How to save on buying property in Italy: new build or resale?

Choosing between the primary and secondary real estate market in Italy

At the beginning of the process of buying real estate in Italy, you can save a lot of money by choosing between the primary and secondary market. Secondary housing is often a more economically viable option. The tax rate threshold in this case is only 9% of the cadastral value of the object. In contrast, when acquiring real estate in the primary market, the tax burden significantly exceeds this figure. For example, if the cost of housing reaches 1 million euros, the tax rate can increase to 10%, which leads to an additional cost of 100,000 euros, which the buyer will have to pay to the state.

Government benefits when purchasing secondary housing

When purchasing secondary housing, there is a possibility to apply various government privileges, which are sometimes available to foreigners. At the stage of finalizing the deal, the notary will ask if you wish to take advantage of the benefits related to the first purchase. If the transaction pertains to the first home on the secondary market, the tax rate can be reduced to 2-4% of the cadastral value. Additionally, such buyers are exempt from property tax in the future, making this offer even more attractive.

Conditions for receiving benefits

Nevertheless, it is worth noting that the mentioned benefits are provided exclusively to holders of an Italian residence permit. For those who do not have a residence permit or if the purchased property is not the first home, the tax rate will be 9% of the cadastral value, with an obligatory annual property tax payment. It is also important to keep in mind that residence permit holders are required to pay the annual tax even when purchasing their first home on the secondary market, especially if it is classified as a luxury property with a cadastral class of A/8. This class can be assigned to even relatively inexpensive but spacious houses built before World War II, which are now valued at around one million euros. For such properties, the tax can range from 9,000 to 10,000 euros per year, which places a significant burden on the budget.

Checking the class of the property before buying

Therefore, before making a decision to purchase property, you should check which class the property belongs to. If you plan to take advantage of tax benefits, you will have 18 months to obtain a residence permit. If you fail to meet this requirement within that time for any reason, such as lengthy document processing, the tax authority may send a notice demanding payment of the 7% difference, as well as impose a fine. The amount of this fine varies depending on the value of the property, but on average it is around 400-500 euros.

The process of obtaining residency for foreigners

It is easiest for foreigners and their families, including spouses, minor children, and elderly parents, to obtain residency under these categories.elective residenceandself-employmentThese alternatives significantly simplify the process of obtaining a residence permit and make it easier to purchase real estate in Italy.

Overview of the residence of choice

A residence of choice is a type of permit that does not grant the right to work in the country. To begin the application process, a specific set of documents needs to be gathered. First of all, it is necessary to prepare proof of housing in Italy, which can include either a property ownership document or a long-term lease agreement for a term of 3+2 or 4+4 years. Each applicant is also required to provide evidence of a stable passive income, which must be at least3000 euros per monthper person. Possible sources of such income may include rental income from real estate, dividends from stocks, cash savings, and other financial inflows.

Stages of obtaining residency by choice

The process of obtaining residency by choice consists of several stages. First, you need to apply for a type D visa at the Italian consulate in your country.

Conclusion

In conclusion, I would like to emphasize that purchasing real estate in Italy requires a careful approach and analysis. The choice between new and secondary properties can significantly impact the overall cost. As we discussed, the secondary market offers budget advantages, especially in terms of taxes. The reduction in the tax rate for those buying their first home in the secondary market is a significant benefit, as well as the opportunity to take advantage of government incentives.

It is especially important to remember the tax implications associated with the type of property. Some properties may entail high annual taxes, which becomes a significant factor in the decision-making process. Obtaining an Italian residence permit is necessary not only for tax-related opportunities but also for legalizing your status in the new country.

Key points to consider:

• Secondary market:offers more favorable tax rates.
• Primary housing:grants the right to tax benefits.
• Real estate class:affects annual expenses.
• Residence permit:necessary for obtaining tax benefits.

The process of obtaining a residence permit is another important aspect to keep in mind. It requires gathering documents and following certain procedures. Understanding all the nuances, such as the need to confirm sources of income and the duration of the lease, can save a lot of effort and time. Every aspect of this process deserves attention, as even the smallest mistakes can lead to unpleasant consequences, such as additional fines or loss of residency rights.

In conclusion, I strongly recommend that all potential buyers carefully consider their options. There's no need to rush into a purchase. By making a thoughtful choice, you can not only save money but also avoid many unpleasant situations. Consulting professionals, such as lawyers or real estate agents, can provide valuable advice and help you avoid common mistakes. I hope this article has been helpful to you, and I wish you good luck on your journey through the world of Italian real estate.