Buying real estate in Italy — how much is the real price?

Sottodichiarazione works like this. A vendor puts farmhouse in Umbria on the market for €300,000. You strike a deal. Your vendor (or the estate agent) then says ‘We’ll put the price on the deed of sale as €150,000, thereby saving us all lots of money’. With heavy taxes, calculated on the sale price, and levied on both buyer and seller (the buyer may have to stump up 15 per cent in payments at completion), it’s very tempting. Come the gathering of buyer, seller, notaio, real estate agent et al on the day of completion, the notary will subtly absent himself from the room as the document is signed; you will hand over the purchase price, possibly in two chunks: the declared price by way of a cheque from your mortgage lender, the rest in a plain brown envelope stuffed with euros.

Vendors have been known to drive the under-declared price down to around 35 per cent of the true price, though get too greedy and they (and you) are likely to arouse the interest of the tax authorities. There is actually a formula for this. The bottom limit (il minimo consigliabile) is taken to be either 80 or 100 times the rateable value (rendita catastale) of the property given in the land registry document (certificato catastale). The amount you agree must, of course, then tally with the sale amount lodged with the land registry by the notaio.

There are risks with this — not least the fact that it is tax evasion and thus illegal. The tax assessors have three years to assess your valuation and challenge it. Any neighbours with a pre-emptive right to buy (diritto di prelazione) are being asked to match the asking price. This is specifically relevant when we are talking about rights to cultivated land (coltivatori diretti). Note that the tax on agricultural land is much higher than that on dwellings. The rule here is that anyone with the right to buy the real estate may do so at the declared price within a year of the registration of the contract. The same goes for sitting tenants with buying rights. If they subsequently discover you paid a lot less for your Tuscan real estate you could be in big trouble.

Fortunately, the custom is withering away, not through any sudden outbreak of honesty and transparency, simply because the abolition of Capital Gains Tax (INVIM) in 2002 has made it much less worthwhile. Estate agents report that what was once the norm is now a rarity. Nevertheless you may be asked to under-declare (particularly in rural areas). Our advice is always to be above board: this may mean walking away from your dream home in Italy, but there will be others. Better that than be a party to breaking the law.