80s. Local authorities, overwhelmed by the sheer volume of construction, were unable to check buildings properly.

Often illegal properties in the countryside started out as summer homes. They may be on land that has no zoning permission for buildings. The owners may have failed to get planning permission for the property when they built, extended or renovated it. In addition, the property may not comply with  building controls or building regulations. They may lack damp proofing, insulation and, often, any logical room distribution, let alone solid foundations.

Often an illegal Italian property doesn’t get demolished even though illegalities are blatantly obvious to local authorities.  There are many reasons for this including an erratic attitude to enforcing the law in Italy, local vested interests and even corruption. Illegal properties can be likened to a cash cow. Penalties, fines and demolition orders can suddenly be handed out, as and when a local authority needs money.

Because of illegal construction, many areas in the countryside have sprung up. These areas usually lack primary services such as mains electricity, water, sewage and telephone lines. They are prime candidates for infrastructure projects when local authorities decide to formalise these areas. Naturally, householders will bear the costs.

However, even in urban areas there are properties that should make you wary. Properties too close to a road or a beach or, in the case of apartment blocks, common areas that breach building regulations. Some villas may extend beyond their allowable habitable area. These type of problems are ticking time bombs.

Seek professional help when buying in Italy

Foreign nationals buying property in Italy can be incredibly naïve. Like me, many people do not use a lawyer to manage checks and conveyancing when buying an Italian property. Believe me, this can expose you to abuse or lead to the possible loss of your property or at least significant costs.

Estate Agents

Make sure your estate agent has a licence. Estate agents offer great support when it comes to looking for properties. However, they may not know everything about a property when it comes to any problems or liabilities. Plus they have a vested interest in selling the property. Their fees are contingent on selling so they don’t want a buyer to pull out of the purchase. When I bought my property in Italy, I asked the estate agent if I needed a lawyer. The estate agent told me I didn’t. Talk about innocents abroad! Start with the premise that the property you are looking at has a problem.

Get a lawyer

Appoint a lawyer before you even start to look at any property. And, choose your own lawyer rather than one your estate agent or the vendor recommends. Make sure that your lawyer understands property law, speaks your language, is registered with the Italian Law Association and has insurance.

Make sure your lawyer provides a written due diligence report and checks who owns the property and that there aren’t any debts such as mortgages on the property.

The report should also include all the details of the property and surrounding area. Land registry details should match property deeds.

Have a survey done

Is the structure sound? Do property boundaries in the land registry match those you can see from walls and fences? A qualified surveyor can confirm all this as well as checking whether there are any alterations to the property including out buildings.

Always get a check on the exact description of the property (existing bathrooms, bedrooms, kitchen(s), sitting rooms, conservatories, garages, out buildings, pool etc.) with your lawyer before signing any contract. To ensure there’s no illegal building work, it’s essential that all the details match the land registry.

If in doubt, don’t!

Don’t hurry and never sign anything without your lawyer’s approval.  Remember it is always better to lose out on a property rather than buy something illegal that risks risks fines or demolition.

Of course, the above does not include everything that you should do. The more information you gather, the easier it will be to make an informed decision as to whether or not to buy a property.

If you follow the guidelines above, I hope you will avoid all the costly worries I am currently experiencing. Be careless or too credulous and sadly, your Italian dream could turn into a nightmare some time down the line.

Finally …

De Tullio Law Firm specialises in cross-border property and inheritance matters throughout Italy. If you are buying an Italian property and need advice or support or, if you would like to discuss a matter with us, we are here to help. Get in touch.

 

You may also be interested in Changing layout of internal spaces does not require building permission

Budget Law 2020 – Imposta Municipale Unica (IMU)

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Budget Law 2020 merges former Italian property taxes to create a new IMU

Italy’s 2020 Budget Law (art. 95) has seen the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

However, tax payments for garbage collection and disposal, known as TARI (Tassa Rifiuti), remain separate.

By switching to a new version of IMU, the Italian government aims to afford more autonomy to local municipalities (comune) in setting their IMU rates.

In addition, the government is looking to shore up tax evasion. Annual differences between expected property tax revenue and what actually lands in the state coffers runs at about EUR 5 billion.

The 2020 Budget Law also allows for reduced penalties if property owners the opportunity to make voluntary corrections to remedy delays or omissions for past IMU.  This opportunity also extends to non-Italian nationals, who may not be aware that they have Italian tax liabilities and payment deadlines.

Overall, the new version of IMU facilitates the application of what was previously a cumbersome system. Moreover, from 2021, the government has started making pre-filled tax return forms available to taxpayers.

Budget Law 2020: Who pays the new IMU?

Because IMU is a tax on second homes, principal residences are exempt – unless they are luxury properties categorised as A1, A8 or A9 in the land registry.

For legal purposes a principal residence is the property in which the owner and/or members of the family habitually live and have their registered residence. If however, members of the same family have their habitual residence and registered residence in more than one property located in the same municipality, the new IMU payment exemption will only apply to one of those properties.

Property owners, or those with rights to use the property pay IMU. There are some exceptions to this and if you need any advice or guidance related to the new IMU, we are here to help.

Budget Law 2020: How is the new IMU calculated?

IMU is a municipal tax. Although rates are capped, each local municipality sets its own rates on an annual basis.

In order to calculate your IMU payments, you need to consult property records to ascertain its tax value category. Additionally, you will also need to know the tax value of any outbuildings on your property. Check the property records at your municipal land registry or, in some municipalities, you can retrieve property information online.

Depending on the land registry category, the following coefficient multipliers apply to a revalued taxable annuity of 5%:

Land Registry Category Coefficient
Group A (excluding A/10) and cadastral categories C/2, C/6 and C/7 160
Group E and cadastral categories C/3, C/4 and C/5 140
Group D5 80
Group A/10 80
Group D, except buildings in cadastral category D/5 65
Group C/1 55

To demonstrate how to calculate the new IMU, let’s take a practical example:

A second home in category A/3 with a property tax value of €600:

Property tax value €600 + 5% revalued annuity = €630

€630 x 160 (coefficient for category A/3) = €100,800

€100,800 divided by 1000 by 10.6 = €1068.48 (we applied an IMU rate of 10.6 set by the municipality)

€1068.48 is thus the new IMU amount payable in two equal instalments.

You may be able to benefit from a 50% IMU reduction for buildings of historic or cultural interest, buildings registered as uninhabitable and/or uninhabitable and unused. Likewise a reduction is available for properties on loan between parents and children, so long as they are used as a principal residence.

When is the new IMU payable?

In the same way as the old system, the new IMU tax is payable in two instalments. Payment deadlines are mid June and mid December every year. In other words, each June, taxpayers must pay half of the annual total of IMU due, applying the rate and making any applicable deductions from the previous year.

The balance of the new IMU tax is due each December, calculated on the rates approved by local municipalities, which issue their local rates by the end of October each year.

How do you pay the new IMU?

There are several options for payments of the new IMU tax. Either you can fill in an F24 form online at your Italian bank’s website or you can print off a filled-in F24 form and pay at a post office or bank counter. On the other hand, you can use a payment slip at the counter of an Italian post office or use the Italian post office website.

Although they are not yet widespread,  local municipalities have started introducing their own public administration digital payment platforms.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 


You may also like to read about tax measures in the 2020 Italian Budget Law.

Italian Income Tax – New Measures from 2020

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Italian Income Tax Relief

In order to foster economic growth, as part of the Italian budget law, art. 5 of, “Decreto Crescita” came into effect in December 2019. Legislation provides for significant changes to the Italian income tax system for anyone who transfers their tax residence to Italy from 2020.

The law is retrospectively applicable to anyone who transferred their tax residence to Italy from 30th April 2019.

Who can benefit from Italian income tax measures introduced in the 2020 budget law?

Legislation on income tax now extends to foreign football players and other professional sportsmen and women. The law establishes a 50% reduction on income tax. It applies for 5 years provided the sports professional maintains their tax residence in Italy for at least two years. For those not from the sports arena, tax relief of 70% is also available. If for example you generate an income in Italy through employment, self-employment or from business start-up activities.

Income tax relief of up to 90% is available for those who transfer their residence to one of the following regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily.

In order to take advantage of tax benefits, certain conditions apply. You can transfer your tax residence so long as you were not resident in Italy for the previous 2 tax years. You must undertake to reside in Italy for at least 2 years and, your work-related activity should mainly be in Italy.

There is no requirement for Italian citizens returning to Italy as tax residents from 1st January 2020 to have previously been registered with AIRE (the Registry Office for Italian Citizens Residing Abroad).

Tax relief is applicable for 5 tax years. However, a 50% income tax reduction is available on income you generate in Italy for a further five tax years if you have at least one minor or dependent child. This also applies if the child is in pre-adoptive foster care.

In addition, you must become the owner of at least one residential property in Italy. Your property purchase can take place either following your transfer to Italy or in the twelve months preceding your transfer. You can purchase property in your name, a spouse or partner’s name, in your children’s name or in co-ownership.

High net worth individual Italian income tax system

The 2017 Stability Law remains in force regarding foreign income from real estate investments, dividends, capital gains and other income.

This high net worth individual tax regime  is available if you have not been a tax resident in Italy for the nine (out of ten) years prior to transferring to Italy. The advantage consists in paying a substitute tax of € 100,000 on all income derived from abroad. Sports professionals (football players, basketball players, etc.) can benefit from this tax system.

Flat Tax

The Stability Law of 2019 includes a flat tax regime. This regime is aimed at individuals with a pension or another source of income from outside Italy. You can transfer residence to certain municipalities in the south of Italy and, provided you were not resident in Italy in the five previous tax years, you can opt to pay a flat-rate tax of 7% on your income from abroad.

Building-related taxes

Deductions for energy re-qualification (65%), building renovation (50%) and furniture and household appliance bonuses (50%) concerning the purchase of new furniture for renovated buildings are available.

A new “Facade Bonus” allows for 90% deductions on documented expenses relating to refurbishing or restoring external facades of buildings. As any work to facades must comply with technical regulations, work needs prior assessment and permission.

Capital Gains

The budget law also introduces changes to real estate capital gains. A substitute tax is available if a principal residence or a second home sale meets certain conditions. The substitute tax starts at a rate of 20% on sales of properties that took place until 31 December 2019. It rises to 26% for property sales from 1 January 2020. The application of this regime is optional and should be requested by the notary on the date set for the completion of the sale.

Company shares

The budget law offers terms for recalculating the value of investments in unlisted companies up to January 1, 2020. The drafting and certification of the appraisal, as well as the payment of the substitute tax is due by 30 June 2020.

These terms only apply to private individuals with equity investments unrelated to business operations. In particular, the aforementioned legislation allows the revaluation of equity investments held in companies not listed on regulated markets. Individuals must hold investments at 1 January 2020 and require a sworn appraisal report by 30 June 2020 when the substitute tax of 11% is payable.

Company assets

The budget law allows the revaluation of company-owned assets. Based on 2019 financial statements, the law introduces reduced substitute tax rates:

– from 16 to 12 per cent for depreciable assets;

– from 12 to 10 percent for non-depreciable assets.

In addition, a new provision allows companies to release credit balances recorded in their accounts against the recognition of higher values ​​at a rate equal to 10%.

This option does not concern IRPEF entities with simplified accounts.

New IMU

The budget law introduces a new version of IMU. It sees the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 

 

You may also be interested in Do beneficiaries have to pay taxes on inheritance?

Real Estate in Italy: Reservation Offer

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Real estate contract law in Italy

If you are considering buying real estate in Italy, Italian civil code in art. 1470 governs sales and purchase contracts for Italian real estate.

A contract is a consensual transactional instrument through which one party (the vendor) transfers the ownership, or a right, to an assets to another party (the buyer).

Contractually therefore, a buyer is under obligation to pay the agreed fee to the vendor for an asset or right.

Acceptance of a reservation offer for real estate in Italy

If you are not familiar with the legal and financial implications of the three-step property purchase process in Italy, you may wish to read our guide to buying property in Italy.

The first step to purchasing a property in Italy is a reservation offer. 

In effect, when buyers find an Italian property they like, they make a written offer on the property. Amongst other things, the reservation offer identifies the property in question and makes a price offer.

For the offer to be valid, first a vendor must accept the reservation offer in writing. This acceptance must then reach the potential buyer within a time frame stipulated in the reservation offer.

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Contractual obligations of a reservation offer

Until written acceptance of a reservation offer reaches potential buyers, no contractual obligation exists between the parties. In other words, the reservation offer is revocable.

However, buyers may stipulate they wish to keep their reservation offer firm for a specified amount of time. If a vendor accepts the time frame, it means the vendor has an obligation to remove the property from the market. Because the vendor will not be able to market the property for the duration, the offer is known as, an irrevocable reservation offer.

Italian real estate agents: roles and fees

As in other countries, vendors in Italy often put their property in the hands of a real estate agency. The role of Italian real estate agents is to market the property to potential buyers. When a potential buyer makes an offer for a property, the real estate agent passes the offer on to the vendor. The estate agent does this through a reservation offer.

At this point, vendor and buyer are usually looking to move towards the second stage of the Italian purchasing process. This is where both parties sign a preliminary contract. If the vendor does not progress the sale to a preliminary contract stage, the reservation offer lapses and neither party has any obligation towards each other.

At the reservation offer stage, another aspect to consider is the estate agency commission. It is always worth asking if a real estate agent’s fees are negotiable. Generally however, commission ranges from 3% to 8% of the property sale price. Some agencies work on a fixed fee. To put that another way, fees are based on a percentage of the total sale price.

A reservation offer may not end in a sale

Between the reservation offer and signing a preliminary contract, buyers should carry out property checks and searches (due diligence). This may highlight problems or irregularities related to the property. These issues may subsequently lead to buyers withdrawing their offer.

The acceptance of a reservation offer between the seller and buyer is not therefore a guarantee it will end in a sale.

You should therefore be wary if the estate agency requests their commission at this stage.

At what stage should you pay Italian estate agency commission?

To clarify when exactly estate agents should receive their commission, a 2010 Supreme Court case is pertinent. In order for a real estate agent to be entitled to their fee, it is not sufficient that a broker merely puts vendors and buyers in contact. It is not enough to hope that the transaction concludes successfully.

In other words, commission is only payable to a real estate agent once a preliminary contract is in place between the vendor and buyer.

Difficulties linked to successful completion of a real estate transaction arise because there are so many pitfalls between the reservation offer and preliminary contract.

Contractual risks of real estate in Italy

To avoid risks, it is wise to seek independent legal advice before you sign any paperwork relating to buying property in Italy. To avoid any conflicts of interest, make sure you choose your own lawyer rather than a lawyer recommended by an estate agent or a vendor.

Your lawyer will guide you step by step through the intricacies of the Italian property purchase process.

Finally …

De Tullio Law Firm is an Italian Inheritance and Real Estate Law Firm present throughout Italy. We specialise in cross-border residential and commercial property transactions and inheritance matters in Italy. Should you need any further clarification concerning this or other property-related topics, De Tullio Law Firm will be happy to help. Get in touch with us at: info@detulliolawfirm.com.

You may also be interested in Insider Tips for Buying A Property in Italy. You may also like to watch our info videos.