ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
a refund by the tax authority in certain circum - stances. Residential Property The sale of residential property by a VAT entity to another VAT entity is generally VAT exempt, except where: • the seller is the developer of a new property or is the company that carried out renovation works on an existing property, provided that the sale is performed within five years from the date of the construction or renovations works being completed; or • the seller is the developer or the entity that performed the renovation works and the transaction takes place more than five years after the works are completed, if the seller exercises the option to apply VAT. In this case, VAT will be applied under the reverse charge mechanism. The following taxes apply on sales of residential properties in VAT exempt sales: • registration tax at 9% of the sale price (the tax authority may verify if the price is in line with the fair market value within two years); • cadastral tax of EUR50; and • mortgage tax of EUR50. In a sale subject to VAT, the registration tax, mortgage tax and cadastral tax EUR200 each will be due. The sale of a real property whose VAT was not totally deducted by the seller VAT entity when it purchased the property is always VAT exempt by law (and liable to proportional registration, cadastral and mortgage taxes).
The purchaser will typically pay the transfer tax and the fees for the notary. Brokerage fees typi - cally range from 1% to 3% of the sale price. If the transfer of the asset is the result of the acquisition of the entity that owns the asset (ie, share deal), the transfer transaction is then VAT exempt and a registration tax of EUR200 will be due, regardless of which percentage of owner - ship in the entity is purchased. No stamp duty will be due in connection with the transaction. However, a financial transaction tax or a Tobin Tax will be due on a purchase of any number of shares representing the corporate capital of a joint stock company ( società per azioni ) but not in the case of quotas in a limited liability com - pany or participation in a real estate alternative investment fund that is an Italian resident com - pany for tax purposes, regardless of whether the purchaser or the seller is an Italian resident person. This financial transaction tax is equal to 0.2% of the sale price. 2.11 Legal Restrictions on Foreign Investors In principle, there are no restrictions on foreign investors acquiring real estate. However, wheth - er or not investors are established in countries that are affected by international sanctions or where rights are limited or restricted will be veri - fied. If it is found that they are, the so-called reci - procity principle or the EU Investment Screening Regulations might apply.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Commercial real estate purchases are gener - ally financed through bank loans, although the
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