Jointly or solely-owned real estate in Italy is often involved in divorces between Italian and non-Italian spouses.
What does an ex-spouse (including civil partner) need to do under Italian law when he/she is ordered to transfer an Italian property or the shares in the property to his/her former spouse? What taxes are payable?
In Italy the parties must follow a specific conveyancing procedure, which may differ from other countries. Assuming that the foreign divorce or separation order is recognised in Italy in accordance with international private law (including the Council Regulation (EC) no. 2201/2003, the so-called Brussels II bis Regulation), there are two essential steps:
Execution of a power of attorney
A power of attorney is required when ex-spouses are unable to attend the 'completion meeting' in person (for example, due to the current Covid-19 pandemic-related restrictions). In this case the power to execute the transfer agreement must be given to a third party, who may be a person of trust or an Italian solicitor, who will act in their name and on their behalf. The attorney may also act as 'attorney-in-fact' purposes only. This power of attorney, if executed outside of Italy, needs to be notarised and apostilled by a Notary Public.
Execution of the deed of transfer
In Italy, the transfer of real estate cannot be completed simply by the parties signing an agreement. They must execute a deed of transfer (the so-called 'rogito') before an Italian Notary. After they sign the deed, the legal ownership of the property is transferred to the other party. This deed must mention the foreign divorce or separation order and abide by the terms and conditions they stipulate.
Tax implications of an Italian asset transfer
As a general rule, the transfer of an immovable asset in Italy is subject to several different taxes (VAT, stamp duty, mortgage and registration tax), depending on various factors.
Italian law in Article 19 of Law 74/1987 sets out the general principle that deeds transferring property in the context of marriage dissolution proceedings or the termination of its 'legal effects', are exempt from 'stamp duty, registration tax and any other tax' (the 'Exemption').
This law, however, does not expressly provide for the application of this Exemption in the case of foreign divorce proceedings. This has paved the way for a debate, particularly among Notaries, as to whether or not this Exemption is triggered in this situation.
The Italian National Council of Notaries ('Consiglio Nazionale del Notariato) recently issued an opinion opting for the application of the Exemption also in the case of non-Italian divorce proceedings involving property located in Italy. Notwithstanding this, many notaries tend to take a more conservative approach and do not recognise the exemption for property transfers.
Is the Exemption triggered when former couples resolve their divorce or separation without going to court (i.e. in the absence of foreign court order)? This question is yet to be settled.
The above is a key aspect that needs to be addressed in advance because should the Exemption not apply, ordinary Italian tax regulations would.
Originally Published 1 March 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.