The Purchase Deed (Rogito)
Pre-Completion formalities. The Deed of Purchase. (Rogito)
After exchange of contracts and before completion the parties and their advisers are usually involved in organising the documentation and the funds required to complete, finalising matters already negotiated before exchange of contracts, and submitting the documentation to the notary.
Whereas the vendor should produce his Title Deeds (Purchase Deed, or the Italian Inheritance Tax Return duly lodged with the Authorities, relating to the property), and all relevant planning and building licences/certificates, the buyer should organise a Power of Attorney (Procura) and Italian Tax Code Number (Codice Fiscale), and the availability of the funds required to complete.
A Power of Attorney is required when the buyer is not going to attend to the completion formalities in person, and wishes to enable someone else to attend and sign on his behalf. A Procura may also be required if the foreign buyer is not fluent in Italian, and therefore will not, normally be allowed by the notary to sign the completion documents, because he cannot readily understand them. In either case a third party should be empowered to sign for and on behalf of the foreign buyer.
An Italian Tax Code number Codice Fiscale is required to enable the notary to deal with all the post-completion formalities, and to comply with the various requirements of Italian tax law applicable to the owners of real property. It can readily be obtained by applying to the local tax office in person, or by a third party, with a copy of the applicant's passport. In the case of individuals, the Codice Fiscale is a combination of sixteen letters and numbers. Usually the tax office issues a card or a passbook with all the relevant details.
As far as the funds are concerned, the foreign buyer should, at an early stage, find out from the notary dealing with the completion the amount of his fees, the taxes payable, and should calculate the amount of the funds payable to the vendor (list of completion expenses). Normally bankers drafts Assegni circolari are organised, in readiness for completion. These are special cheques issued by a bank, and they are a guarantee that funds are readily available and will be paid on presentation.
Particular care should be taken with reference to any statutory pre-emption rights of neighbours in agricultural areas. Very old and complex legislation entitles farmers and other neighbours to be notified of a proposed sale to third parties, and to have a priority in buying agricultural land offered for sale, in their immediate neighbourhood. A surveyor will, as part of his searches and enquiries, before exchange of contract have informed the buyer of these third parties' rights, and immediately before or if impossible, after exchange of contracts, it will be necessary to serve a copy of the contract on all parties having pre-emption rights, so that a decision can be made within the statutory term (usually 30 days). Serious problems may result from a breach of these third parties rights.
The notary public Notaio is the only professional entitled to transfer legal title to properties in Italy (apart, of course, from transfers ordered by Court Judgments). Although the notary is normally selected by the buyer, he is an independent public officer /professional charged with the duty of drafting the Purchase Deed Rogito finalising the sale, ensuring that title passes legally between the parties, and registration in the Local Land Register. A notary as a public official, is under a specific legal duty to ensure proper payment of all Italian taxes payable on a sale/purchase of property.
Usually, the balance of the agreed price is tendered in the form of bankers drafts Assegni Circolari by the buyer, immediately before completion. A notary is entitled to refuse to act if his fees and any Italian taxes are not so tendered. The notary will also, before completion, deal with the formalities relating to the discharge/cancellation of any existing vendor's mortgage. For ease of reference and economy, they usually deal with any new mortgage application by the buyer.
Various taxes are payable on a sale of property, in Italy. Other, different, taxes are due in Italy while owning the property, over the years, which are not dealt with in this section. On a sale of property, both the seller and the buyer are taxed. The seller is subject to INVIM tax (Imposta Comunale sugli Incrementi di Valore) . This is a tax levied on the capital gains realised on a sale of property, up to and including the 31st December 1992. INVIM tax is calculated by applying index-linked rates of tax to the capital gain realised, which normally is the difference between the purchase price and the expenses incurred in restoring or improving a property and the price collected on a sale. The actual amount of INVIM tax is calculated by the notary and should be tendered immediately before completion.
On the other hand the buyer is subject to Registration Tax (Imposta di Registro) and other minor charges. All together these taxes are calculated by applying a flat rate of tax (11 to the contract price of the property, as stated in the Purchase Deed. A different rate applies to agricultural land. This tax can be halved if the buyer acquires the property in Italy as his main residence (Prima casa). The buyer will also pay the notary's fees.
The local Registration Tax Office will then have two years from the date of completion to make additional tax assessments, based on the presumed (higher) market price of the property in question. As an alternative, and to avoid the risk of additional assessments of tax, it is advisable to declare in the Purchase Deed a price in line with the statutory value of the property in question, as from the relevant entry in the Local Land Register. No additional assessments can then be made in these circumstances.
IVA tax (Imposta sul Valore Aggiunto), equivalent to VAT in the UK, will be payable, when the vendor is a builder or a trader (either a company or a sole trader). There are various flat rates of tax, ranging between 4% and 19%. In this case Registration Tax will be payable for a fixed amount, only.
As already mentioned, completion normally takes place in the notary's office. Whereas the buyer or their appointed attorney will sign and pay the balance of the agreed price by delivering the Assegni Circolari, the vendor will agree to convey the property by signing and delivering the same Title Deed (Rogito).