Taxes on the house's purchase

Real estate Informations for buy your property in Italy: taxes on the house's purchase deed tax buyer and seller

THE PUBLIC DEED OF SALE (DEED)

The deed of sale is the contract whose purpose is the house's ownership transfer against payment of an amount of money (price); more generically, we can say that the real estate sale is the formal agreement by which one party, called vendor, transfers to another, called purchaser, the ownership of a certain property against payment of the agreed price. For these elements of exchange, the sale (exchange of a thing against money) differs from barter (exchange of one thing against one thing). The deed of sale, also called deed, is usually stipulated in the presence of a notary, vendor and purchaser and it is written in public form. In this way the notary guarantees the identity of the parties, the legality of the deed and the truth of what it says. A notary is entitled to formal checks on the existence of mortgages or other obligations, on the enforcement of building standards and the compliance of the deed with the previous acts (such as the compromise). The deed is the conclusive act of the deed of sale. Following the normative updates laid by the Finance Act 2006 (266/2005) and the Bersani Decree 223 of 2006 (which later became the law 248/2006), in the sale of residential properties occurring between private parties, the deed must contain, among other data:

• the actual property disposal value

• the analytical directions of the payment method (check, bank transfer, etc.)

• the possible recourse of one or both parties to activity of mediation and, if so, all the identification data of the holder, if a natural person, or the name, business name and identification details of the legal representative, if different subject from natural person, or of the mediator, not as a legal representative, who has operated for the company itself; VAT; tax code; registration number at the role of business agents in mediation and at the chamber of commerce.

• the expenses incurred in such activity, with the analytical method of payment of the same.

In case of lack of registration to the role of business agents in mediation, the notary is also compelled to make a special report to the Revenue Agency.

TAXES ON THE HOUSE'S PURCHASE

Purchasing a house involves payment of some taxes which vary according to the destination of the property and the vendor subject. When you buy your "first house", you can enjoy a favorable tax regime which allows you to pay taxes to a lesser extent than those ordinarily due.

As a result of Article 10 of Legislative Decree No. 23/2011, starting from January 1st 2004, taxes on properties transfer are modified with the aim of reducing the tax burden on trades between private parties, concerning properties intended for use as a first home.

If the object of purchase is the first home, the deed of sale is subject to the following taxes:

when the vendor is a private

• registration tax of 2%

• fixed mortgage tax of € 50

• fixed cadastral tax of € 50

In case the property is registered at the Land Registry as a luxury property (categories A/1, A/8 and A/9), the registration tax has a value of 9%.

when you buy from a building company (or restructuring) within 5 years from completion of work

• 4% VAT

• fixed registration tax of € 200

• fixed mortgage tax of € 200

• fixed cadastral tax of € 200

when you buy from a non-building company that did not make any restoration, renovation or restructuration, or you buy from a building company (or restructuring) after 5 years from completion of work

• exempt from VAT

• registration tax of 2%

• fixed mortgage tax of € 200

• fixed cadastral tax of € 20

if the object of the purchase is a residential property, not first home, the deed of sale is subject to the following taxes:

when the vendor is a private or a non-building company that did not make any restoration, renovation or restructuration, or a building company (or restructuring) selling after 5 years from completion of work

• registration tax of 9%

• mortgage tax of € 50

• cadastral tax of € 50

when the vendor is a building company (or restructuring) selling within 5 years from completion of work

• 10% VAT (22% if luxury property)

• fixed registration tax of € 200

• fixed mortgage tax of € 200

• fixed cadastral tax of € 200

Registration, mortgage and cadastral taxes are paid out at the moment of the deed registration by the notary. From January 1st 2007(due to the 2007 financial law), only for the deeds of sale of residential properties, including their outbuildings (boxes, garages, basements) in favor of a private (buyer), it can be assumed as taxable base the cadastral value, instead of the paid amount.

For all other deeds of sale where the buyer is not a private and/or concerning lands, shops or offices, the taxable base is made by the price agreed and stated in the deed from the parties and not by the cadastral value.

When the sale of the house is subject to VAT, the taxable base is made by the price agreed and stated in the deed from the parties and not by the cadastral value. Concerning these transfers, the new provisions allow the office to directly adjust the vendor annual VAT return, if the declared amount is lower than the "normal value" of the property. The law defines

as normal value "…the price or the amount averagely charged for goods and services of the same or similar kind, under conditions of free competition, and at the same marketing stage, at the time and in the place where the operation was performed, or the nearest time and place." (Article 14 of Presidential Decree n. 633 of 1972).

The buyer can ask the notary that the taxable base for the purpose of applying taxes (register, mortgage and cadastral) is made of the cadastral value of the property. The facility occurs provided that the deed indicates the actual amount agreed for the sale.

In case that the sale is taxed on the basis of the cadastral value, the law also states that the notary fees should be reduced by 30%.

If, however, for the purchase of the house the buyer has stipulated a mortgage or asked for a bank loan, the taxable amount cannot be lower than the mortgage or the loan disbursed amount. At the same time, you cannot deduct, for income tax, interest expenses resulting from mortgage amounts exceeding the purchase price.

Omission, false or incomplete declaration implies, in addition to the penal sanctions, the subjection for the purposes of the registration tax, to ascertain the value of the transferred assets. In essence, the office will apply the taxes on the property market value, even if the parties had requested the taxation on the basis of the cadastral value. Moreover, there are onerous pecuniary and administrative sanctions.

Since 2007, you can fiscally deduct for Irpef/personal income tax purposes (to the extent of 19%) the fees paid to real estate brokers, for the purchase of the property to be used as a main residence. The deduction is however usable for an amount not exceeding €1000 and the opportunity to deduct this expense is exhausted in a single fiscal year. If the purchase is carried out by several owners, the deduction, up to a total of €1000, shall be apportioned among the co-owners on the basis of the percentage of the ownership.

The buyer, in order to benefit from the application of taxes (registration, mortgage and cadastral) on cadastral value of the property, should make an explicit request to the notary.