First Home Purchase
We hear more and more about the concept of “first home purchase”.
However if we try asking to an estate agent to explain in a simple and detailed way the meaning of “first home”, the main differences between a sale subject to registration tax and a sale subject to VAT regime, we don’t always find clear and simple answers.
In this post I will try to briefly analyze, in the clearest possible way, the main characteristics and advantages of a first home purchase, finally clarifying its main aspects.
First of all, what is a first home purchase?
With “first home purchase” we mean in fact a facilitated purchase in terms of taxation in case of some requirements (that we will see later on).
First of all it is important to separately analyze contracts subject to registration tax and those subject to VAT regime.
In the first case (registration tax) there will be a reduction in the share percentage from 9% to 2% (or even 1,5% in case of purchase made with a “property leasing”). In the latter case (VAT regime) there will be a reduction of the share percentage from 10% to 4%.
But when is the registration tax applicable? Let’s go through the various cases:
- The seller is a private person (who doesn’t act in the exercise of a business, art or profession)
- The seller is subject to VAT (construction or refurbishment company), has finished the works (construction or refurbishment) since more than 5 years, and declares not to apply VAT to the buying and selling.
- The seller is subject to VAT and sells a property he didn’t build or refurbish.
When is the VAT regime applicable instead?
- The seller is subject to VAT (construction or refurbishment company) and carries out the buying and selling during the construction or refurbishment.
- The seller is subject to VAT (construction or refurbishment company) and carries out the buying and selling within 5 years from the end of construction or refurbishment works.
- The seller is subject to VAT (construction or refurbishment company) and even if carrying out the buying and selling later than 5 years from the end of construction or refurbishment work he still chooses to apply VAT
Another very important difference between registration tax and VAT regime regards the possibility by the buyer (only in case of registration tax) of asking the notary to apply the “price-value” system, so that the tax amount on which taxes are calculated is the cadastral value (obtained multiplying the cadastral income by 115,5) and not on the real value declared during the buying and selling. With the “price-value” system, taxation is definitively lower if compared to the case of first home purchase subject to VAT.
Let’s go through the essential conditions to be able to benefit from the “First home purchase”:
1 – The property has to be classified in the land register within the catastral categories “A” different from A/1 – A/8 – A/9 (luxury homes, villas, castles or historical and artistic palaces) and A/10 (offices and private studios).
2 – The property has to be in the municipality where the buyer has his residency (or settles it down within 18 months from the notary deed); or in the municipality where the buyer carries out his activity of work or study; or in the municipality in which the buyer’s employer resides (buyer moved abroad for working purposes); or in any other Italian municipality in case the buyer is an Italian citizen has moved abroad, without other homes in the Italian territory.
3 – The buyer also has to declare on his sales/purchase agreement not to be exclusive owner of another home (in property or usufruct) within the municipality of the property he’s buying; not to be owner (not even for shares), even in community of property, on the whole national territory of another home (ownership, usufruct or bare ownership), bought by the same buyer or his/her spouse with the “first home” benefits.
Concerning point 3, it is important to specify that with Stability Law 2016 the “first home” benefits is also applicable on deeds of transfer where the buyer doesn’t meet the requirements of point 3 (but does meet point 1 and 2), but he commits to sell his property, previously bought with the “first home” benefits, within 1 year from the deed of transfer. If this won’t happen on time, the full registration tax of 9% will be applied, together with interests and a penalty of 30%.
The full registration tax of 9% with interests and penalty of 30% (as specified above) will be applied also in case the buyer transfers (for free or with a payment) the property bought with the “first home” benefits within 5 years from the deed; unless he buys within 1 year from the last deed another property to designate as main house.
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