When buying a property in Italy there are several important financial matters that must be taken into account and planned carefully. Here are our top ten tips:
1. What is your total budget?
Do you know exactly how much you have to spend on your property in total? This must take into account the full property cost – including factoring in the exchange rate – the fees that arise as part of the purchase process and the ongoing cost of maintaining your property if renting or using as a holiday home. If you are planning to move to Italy for good, you have a number of other additional costs to consider to support your life there once you are settled in Italy.
2. How will you fund the property purchase?
If you are looking to take out a mortgage, it is worth noting that mortgage availability for foreign nationals in Italy is fairly limited at present. There is simply no getting away from the fact that Italian lenders have tightened their mortgage eligibility criteria in recent years.
If you are a British citizen, you are unlikely to get a mortgage for an Italian property through a British bank, even one with a presence in Italy. However, in rare instances, the latter may be possible, although often only in extraordinary circumstances. It is for this reason that the majority of international property buyers in Italy purchase in cash.
3. Have you considered the effect currency market movements will have on the price of your property?
It is most likely that you will need to transfer your funds into Euros, and the most cost effective way to do this is through a specialist currency company like Halo Financial. We recommend opening an account with Halo Financial as soon as you have made the decision to buy in Italy, giving you time to discuss the best strategy to make the most of your money on a continuously fluctuating market. The Currency Consultants at Halo Financial have the right expertise and currency tools that can help you with your currency trade, minimising your risks and saving you a significant amount of money. By using a currency specialist, you will be able to take advantage of better exchange rates than your average local bank, and will also not be charged a fee on any transfer above £5,000.
4. Have you factored in all costs for your Italian purchase?
When buying Italian property, you will find that you need to pay additional costs on top of the purchase price – these costs include travelling to Italy before and after the purchase for property viewings, along with legal fees, estate agent fees, local and international taxes, valuation and registration costs, and exchange rates when making money transfers between countries.
- Agency fees (between 3-8 percent);
- Purchase tax (approximately 8-10 percent, although only 3 per cent if the buyer purchases the property as a first home and applies for residency in the area); and
- Notary fees (around 1-2 percent).
- On top of this, there may be a registration fee (which is often included under the agency fees, but not always);
- Fees for lawyers (this could cost even more if you choose to use a UK lawyer for language purposes);
- Survey (geomettra) fees, which could cost around £700;
- Mortgage fees (if you can find one); and
- Document translation charges (if required).
5. How will you pay the ongoing costs associated with owning a property in Italy?
Once you have moved to Italy, you will need to ensure any regular bills and mortgage payments are covered, as well as ongoing maintenance, amenities, and so on. Remember that if you are paying these in another currency, the same currency market movements will affect the price of these payments. Consider any recurring and regular payments needed and discuss with an expert at Halo Financial how you may be able to save money on these and the best way to set up and make those international payments.
6. Do you have a bank account in Italy?
Italy’s largest banking group is by far and away Intesa Sanpaolo which boasts over 5,600 branches and almost 11 million Italian customers. Other large Italian banks include Che Banca (the retail banking arm of international conglomerate Mediobanca) and Monte dei Paschi di Siena, which has around 3,000 branches and 4.5 million customers. It is arguably one of these larger organisations that you should consider opening a bank account with. Not only are these banks more likely to have offices in your home country – and have branches near the area you are looking to settle in – but they are also more likely to offer international services and have English speaking staff; something that regional banks are unlikely to be able to offer.
The larger banks are also almost certain to offer services such as free internet and telephone banking – again these are products which are not available at all regional banks as yet. If you don’t live in Italy then it is possible to open a non-resident bank account (conto estero). However, only foreign currency or imported euros may be paid into such an account.
The process for opening an Italian bank account is similar to whether you are a resident or non-resident of the country. In almost all instances you will need to be present in an Italian branch of the bank to open an account (arranged appointments generally aren’t necessary) and you will need to bring the following documents with you: Passport, Tax number (Codice Fiscale), a recent utility bill (as proof of address) and, if you’re an Italian resident, your residence card or proof of employment in Italy.
A Codice Fiscale is needed by everyone in Italy (be they Italian or foreign; resident or non-resident) who needs to conduct practically any everyday activity, from registering with the health service to opening a bank account. Banking charges in Italy do exist, so it can be worth taking some time to see what accounts you are eligible for, and how they compare financially, before opening one.
7. Have you considered inheritance implications?
A new property in Italy is likely to have an impact on your worldwide estate. You may also be affected by Inheritance Tax in Italy. We recommend speaking to a legal and financial advisor who specialises in Italian tax as this will ensure you understand the implications of your plans; this is an especially important area as inheritance laws are generally long and complex.
8. Have you thought about how you will manage salary or pension requirements?
If you are moving to Italy long-term, ensure that your salary or pension can be paid directly to you. The UK basic state pension is payable in Italy. Pensions that remain in the UK are subject to unique tax liabilities and obligations. Transferring these pensions to another jurisdiction under the Qualifying Recognised Overseas Pension Regime (QROPS) can help you protect your pension funds from double taxation and UK inheritance taxes and charges. It is essential to seek expert advice from an independence pensions/financial expert before taking any action regarding financial issues.
June 2017 figures suggest that the average salary in Italy was €6,246 per year. Please note that there is far more likelihood of you receiving salary of around this region in the North of the country, than there is in the South.
9. Are you liable for income taxes in Italy?
Taxation of an individual’s income in Italy is progressive – the higher the income, the higher the rate of tax payable. There is no income tax threshold in Italy. The lowest earners, those taking home less than €15,000 a year, pay tax at a rate of 23 percent. Those who earn between €15,001 and €28,000 a year pay a rate of 27 percent; between €28,001 and €55,000 pay 38 percent; between €55,001 and €75,000 pay 41 percent; and those who take home more than €75,001 pay 43 percent. On top of this, however, there is also a regional tax of up to 3.33 percent and a municipal tax of 0.1 – 0.9 percent. Each region and municipality is free to set its own rate within the range set out in national law.
10. Do you have reliable estimates for shipping costs?
Find a professional relocation and removals firm to give you a quote. If you are purchasing a home for investment purposes, and therefore not planning on moving any belongings to Italy, then you will need to ensure that the house you buy is furnished or you have allocated the budget to furnish the property you have bought it. It’s worth noting here that unfurnished homes command less rental value than furnished ones, and are therefore harder to find tenants for.