While the amount of Italian red tape is well known, and bureaucracy tends to move rather slowly, buying a property in Italy is actually pretty straightforward - if somewhat time consuming. There are no restrictions on foreigners buying property in Italy, but, as ever, employing a fully qualified specialist English-speaking lawyer is a must.

As a guide you should expect to pay approximately 15% of the purchase price in fees and taxes when buying a new property from a developer. This will cover the equivalent of VAT which is charged on the purchase price of any new property, solicitor's fees, notary's fees, land registry fees and local taxes. Your lawyer will advise you of the exact costs associated with your purchase. When buying off plan, all payments are fully bank guaranteed.

The buying process
There are three main buying stages:
 
• The buyer makes an offer which commits him/her to buying the property at the given price. If the seller   accepts a deposit is paid.
• Both parties sign a legally binding buying proposal. This outlines the details of the transaction, including the   scheduled completion date. If you are buying an "off plan" property the first stage payment is made at this   point.
• On completion both parties sign the final contract in the presence of a notary, who then issues the deeds
  and informs the land registry to transfer ownership. The remainder of the balance, plus all taxes must then
  be paid at this point.

You do not need to be present to complete your purchase. You can assign Power of Attorney to your lawyer who will be able to attend the signing of contracts and deeds at the Notary office and sign all relevant documents on your behalf. The Notary is a government official who must place on the public record that the property title deed recording the purchase has been signed in his or her presence and understood by the buyer and the seller, both of whom must be represented at the signing. Your lawyer can act on your behalf at this point if you have assigned the relevant Power of Attorney to them. Note that the use of the Notary is not a substitute for independent legal advice.

You will also need a fiscal code before you complete and your lawyer can obtain this from the tax office on your behalf.

Capital Gains Tax
For those looking to purchase for investment, capital gains made on the disposal of Italian real estate are taxable unless the property has been owned for more than 5 years in which case it is exempt from capital gains tax in Italy. Selling prior to five years incurs a charge on a sliding scale, depending on the number of years of ownership. The main home is also exempt provided another main home is bought within one year of the sale.

Inheritance Tax
There is no Inheritance Tax, but a transfer and registration tax on those inheriting the property is payable. Gift tax was also partly abolished meaning that no taxes are levied on gifts between spouses and other relatives to the limit of the fourth degree of the relationship. If the beneficiary is not related, gift tax is only payable on the value of the asset transferred which exceeds €180,760. There is no liability on the transfer of assets up to this amount or of a lesser value.

Tax on Rental Income
If you let out a property in Italy, you will usually be taxed on 85% of the rental income received. A person not resident in Italy for tax purposes must still make a declaration of Italian income. At the time of going to press, a rate of 23% was payable for most investors. There is also a deemed income tax on properties that are not rented out. This tax is calculated on the rateable value and is usually very small.

Property Tax
The basic property tax in Italy is known as the ICI (pronounced "ichy"). Everyone who owns land in Italy, whether they are resident or non-resident, pays this tax which is usually between 0.4% and 0.7%. The amount depends on the local authority and the size, location and category of property you purchase. If the property is passed as uninhabitable or being restored, the tax is reduced by 50%.

Garbage Collection Tax
In some towns, an additional tax is raised to deal with services the town hall supplies. These could include rubbish collection, street and beach cleaning. In some municipalities you will be charged for use of a car in the area, but not in all. These taxes vary between €200 and €250 per year.

Income Tax
Whether or not you are resident in Italy, as a property owner you must still make a tax declaration. The Italian authorities are only interested in any income you may have accrued in the country, for example you may have money on deposit in a bank that is receiving interest. They have no interest in any holdings you may have outside of Italy.

Wealth Tax
While in many other European countries you may be liable for wealth tax, in Italy there is no such tax.

UK-Italy Tax Treaty
There is a double tax treaty between Italy and the UK and this protects the investor from paying tax on his Italian assets in both countries.

Legal Advice
We believe it is absolutely essential that every individual buyer should receive independent legal verification that the property they intend to buy has good, clean title, has all of the appropriate planning in place and is completely free of the burden of debts or charges registered against it.

Financing your purchase

Mortgages
Should you require a mortgage these are easily available in Italy. You will need to prove to the lender that you are able to meet the monthly payments and if so, you will normally be able to borrow up to 75% of the valuation of the property. To guard against the risk of increasing mortgage rates, you may consider taking a fixed rate mortgage over a specified number of years.

Even if you have the funds available to complete your purchase without any loan, a mortgage may still make very good sense. With interest rates in the EuroZone generally lower than UK rates, it may mean that your own money could be better invested in other assets. Borrowing part of the price of your property can mean your own investment grows at an even faster rate, provided the property rises in value more than the interest rate. Investors can further enhance their yield from rental returns by taking advantage of interest only products which are now becoming available.

What about a UK mortgage?
If you have an existing mortgage in the UK and equity in your property, you could remortgage against this to raise funds. This way you may avoid any legal or land registry fees, depending on the lender and product. However interest rates are currently higher in the UK than in Italy so taking a loan against your UK property will cost you more to pay back.

Our sister company www.mortgagebusiness.net are able to give you advice regarding the best way to proceed and are able to offer you help with obtaining a mortgage in Italy.

Buying a property in Euros - what about the exchange rate?
We work closely with independent foreign exchange providers to ensure that you are able to secure the best rates of currency exchange, enjoy free transfers and pay no commission. Please contact us for further information.

Please Note
The above information is provided as a guide only and may be subject to change. You should consult your professional legal and tax advisors for the latest information.