Italian Mortgages

Financial Issues

Advanced Financial Considerations
As well as the basic question of where the purchase money is going to be obtained from, there are other financial considerations which must be addressed such as who should own the property and what the taxation implications may be.

Deciding on the Relevant Owner
Italian property can be held in several ways; in the name of one owner, in the name of two people, e.g. husband and wife, in the name of a limited company or in the names of those who will inherit the property upon the original owner¡¦s death.

Taxation
Taxation plays a huge part in the decision regarding how a property should be held. This is an issue that should be discussed in advance of the property purchase with a local lawyer. Inheritance law is slightly different in Italy compared with the UK.

Until recently, there were very high inheritance taxes in Italy. Although this is currently not an issue as many inheritance transfers are now tax-free, there is no guarantee that the situation will not change in the future.

Fees when Purchasing Italian Property
The main fee to consider when purchasing a property is the Land Registration tax which is 10 percent of the declared value for urban property and 17 percent of the value of rural property. In reality, ¡¥rural¡¦ actually means land and agricultural property, as most standard residential property has now been re-categorised as urban.

If the property is owned by a company then VAT is payable (it is called IVA in Italy) at 20 percent as an alternative to the registration tax. Therefore, the person from whom you are purchasing can have a huge impact on the amount of fees you are liable to pay.

Things are slightly different with a new build property. A non-luxury property attracts an IVA charge of 10 percent, whereas luxury homes attract a charge of 20 percent. A self-build property has a much lower rate of 4 percent.

Although the seller will normally pay the estate agent¡¦s fees, it is not uncommon for the purchaser to be required to make a contribution. Fees are usually around 3 to 5 percent of the value of the property.

Notary fees will also have to be met at approximately 2.5 percent of the value of the property.

Summary
Advanced considerations when purchasing a property in Italy include how the property should be held and by whom;
taxation can be a big issue when purchasing in Italy; rules change regularly and local advice is essential;
other fees which can have a large impact on the financial viability of an Italian property is the Land Registration tax or VAT, depending on the type of property; and
estate agents¡¦ fees and notary fees also have to be met.