Did your parents or grandparents once fulfill their dream of owning their own property in Italy? Whether it was a vacation apartment on Lake Garda or a house in Tuscany, it is possible that this property will be included in the estate.
But what do you do with the property then? What do you have to consider when you inherit?
Which inheritance law applies? The European Succession Regulation came into force in 2015. This states that in the event of a person’s death, the law of the country in which the deceased person (testator) had their last habitual residence applies.
The problem with this is that habitual residence must be determined on the basis of an overall assessment of the deceased person’s circumstances. Criteria can be, for example, how long and how regularly someone stayed in the country in question or where the center of their life was in family or social terms. This may not be so easy in individual cases.
In the best case scenario, the testator has specified in the will which law should apply in the event of inheritance – German or Italian inheritance law. If this is the case, it is clear which inheritance law applies in this case if the will itself is valid.
Otherwise, it would be necessary to determine exactly where the testator’s last place of residence was in each individual case.
Please note that the legal consequences, such as the statutory succession under Italian inheritance law, can differ considerably from those under German law and may lead to unexpected surprises.
Have you inherited a property in Italy as part of your estate? We can help you determine which inheritance law applies in your case!
- Proof that I have become an heir
In order to be able to prove your own position as an heir, it is possible to apply for a so-called European certificate of inheritance (EU certificate of inheritance). In Germany, the probate court at the last place of residence of the deceased is responsible for this. Heirs, legatees in rem, executors and estate administrators can apply for an EU certificate of inheritance. Heirs can also use it to prove their status as heirs abroad. Please note that fees are charged for the issue of a European certificate of inheritance.
However, it may also be possible to use a “Dichiarazione sostitutiva dell’atto notorietà” – a declaration or self-declaration instead of a notarial deed.
In inheritance matters, these can be used in certain circumstances if certain statements or information need to be provided in the probate proceedings. This could, for example, concern confirmation of the status of the heir or other facts relating to the estate.
Although this can be cheaper and less formal, it can have far-reaching legal consequences, which is why it is essential to consult an Italian lawyer.
- Inheritance notification and inheritance tax return („Dichiarazione di Successione“)
If you wish to accept an inheritance in Italy involving real estate assets in Italy, you must submit an inheritance declaration and thus an inheritance tax return to the relevant tax office (Agenzia delle Entrate). The declaration of inheritance, in which heirs must state their respective Italian tax number (Codice fiscale), is necessary in order to transfer an inherited property. It is also advisable to attach documents such as a European inventory of estates or the will to the inheritance tax return in Italy.
Important! Inheritance tax returns in Italy must generally be submitted within twelve months, otherwise penalties may be imposed! The deadline usually begins with the settlement of the estate, which generally coincides with the date of death of the taxpayer.
- Inheritance tax
Real estate in Italy is subject to Italian inheritance tax. However, spouses and children are subject to an exemption of EUR 1 million. If the value of the inheritance exceeds this amount, this amount is taxed at 4% for children and spouses.
However, it is important to note that a property in Italy that is not subject to inheritance tax there may be subject to inheritance tax in Germany if the tax-free amounts are exceeded! This may be the case, for example, if the testator is or was resident or habitually resident in Germany.
Please note, however, that the acquisition of a property in Italy as part of the succession is also subject to German inheritance tax in Germany, provided that the heir or the acquirer had their domicile or habitual residence in Germany at the time of the inheritance.
Do you have questions about inheritance tax in Germany and Italy because you have inherited a property in Italy? Please feel free to contact us!
The transfer of a property from the deceased to heirs requires entry in the land register (Registro Immobiliare). This is subject to fees, including the Imposta ipotecaria (mortgage tax) and the Imposta catastale (cadastral tax). Imposta catastale and ipotecaria are fees related to the registration of property rights in the cadastre and the registration of mortgages. The amount of the fees depends on various factors, e.g. the value of the property.
Only after the inheritance tax has been paid is it possible to transfer the property to the land registry.
Once you have actually become the owner and can prove it, there are basically two options for what to do with the property: keep it and use it or sell it.
Option 1: Keep and use the poperty
Keeping and using the property is the right alternative, especially if you are attached to the vacation property yourself. But even then, many legal questions arise. This is because Italian law naturally applies to the cottage or vacation home.
1. Renovation & conversion
As a rule, older vacation properties in Italy must at least be renovated, if not refurbished, so that they meet modern living standards. Some people may even want to rebuild and/or extend.
It is not uncommon for permits to be obtained that would not be necessary in this form in Germany. This is because conversion projects must comply with local building regulations, which can vary greatly depending on the region and location (protected landscape area!).
Important! It is important to consult a surveyor or architect BEFORE starting the conversion!
2. Taxes and basic levies
Anyone who owns a property in Italy is also obliged to pay property taxes etc. in Italy. What are the main taxes?
Imposta Municipale Unica (IMU):
The IMU is a municipal tax levied on the ownership of real estate. It is calculated according to the value of the property. The exact amount depends on various factors, including the type of property, its location and use.
Tassa sui Rifiuti (TARI – garbage tax):
TARI is a garbage tax that is applied to all properties, regardless of whether they are used as a primary or secondary residence. The amount of TARI depends on various factors, including the type and size of the property.
Tributo per i Servizi Indivisibili (TASI):
The TASI is a municipal tax that covers services to the community. It is also applied to the ownership of real estate and is based on certain criteria, including the cadastral value of the property.
3. Renting out as a vacation property
If you can’t be in Italy all year round or don’t want to leave your property empty for most of the year, you can rent out a vacation home in Italy – either directly or via portals such as airbnb, booking.com etc.
However, if you want to rent out your property, you shouldn’t just do it “in the black”. This is because taxes are also payable on income from the rental of vacation properties in Italy. In addition, it is important to check beforehand whether tourist rentals are possible in the specific case of your inherited property and whether they require approval.
Ideally, you will find a local company that will take over the entire rental process and also register the tenants with the local authorities.
The income from the rental of the inherited property is subject to income tax in Italy. Taxation in Italy can vary greatly, with the individual IRPEF tax rate or the flat-rate final withholding tax of 26%, among others, being applicable.
As a general rule, rental income must be reported to the Italian tax office and taxes must be paid accordingly. Failure to do so can result in severe penalties. In addition, rental income must also be declared in Germany.
If you have any questions about the taxation of rental income from Italy in Germany, our tax advisors will be happy to help you!
Option 2: Sell the property
Another option is to sell the property. This may be necessary if several heirs are unable to agree on the further use of the property and a sale of the inherited shares fails.
But even if there is no interest in the property in Italy or the maintenance is too expensive, a sale is a conceivable solution.
1. Brokerage contract with Italian broker, brokerage fee etc.
Only a good estate agent can guide you confidently through the sale of your property in Italy. As the estate agent is your point of contact for all matters relating to the sale of your property, the agent should ideally speak Italian and German or English.
When choosing a real estate agent, make sure that it is an “official” agent who is registered with the local Italian Chamber of Commerce and not a person who sells properties more or less professionally from time to time. This is because real estate agents in Italy must be professionally qualified and have an appropriate license including liability insurance (Assicurazione contro la Responsabilità civile) for their professional activities.
The costs for an estate agent/the estate agent’s commission are not legally defined in Italy. What is special in Italy is that the estate agent receives a commission of approx. 3-4% of the purchase price plus 22% VAT from both the buyer and the seller. However, the more expensive the property is, the lower the commission usually is.
Important: The brokerage fee for the entire purchase price is due in Italy if a binding preliminary contract has been concluded, see below! For this reason, sellers should only conclude a preliminary contract if the subsequent sale is very likely.
2. No real estate sale without a notary
In Italy, too, the involvement of a notary is required for the sale of a property. However, as you are not bound to a local notary, it is advisable to choose a notary who can also draw up and notarize the purchase contract in German, e.g. in South Tyrol.
We will be happy to assist you in your search for a suitable notary in Italy for your real estate sale.
3. Binding preliminary purchase agreement: binding even without a notary!
If you want to sell a property in Italy, you need to be aware of a difference to German law that can cause considerable trouble if the worst comes to the worst: In Italy – unlike in German law – there is a binding preliminary purchase agreement (Contratto preliminare).
The form of the preliminary agreement must be in writing. The parties may choose to conclude the preliminary agreement either by means of a private written document or by contacting a notary to conclude the preliminary agreement by means of a public deed or notarized private written document.
As a rule, part of the purchase price is already due for payment when the preliminary contract is signed. The preliminary contract must also be registered within 30 days of signing. This incurs a registration tax of 200 euros and stamp duty.
If a payment is provided for in the preliminary contract, the pro rata register tax is also due:
- 0.50 % of the amounts provided for as a confirmation deposit,
- 3 % of the amounts provided as a down payment on the sales price.
The conclusion of the preliminary contract only creates a legal obligation between the seller and the buyer. The buyer does not yet become the owner through this contract. It may therefore happen that the seller sells the property to another person, for example, despite the agreement. If one party no longer agrees to the purchase after the preliminary contract has been concluded, there is a risk that the purchase contract will be enforced in court or claims for damages may be made.
Should the buyer withdraw from the contract, the seller may retain the deposit already paid as a contractual penalty.
Attention! Even if this can be financially advantageous for the seller, it is important to be careful here. This is because when a preliminary contract is concluded, the estate agent is entitled to his commission, but based on the full purchase price.
4. Check whether the building complies with building regulations.
Even in Italy, you should not sell a property as a pig in a poke in order to avoid being exposed to claims for defects later on. For this reason, it is important to check with an architect or surveyor before the sale whether the condition of the house complies with the applicable building law and is also entered accordingly in the public registers (land register or cadastre).
This is because it is not uncommon for older houses in particular to have been illegally added to or extended, or their use changed, etc. Such “illegal constructions” should be checked before a sale and, if possible, the necessary permits should be obtained before the property is sold and the buyer is in for a nasty surprise and may demand compensation etc.
If you have inherited a property in Italy, there are different ways of dealing with it. In all cases, however, it makes sense to seek legal advice to avoid any legal or tax surprises – whether in Italy or Germany.
Do you have questions about real estate in Italy & inheritance law?
Feel free to contact me directly!
The information in this article represents initial information that was current at the time of publication. The legal situation may have changed since then, so I recommend that you simply contact us personally to discuss your specific situation.