Italian rent to buy legislation is covered in full in the Decree 133/2014 – Art. 23 (Decreto Sblocca Italia) and the taxation implications are explained in Italian Revenue Agency (Agenzia delle Entrate) in Circolare 4/E 19.02.2015.
Our Italian rent to buy legislation page is a simplified summary in English to help you decide if rent to buy is a financing option you should consider for your Italian property purchase.
Art.1) The registration of the rent to buy agreement is obligatory. Registration of the rent to buy agreement confers equivalent status to that of a property sale and purchase agreement.
Art. 1-bis) The parties agree the percentage of the full sale price that must be refunded to the tenant/buyer in the event that property ownership does not occur by the expiry date (maximum 10 years).
Art. 2) If the tenant/buyer fails to pay a minimum number of instalments, which must be at least 1/20 of the total number of instalments, the rent to buy agreement can be set aside subject to any termination clause.
Art. 2-bis) If the tenant/buyer defaults, the landlord/seller has the right to use the Italian repossession procedure to regain possession of the property.
Art. 3) The duration of the contract and the related registration can be for a maximum 10 years. During this period, the rental legislation generally applies if compatible with this method of purchase.
Art. 4) Before signing the Agreement, the Notaio is obliged to check there are no charges on the property and there is no obstacle to the ultimate transfer of the ownership.
Art. 5) In case of default by the landlord/seller, the landlord must refund all the capital instalments plus the legal interest.
In case of default by the tenant/buyer, the tenant must vacate the property and forfeit capital instalments already paid along with the initial deposit.
This provision may be varied if agreed between the parties and engrossed into the Contract.
Art. 6) If the landlord/seller is declared bankrupt the contract will not be affected.
If the tenant/buyer is bankrupt the benefits of the contract may be assumed by the liquidator.
Art. 7-8) The protection against the illegitimate occupation of the property generally provided by the Italian Law also applies for the Rent to Buy agreement.
Italian Rent to Buy Financial Considerations
Property transfer tax will become due at the point of the Rogito, the point at which the property will be transferred.
The Rental Tax Law will apply and a 2% Register Tax will be levied on the monthly interest rate if the seller is a physical person. If the seller decides to pay his rental income tax choosing the Flat Tax option (Cedolare secca), then the buyer will not be subject to the 2% Register tax.
A 3% Register Tax will be applied at the point of the Rent to Buy registration by the Notaio. This is the same position as for a Preliminary Agreement for a property sale.
The 3% Register Tax can be offset and thus recovered from the transfer tax (basically 9%, but with exceptions) due on the Rogito.
If the seller is a company (juridical person) VAT regime will apply both for the monthly interest rate and sale-price rate.
Long rent to buy represents a very flexible and convenient way to postpone, partially pay or avoid the payment of a significant element of tax.
Furthermore, a long rent to buy contract allows for a property price to be fixed for later settlement, an opportunity to have a considerable property value appreciation if the market rises.
Additionally, some buyers might elect to choose their Italian property as their Prima casa within the duration of the rent to buy agreement to benefit from the lower rate of transfer tax on main homes.