Tag Archive for: Notary Public

First Property Purchases in Italy. Fiscal Benefits And Rules

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Tax benefits for first property purchases are contingent on transferring residence

Property buyers in Italy often decide to take advantage of tax reductions available for first property purchases. These consist of a reduced registration tax of 2%, a
fixed cadastral tax of €50 and a fixed mortgage tax of €50.

Delaying transfer of residence other than for force majeure means losing first property purchase benefits

To benefit from fiscal reductions, buyers must transfer their residence to the municipality where the property is located. This transfer must take place within 18 months of signing the deed of sale. Missing the residence transfer deadline entails the loss of tax benefits.

Delays in transferring  residence may also involve a hefty fine unless there is an extraordinary event or circumstance that constitutes a force majeure. Examples of a force majeure event might be an earthquake, seaquake, flood, landslide. In general, an event beyond anyone’s control, which renders the property uninhabitable.

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Buyers must prove force majeure to retain benefits of first time property purchases

In judgement n. 864, dated 19th January 2016, the Italian Supreme Court ruled that the purchaser should not lose the fiscal benefits granted to first time property purchases.

However, this is only applicable where a purchaser is able to prove that failure to comply with the 18-month residence transfer deadline is with cause. In other words, the delay is justifiable because of an unavoidable and unpredictable event.

Summing up then. In order to maintain fiscal benefits related to first-time property purchases, a delay in transfer of residence must be due to an event or circumstance beyond the control of the buyer. As such, the buyer must prove that the delay is unavoidable and unpredictable. If transfer is due to a general impediment, the purchaser loses fiscal benefits.

Finally …

Property buying in Italy is a serious investment for most people and, often the fulfilment of a dream. Navigating Italian real estate laws and local customs can be complex. For more comprehensive information about the Italian property purchasing process, you might like to read our Guide to Buying Property in Italy. If you would like to discuss your situation or, if we can be of assistance, please get in touch.

De Tullio Law Firm provides specialist legal advice in all areas of Italian law. Our particular expertise is in cross-border property transactions and inheritance matters in Italy.

 

We also have a number of info videos on the subject of how to buy Italian property safely.

No Certificate of Habitability for An Italian Property?

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Buyers can back out of a sale if there is no certificate of habitability

A certificate of habitability or certificato di abitabilità in Italian, attests that a property is legally habitable. The Italian Supreme Court of Cassation ruled that buyers can refuse to sign the final deed of sale if a residential property has no certificate of habitability. (Court of Cassation., section II, 26th November 2015-8th February 2016, n. 2438).

Property owners obtain a certificato di abitabilità from their local municipality. Local municipalities should check that a property and its systems comply with health, safety and building regulations. In other words that the property is up to code. In addition, municipal authorities should check that the property complies with planning permission.

A certificate of habitability is also useful for obtaining utility connections and municipal services such as refuse collection.

The Italian Supreme Court of Cassation has ruled that buyers can back out of a purchase if a municipality refuses to issue a certificate of habitability.

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The responsibility to provide a certificate of habitability lies with the vendor of an Italian property

This is pursuant to article 1477,  paragraph 3, of the Italian Civil Code. Where there is a delay or a failure to supply the certificato di abitabilità, there is a clear case of non-execution of a contractual obligation (breach of contract). In order to remedy this, the purchaser may request a reduction in the sales price, or request a refund of deposits. A purchaser may also decide to back out of the transaction.

Where there is no certificate of habitability, a buyer can still buy the property. However, the buyer must expressly consent to the lack of certification. In addition, the lack of certification must be included in the notarial deed of sale.

Due Diligence

While the vendor is responsible for supplying a certificato di abitabilità, the onus is on the buyer to verify its existence. Buyers should receive the certificate before completion. It should form part of the buyer’s legal due diligence.

It is also vital to check that the certificate pertains to the entire property, not just part of it. While the issuing municipality will check land registry plans, if the owner has undertaken any unauthorised work on the property, this may not appear in plans.

Not having a certificate of habitability can have long term repercussions

A vendor’s failure to provide a certificate of habitability represents a liability for buyers. Purchasers will need to obtain a certificate following the purchase. However, this is not always possible. Properties with no certificate of habitability have a lower market value. Purchasers should therefore be aware that not having a certificate will have repercussions on the resale price and saleability.

Finally …

If you are looking at a real estate investment in Italy, why not talk to us? De Tullio Law Firm can advise and guide you throughout your Italian property purchasing journey. We have over 55 years of experience working with clients on their Italian and cross border property, family and inheritance matters. Get in touch.

You may like to read about the preliminary contract or you may like to watch our info videos about Italian property law.

Property Leaseback Scheme in Italy

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Italian property leaseback scheme: buying a house in instalments

In 2016, the Italian Stability Law introduced a property leaseback scheme. In effect, this allows buyers to purchase an Italian property without a mortgage.

The property leaseback scheme is available to those whose annual income does not exceed 55,000 Euro. and who do not already own another property.

As this is a financial product, only banks and leasing companies offer property leaseback contracts. The bank or leasing company commits to buy, or to build, a property on behalf of a client, who then becomes the property lessee. The lender therefore owns the property and the lessee has the right to use the property. The lessee pays of an initial instalment and a monthly rent thereafter.

Get Your FREE Guide to Buying Property in Italy

Our PDF guide covers every aspect of the buying process so you're ready to purchase with confidence

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Residence rules apply to the property leaseback scheme

The lessee must be resident at the property. This means the lessee or the lessee’s family must live at the property and use it as their main residence. The lessee must take up residence at the property within one year of taking possession of the property.

Costs and buy back rights

Annual interest payments and fees apply to the Italian property leaseback scheme. These are calculated on the basis of the property purchase price and the duration of the leaseback contract.

When the leaseback contract expires, the client can exercise the right to buy the property through payment of a final instalment. This final payment is established at the outset of the leaseback contract. If the client has a change of heart, the lessee can relinquish the property without any penalty payments.

If the lessee is unable to make the monthly rent because of a loss of employment, there is a one-off right to suspend payments. Rent suspension lasts for a maximum period of twelve months.

Tax incentives to promote uptake of property leaseback

The 2016 Stability law also introduced a series of tax incentives on both direct and indirect taxes. This aims to boost the uptake of the property leaseback scheme.

More specifically, people under the age of 35, can benefit from income tax deductions in the form of a 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. This is available for an annual sum not higher than €8.000. In addition, lessees under the age of 35 can benefit from a 19% deduction on the buy back cost, if the lessee decides to exercise the right to buy the property. This benefit is applicable to sums not exceeding € 20,000.

People over 35 years of age can also benefit from income tax incentives in the property leaseback scheme. A 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. This is applicable to an annual sum not higher than €4.000. A 19% deduction on the buy back cost is also available should the lessee decide to exercise the right to buy the property. This benefit is available on sums not exceeding Euro 10,000.

Finally …

The key to making your Italian property project as safe and smooth as possible is to appoint a legal team that speaks your language. De Tullio Law Firm has a thorough understanding of Italian property law and decades of experience managing all types of Italian property transactions. Get in touch with us: info@detulliolawfirm.com

You may also like to read about the Italian buy to rent scheme. We also have a range of info videos about Italian property transactions that might be of interest.

Italian Property Buying Process

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At what stage of the Italian property buying process should you contact a lawyer?

The Italian property buying process is quite complex. At the very least, it differs from what buyers may have experienced at home. The question about contacting a lawyer is one overseas buyers frequently ask us.

On the one hand, people worry that contacting a lawyer too soon, may be a waste of time or costly. The concern is that they might not actually proceed with a property purchase immediately or ever.

On the other hand, people fear that if they don’t contact a lawyer soon enough, they may find themselves in trouble. Perhaps with a request to pay broker’s fees or a deposit on a property. They worry about committing themselves and their money, without appropriate, independent legal advice.

Get Your FREE Guide to Buying Property in Italy

Our PDF guide covers every aspect of the buying process so you're ready to purchase with confidence

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We would recommend getting in touch with a lawyer before you view any property in Italy

Most experienced property lawyers in Italy appreciate that you will not necessarily find your ideal property during your first trip. They will also understand that you don’t need their help immediately. A reputable lawyer will recognise that it is helpful to have some initial guidance and their details at hand just in case you do. Many Italian law firms, including ourselves, offer a free consultation for this purpose.

If you contact an Italian property lawyer before your trip, they can outline the Italian buying process and provide details of legal fees. There is no obligation to appoint them just because you have sought some advice about your particular situation.

The lawyer will also be able to confirm other costs associated with a property purchase. That way, you can factor these additional costs into your budget before you negotiate a purchase price with the vendor or estate agent.

Getting in touch with a lawyer early also gives you the opportunity to speak to them on the phone or even to meet during your trip to Italy. This will allow you to  decide whether they are the right lawyer for you.

Once you have had contact with a lawyer you should feel more confident about moving forward with your property purchase. You will know that you have someone at hand who can assist you with all aspects of your property purchase in Italy.

Finally …

Having a home in Italy is a dream for many. It is also a major investment. There are many aspects that need careful consideration before taking the plunge. For example, the Italian buying process, buying structures, tax and inheritance to name but a few.

If you are considering buying a property in Italy, think long-term. Make sure it’s for the right reasons and that you have done your research absolutely thoroughly.

De Tullio Law Firm has been guiding overseas buyers with their Italian property investments for over 55 years. If you need any advice, an independent second opinion or, if you would just like to discuss your options with a specialist we are here to help.

For more information on buying property in Italy, you may like to read our comprehensive guide on the subject. You may also find our info videos useful.

Buying properties in Italy: avoid pitfalls

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Buying properties in Italy is a major decision. You must proceed with caution, always do your research and seek independent legal advice.

Continued slow economic growth in Italy helps to keep property prices low and therefore is attractive for those looking to invest. Interest rates show no sign of substantially increasing in 2016 either in The UK or in the Eurozone. 2016 is therefore looking to be another year with many Brits purchasing Italian property.

Get Your FREE Guide to Buying Property in Italy

Our PDF guide covers every aspect of the buying process so you're ready to purchase with confidence

Download now

Buying properties in Italy can go from dream to disaster…

Every year, clients contact us, whose Italian property purchase started out as an impulse decision. However, at some point during the purchase, the dream turned in to a nightmare. All sorts of additional costs appeared. That could easily have been avoided if they had sought legal advice prior to purchase.

At the very least, mistakes made during the purchase process can cause legal headaches, uncertainty and stress – the last thing anybody buying a home wants.

Recently, some clients contacted us to resolve a case where they had purchased a property without a Certificate of Habitability. The new owners didn’t realise that this certification was essential until they tried to get water and electricity supplied to the property. Utility companies refused to hook up the property because the owners didn’t have the relevant paperwork.

The ramifications can be serious. Take for example, a client who didn’t have a survey and now finds his roof collapsing, or the owners of a property that lacks planning permission for some of the outbuildings on their recently acquired land.

Authorities such as the Financial Conduct Authority (FCA) do not regulate property purchases in Italy. You are not protected if things go wrong, even if you use an FCA-registered financial adviser or mortgage broker in the UK to make the deal on your behalf.

Don’t succumb to pressure to sign anything. You may find yourself liable to pay fees or a deposit before you’ve had a chance to think carefully. Make sure you check all the paperwork. That the titles are correct and that you have all the necessary permissions, licences, certificates and planning consents. Furthermore, you must make sure you account for all the tax you’ll be liable to pay, both in the UK and in Italy.

Finally..

Before you sign any kind of paperwork relating to an Italian property purchase, always seek independent legal advice. Ensure your lawyer is fluent in both English, and Italian and that they have a good understanding of Italian property law.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. If you would like to discuss your situation or, if we can be of assistance, please get in touch.

You may also be interested in Buying A Property in Italy. Insider Tips from Our Clients

Italy’s 2019 Stability Law – Flat-Rate Tax Scheme

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Italy’s 2019 Stability Law – Flat-Rate Tax Scheme

By introducing the flat-rate tax scheme in 2018, the Italian government’s objective was to boost employment. In addition, the government aimed to reduce undeclared taxable income and employment irregularities. In the 2019 stability law, the government broadened the flat-rate tax scheme.

The scheme therefore now extends to individuals operating in, ‘the arts and independent professional activities’ sector. This includes individuals generating income from investment property rentals and second homes.

As well as replacing Irpef, Irap and additional taxes, the scheme establishes a tax rate of 5% for the first 5 years. This subsequently rises to 15% from the sixth year onwards. Neither VAT nor other taxes are payable.

The flat-rate tax scheme also provides an opportunity to regularise previously undeclared activities to the Italian tax authorities.

Foreign property owners may not realize that they need to declare income from rental or investment properties, even if it is seasonal and infrequent. However,  property owners may be subject to heavy penalties in case of an audit by the Italian tax authority.

Flat-rate tax calculations in the 2019 Stability Law

Taxable income in the flat-rate scheme is determined by applying profitability coefficients. These coefficients vary according to business activity. A profitability coefficient of 40% on revenues is applicable to accommodation, lodging, lettings and B&B activities.

To illustrate this:

Mr. Hunt owns a property in Tuscany, which he starts using as a seasonal holiday letting business. Mr. Hunt opts to apply for the flat-rate tax scheme.

Revenues from Mr. Hunt’s first year of lettings are € 40.000.

Based on a 40% profitability coefficient, taxable revenues would therefore amount to €16.000. At a 5% tax rate, Mr. Hunt would be liable for a tax payment of €800.

Had Mr. Hunt opted to use the personal income tax scheme, he would have paid tax of approximately € 4.300.

As you can see from the example above, for the purposes of calculating income tax, expenses are not included – income tax calculation is exclusively on revenues. Only social security contributions (INPS) are deductible from revenues.

The flat-rate tax scheme requires social security cover

It is worth bearing in mind that anyone wishing to take advantage of the flat-rate scheme, must have social security cover. Contributions are a percentage of revenues. However, a reduction of up to 35% of contributions is available and in certain cases an exemption is possible.

Any individual planning to start-up a business activity in Italy qualifies for the flat-tax scheme, provided that the individual has not carried out the same activity in the past three years and that revenues do not exceed €40.000 per annum.

Foreign residents and non-residents, who generate an income from letting their property in Italy, wishing to benefit from the flat-tax scheme, must notify the Italian tax authorities through a Notice of Business Start-Up.

Finally …

If you need help to understand your personal situation, please get in touch with us or seek advice from a qualified accountant registered with the ODCEC, the Italian professional accounting association of certified public accountants, auditors and advisors.