So as you know from episode 2 post it turned out that buying fees and taxes are not so scary as they could be. I have to be honest I was little worried, but thanks to deep research we know now that we can handle them. Uff 🙂
But because we are from Poland we have another crucial issue to be addressed -costs of living. We don’t want to move to Italy and look for regular jobs there. We want to slow our life’s pace and work only on our own projects. Because of this need, the cost of living is a very important factor that we must consider.
I made a simple assessment of the monthly cost of living and received a figure of around 4,000 EU. I think that for many people, especially for those who live in countries with strong currencies like Euro, Dollar or Pounds this 4 000 EU is not a big of a deal. But for us it is. In Poland 4 000 Eu is around 18 000 zł. To understand how much it is let’s take a look on the National average in Poland. In 2019 the National average was around 3 800 PLN (around 830 EU). To give you a reference point lets take a look on the National average in Germany – in 2019 it was around 4 000 EU. So yeah, 4 000 EU monthly is a lot.
So our plan to deal with this living costs is twofold. Firstly, we want to start few businesses here in Poland, develop them as much as possible and take them to Italy. (If you interested to know more about our businesses, feel free to take a look on other sections of the blog). Secondly we want to start some local business in Italy. We want to have a guest house there and some special services for our guests.
The first part (businesses) is going quite well, but they are not generating as much revenue as we would like yet, so we need more time to improve their performance. The second part (guest house) is of course only possible in Italy, but to know what to expect, we made estimations for the performance of the house with 5-6 rooms. Therefore, it is planned to cover 70-80% of living expenses with revenues from businesses created in Poland and 20-30% with income from renting guest rooms.
Unfortunately the COVID-19 came and the situation changed dramatically. Because of the panic and all those restrictions and bans the major recession is expected. Especially in Italy, a country whose revenues largely come from tourism. For this reason, all estimates are pointless now and we have to wait and see what the future holds. Also, I think that this situation can be really big opportunity for us. I think that there is a big chance that this pandemic will cause a massive property price drop in Italy.
So, yes we are taking two steps back and will see how the situation will develop in the near future.
Ok., so we finally are finished our consultation with an Italian Accountant. To be honest we didn’t learn anything that we couldn’t find on the internet already, but what’s very important we were able to confirm the information we found and discuss it in more detail. So, below you can find what we found so far. I think is quite complete guide for buying a House in Italy. At the end of the post I will also write few words about the costs of living in Italy.
Purchase guide and Ownership taxes During the research I found amazing purchase property guide made by Studio Legale Metta for 2018. It is in english (not so common when it comes to Italian companies) and is written in a simple and easy to understand language. You can find there all you need to know about the proces of purchasing a property in Italy and about the taxes and fees related with this process. You can also find there information about ownership taxes and fees. You can download full guide here.
Business costs Because we want to move to Italy with our businesses we are curently building here in Poland we wanted to know how the tax system looks like in Italy when it comes to self-employment. Below you can find information we gathered (remember that it is March 2020 and this numbers may change in time):
The VAT VAT is 22%.
The Income Tax Income tax in Italy is progressive and has the following thresholds:
€ 0 to € 15,000
€ 15,001 to € 28,000
€ 28,001 to
€ 55,001 to
Over € 75,000
The INPS (social security) This is quite a big tax, so be aware and remember that this one will consume a lot of your income. Standard equasion for INPS is: (Total Income – deductible costs)*27-28 % But INPS has an annual minimum contribution of about 3 500 EU (for partner in marriage company) and 3 800 EU one person company. So minimum of 7 000 EU for 2 people company (marriage type).
Accounting cost Of course, the exact numbers depend on the amount of work the accountant will have to do, which is related to the number of documents and invoices you will produce monthly. But we can assume that the costs would be between 2 500 – 3 000 EU annually.
Abroad income, properties and assets If you own a house or other property you will have to pay 0,76% on the market value annually.
If you have financial assets including bank account you will have to pay 0,2% with a minimum of 34 euros for each current account.
If you have income including rentals or interests from financial assets or any income, you will have to pay taxes on it at the regular tax rate (progressive from 23% to 43%) but you may be able to deduct from the amount payable the taxes you have paid already in you country. It depends on whether specific income abroad is regulated by a double taxation agreement.
Tax incentives In some cases you can take advantage of the preferential taxes that the Italian government has prepared as an incentive to attract human capital to Italy. You can download this guide below:
Local differences in taxes Please note that in Italy each region and often each municipality or even city or village may have their very own rules and taxes. So, it is crucial to check this before you decide to buy a property. With that issue I would recommend you to contact Italian accountant.
Living costs This issue is very crucial for us. It’s because we live in Poland and here, we have Polish Zloty (PLN), which is more that 4 times weaker currency than Euro (1 Euro = 4,25 PLN). We have to calcutale everything very carefully, so when we take our businesses to Italy they will withstand currency change and much higher taxes.
I will certainly write a dedicated post about the cost of living, but for now I can say that we have estimated that we need around 4,000 EU per month.
Welcome to episode one. The first of many to come. In each post I will describe what issue we are currently working on, we have just worked or we will be working in the near future. I hope that in time this section will become a mini guide for everyone who wants to know how to carry a project like that and maybe help you make your Italian Dream come true.
So, as you know from the section’s opening post we decided to move to Italy. For us moving to Italy is a part of a larger plan – we want to change our lives and slow down our life’s pace a little. Our business plan for moving to Italy is partly based on the idea to make a guest house there (I will write about our business plan in details in near future). So, because guest house is an important part of our business plan, the house has to meet specific requirements. Because there are thousands of home ads online, before we could start browsing ads, we wanted to specify requirements for our dream home.
Our requirements list looks like this:
Size: at least 200-250 m2, ideally around 400-500.
Rooms: at lest 6, ideally 8-10
Bathrooms: at lest 2, ideally 3 or more
Detached house, free on four sides
Region specific desing, ideally traditional italian stone house
2 or 3 floors with bathroom on each floor
Terrace or/and balconies and ideally large windows
Ready to move in or small renovation works required
House in quiet place, but at the same time not to far from small city or village
Not to far from the main tourist attractions such as a big city or natural attractions located near lake, sea or in the mountains
House in dominant position with panoramic view on mountains, lake or sea.
Medium or large size garden with few trees
Garage at least for one car – ideal for 2
Good quality road leading to the house
Furnished or partly furnished
Possibility of connecting the internet with a good quality connection
The next key thing when it comes to buying a home is of course money. You probably think that this should be the first thing to consider and maybe for you this is the issue number one. But for me, and it’s not just about buying a house, I like to first build the vision of my dream in my mind and then think about the money and how to make it happen. So first I build this picture in my mind:
I see us living in a nice, stone house in a beautiful place in Italy. As every morning, we go out to the terrace for tea and we look at the breathtaking view. In our garden we can see our dog happily gambols. While drinking tea, we think about tasks to be carried out on the coming day and we can’t wait to start. We are happy and calm and we feel really special.
I know the picture is nothing special in general but it is special to me. Maybe your picture would look different? I think it’s worth spending some time visualizing your dreams. In my life I made a lot of many different projects and I made a lot of my dreams come true and I would not be able to do that wihout vizualization. Visualization is a powerful tool that has this magical power of making things happen. I honestly recommend it to everyone.
Ok., so after we did the visualization and requirements for the house, we started to work with the numbers. After short research I found that buying a house in Italy is quite expensive when it comes to transaction costs. According to the report from Global Property Guide it could be even 32% of the property’s value. Below you can find detailed table with fees and taxes and here you can read the whole article about the costs.
3.00 – 7.00%
Value Added Tax (VAT)
4.00% – 22.00%
Land Registry Tax
1.00% – 2.50%
1.00% – 2% (+ 22% VAT)
Real Estate Agent´s Fee
1.50% – 4% (+ 22% VAT)
Costs paid by buyer
9.05% – 32.82%
So, all these fees and taxes are really high even if I would consider the optimistic variant that the costs will be around 10% (and they will probably be more). This is especially problematic for coutries that do not have the Euro or their currency is much weaker than Euro. In Poland we have Polish zloty (PLN) and we have to pay around 4,25 PLN for 1 Euro. So for example if we consider buying a house that cost 250 000 Euro, the fee would be around 25 000 EU. To make you realize how much it is for us, I will say that it is a quarter of the price of a two-room apartment that can be bought in a good district of our capital city, Warsaw.
So knowing exact fees and taxes values for a specific house is crucial information. Reading online articles about fees and taxes are great source of information for the start, but to know the exact numbers we have to contact with some local accountant and real estate agency. To find the italian accountant I used the Advocate Abroad site. Currently we are in the middle of consultation about the costs, so I can’t say if the contact was ok or not. I will definately update this later. The results of this consultation is crucial for our business plan, so we are really looking forward to it. I have to admit that I’m a little afraid of the result of the conversation with the accountant, because I’m afraid that the amount of taxes can make it very difficult for us to make our dream come true. As soon as I will have the numbers I will definately write a post about this.
Regardless of the result of the conversation with the accountant, we have already started looking for a home so that during the next vacation we can see a few of them personally. We currently mainly look for houses on Idealista.it and I can definitely recommend it. It has good interface, very nice search tool (you can draw a search area on google maps), but the most important thing is that its data base is really, really big, so you will not have a problem to find houses in any area you are interested in.
So that would be all about how we defined the criteria for searching for our house, how we determine the budget and where we are currently looking for online real estate sale advertisements in Italy.
The next step will be to create a complete tax and fees table, so we can see how much money we actually have for the house. Then we will start working on a business plan that will show us how our plan looks in numbers.
I love when its warm, the sky is blue and the sun is shining. For me 30 degrees celsius is just ideal temperature. I have always thought that I was born at the wrong latitude and I should live somewhere in the south. Unfortunately I was born in Warsaw, Poland. Don’t get me wrong I love my country and I am really proud to be Polish, but the weather here is just killing me. Although, I must admit that the last two years have been really great, it does not look so beautiful normally. Our polish summer weather is very capricious and unpredictable. You never know if its gonna rain or not, and you can be sure part of your long awaited holidays you will have to spend in hotel room because of the rain or rapid temperature drops.
There is one more thing that makes it very difficult for us to spend our dream vacation in Poland. It’s geography. Like our great comedian Marcin Daniec said in one of his standups: “Every normal country has a sea in the south and mountains in the north. But of course in Poland it must have been the opposite.” As a result, it is often too cold and unpleasant by the sea in the summer, and in the mountains in the winter it is too warm and there is no snow.
But by far the worst for me when it comes to the weather in Poland are the long, dark periods of no sunshine in autumn and winter. Often for many days or even weeks all we can see are dark, steel and heavy clouds that cover the whole sky. Every winter I feel that it will never end and I will never see the sun again. After every winter I am trully exhausted because of lack of the sun. We both with my wife simply love the wormth and hate the cold. That’s why for our holidays we choose mostly south destinations. So few years ago we decided to go on Canarian Islands. We stayed one week on Tenerife and one week on Grand Canaria. Before this trip I was only one week on a boat in Croatia, so for me this was the first true holidays in someplace warm.
The whole holidays were amazing and I simply can say that Canarian Island are true paradise. I remember that waking up with certainty that today the sun would definitely shine was a great experience for me. I felt like a great weight was removed from my shoulders. It was very, very nice feeling. I feel that I never came back from this amazing place. I mean my body is back in Poland but my mind and heart stayed on those amazing islands.
Just after returning to Poland I started to search the information how we can move to Canarian Islands. My plan was simple, we will buy a house and we will start Guest House there. Unfortunately I found very quicky a law that says you can’t rent a home to tourists in which you live at the same time. It simply means that you have to have two houses – one for you and one for tourist. So, because we simply can’t affort to buy two houses, this was the end of the Canary dream for us.
But the idea to move to the south didn’t died with this little spanish obstacle. We continued our search and soon we found two new localizations: Croatia and Italy. We have been in both destinations few times and we loved them both. Two years ago we decided to go on two weeks holiday – one week in Croatia and one week in Italy. The oportunity to be in both countries on the same holiday really helped us made the final decision. We always wanted to live in Italy but we tought that we simply can’t afford it, that’s why we were looking for an alternative locations. Croatia was looking really good especially when it comes to financial issues, so we consider it very seriously. Unfortunately we discovered that many things has changed in Croatia over the last few years and the prices went really high and now there are even higher than in Italy (sic!). In the meantime we did some research about the prices in Italy and we discovered that we are able to buy a House there. So the decision was done – Italy will be our new home!
Ok., so now we only had to pick the region and start looking for a house. In the past few years we visited: Merano, Cortina di Ampezzo, Bergamo, south and middle part of Lago di Como, northern and middle part of Lago di Garda (Molveno, Tenno, Arco, Riva del Garda, Limone, Malcesine, Arco, Bolognano). We love Dolomites, so we liked Lago di Garda the most, especially around Riva del Garda. However, this is one of the most expensive regions in Italy and we don’t think we will be able to find a house that we can affort, so our search is around four regions: Trentino Alto Adige, Lombardy, Veneto and Tuscany.
Moving to Italy is by far the largest and most complicated project I’ve ever carried out. In this section I will describe each step we take to make our Italian dream come true. There are so many aspects that need to be taken into account that I’m sure we won’t have any problems to find new topics.