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.
Please do not hesitate to contact our Italian real estate and tax teams for further assistance.
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I am an expert in Italian real estate law, with a deep understanding of the intricacies involved in property transfers, especially in the context of divorces between Italian and non-Italian spouses. My expertise is grounded in extensive knowledge of Italian legal procedures, international private law, and relevant regulations, including the Council Regulation (EC) no. 2201/2003, commonly known as the Brussels II bis Regulation.
In the scenario described, where an ex-spouse is ordered to transfer an Italian property or shares in the property to the former spouse, the process involves specific steps and considerations unique to the Italian legal system.
The first crucial step is the execution of a power of attorney. This becomes necessary when ex-spouses cannot attend the 'completion meeting' in person, as might be the case during the current Covid-19 pandemic-related restrictions. The power of attorney allows a trusted third party, such as an Italian solicitor, to act on behalf of the ex-spouses in executing the transfer agreement. The document, if executed outside of Italy, must be notarized and apostilled by a Notary Public.
The second essential step is the execution of the deed of transfer, known as the 'rogito.' Unlike some other countries, in Italy, the transfer of real estate cannot be completed solely through a signed agreement between the parties. The 'rogito' must be executed before an Italian Notary, and it explicitly mentions the foreign divorce or separation order, adhering to the terms and conditions stipulated in the order.
Regarding tax implications, the transfer of an immovable asset in Italy is subject to various taxes such as VAT, stamp duty, mortgage, and registration tax. However, Article 19 of Law 74/1987 outlines a general principle exempting deeds transferring property in marriage dissolution proceedings from stamp duty, registration tax, and any other tax. Notably, there is debate among Notaries about the application of this exemption in the case of foreign divorce proceedings.
The Italian National Council of Notaries has opined in favor of applying the exemption in non-Italian divorce proceedings involving property in Italy. Nevertheless, some notaries adopt a more conservative stance, refraining from recognizing the exemption for property transfers in these cases. An unresolved question pertains to whether the exemption is triggered when former couples resolve their divorce without going to court, in the absence of a foreign court order.
This key aspect needs addressing in advance, as the application of the exemption has implications for ordinary Italian tax regulations. For further assistance, individuals are encouraged to contact Italian real estate and tax teams with expertise in navigating these complex legal and financial matters.
