Under Italian law the taxation of buildings is inexorably connected with the Local Land Registry. Italian Income Tax (IRPEF) and local taxes like Italian Council Tax (Imposta Comunale Immobili – ICI) and refuse collection tax (TARSU) are levied on the values / data registered at the Local Land Registry (Catasto) against each property.

It used to be the case that if a building was not fully registered and a detailed map entered at the “Catasto“, effectively it could evade taxation and also, sometimes, the implications of breaches of planning and building regulations. The building or any unregistered changes / variations were unknown to the Authorities.

The same used to apply to farmhouses or other farm buildings (which in Italy are not taxed on their own), which had subsequently been converted to residential use and were therefore subject to Italian taxes. If any such change of use was not duly registered as required by law, taxation was evaded.

The matter came of course to the attention of the Italian Revenue. Following legislation dating back to 2007 (Read article), the current building status of the whole territory of Italy was documented by aerial photography, and the photos were superimposed over the corresponding Local Land Registry maps, thus revealing almost 2 million undeclared buildings (or as they are known in Italy, “Edifici fantasma” – ghost buildings).

Whole lists of “ghost buildings” or partly undeclared buildings were compiled, ordered by district and published on the Internet. The owners were given limited time to apply for registration, failing which registration would be effectively carried out automatically by the Authorities and all charges with fines debited to the tax evading registered owners.

This procedure was still in progress when, on 1st July 2010 special urgent legislation enacted under the umbrella of the Italian 2010 Budget, came into force.

Under this legislation the owners of “ghost buildings” or of partly undeclared buildings must apply for full registration, with the production of detailed up to date maps, by 31st December 2010. This deadline has now been extended to 31st March 2011.

The law then provides that these Returns will be passed to the local authorities, so that any breach of planning or building regulations may be identified and, if necessary rectified. This will involve penalties and charges, but in extreme cases may involve the abusive building(s) being demolished.

If no action is taken by the 31st March 2011, this new legislation provides that the Local Land Registry, pending the process of automatic full registration at the expenses of the owners (which in view of the number of properties involved is likely to be rather protracted in time), may “assign deemed values and income” to defaulting property / buildings, so that taxes will become payable and due, whether the automatic registration has been completed or not, by 31st March 2011.

Thus Italian tax evaders of the building kind will be hit by a triple whammy. “Deemed” immediate taxation which is likely to be higher than the actual tax payable if the building had been duly declared, charges and fines levied by the Local Land Registry on the automatic registration of their buildings, and finally, penalties connected with any breach of local planning and building regulations which may be detected, in due course.

The sting, however is in the tail. Lost in a complex and voluminous raft of legislation mainly aimed at cutting public costs and expenses, a small paragraph states that with effect from the 1st July 2010, any sale of Italian buildings which are not correctly identified at the Local Land Registry and on the corresponding Cadastal maps will be null and void. Basically, this prevents any sale of any “ghost” or not fully declared building, until full registration at the Local Land Registry and full representation in the relevant Cadastal maps.

At the time of completion of any property sale, Italian Notaries are now required to identify on the maps the cadastral parcels in question, and to check that they are correctly registered.

Sworn statements as to compliance with these regulations are also required to be made in the Deed of Sale, by vendors of Italian properties. It will be possible to delegate this responsibility to Italian surveyors, who can produce a certificate of compliance (Attestato di conformita`) instead of the vendor`s sworn statements. Many owners of “ghost” or irregular Italian buildings will thus now find themselves in a most unpleasant situation.

Inevitably, this results in a pitfall for the unwary foreign buyer. If for any reason the Italian building is not correctly registered, and the Italian notary does not detect the problem, and proceeds with the sale, the unwitting foreign buyer will part with his money, but his Italian title deed will be void at law.

In these circumstances, the foreign buyer may have a claim in negligence against the Italian notary, but will not acquire his Italian property.

Caveat Emptor (Latin for “Buyers beware !”).

01.07.2010 Copyrights reserved.
Dr Claudio Del Giudice