Italian First Home Benefits for Expatriates

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Law No. 103 of 10.08.2023, coupled with amendments to DL No. 69/2023, has ushered in significant changes to Italian first-home benefits for expatriates. This pivotal legislation not only addresses an infringement procedure initiated by the European Commission against Italy but also introduces key enhancements to the first home benefits regime.

The Innovation Introduced by DL No. 69/2023

DL No. 69/2023 addresses a critical issue flagged by the European Commission concerning first home benefits for expatriates. This decree, aptly named “Salva infrazioni” (Save Infractions), rectifies discrepancies in the application of reduced property taxes for expatriates. Now, expatriates who have resided or worked in Italy for at least five years and are transferred abroad for work reasons can enjoy reduced property tax rates when purchasing a property in Italy.

Understanding Italian First Home Benefits

Italian first-home benefits encompass a range of advantages aimed at facilitating property acquisition for expatriates. These benefits include reduced tax rates, fixed tax amounts, and VAT reductions, making property ownership in Italy more accessible and affordable.

Reduced Tax Rates: Expatriates can benefit from lower registration tax rates, alleviating the financial burden of property acquisition. Under the first home benefits scheme, taxes payable when buying property in Italy include:

For purchases from private individuals or VAT-exempt companies:

– Proportional registration tax at a rate of 2% (instead of 9%)

– Fixed mortgage tax of 50 euros

– Fixed cadastral tax of 50 euros

For purchases from companies subject to VAT:

– Reduced VAT at 4%

– Registration tax of 200 euros

– Mortgage tax of 200 euros

– Land registry tax of 200 euros

These reduced tax rates and fixed tax amounts provide transparency and predictability in property transaction costs, enhancing the appeal of property ownership in Italy for expatriates.

Eligibility Criteria for Italian First Home Benefits

To qualify for Italian first home benefits, expatriates must meet stringent eligibility criteria. These criteria include sole ownership of the property, compliance with municipal constraints, meeting residency prerequisites, and adhering to specific property categorization requirements. Moreover, only properties falling under designated cadastral categories, such as A/2, A/3, A/4, A/5, A/7, and A/11, are eligible for the benefit.

Evolution of Legislation for Italian First Home Benefits

Previous legislation provided exceptions for expatriates, particularly those relocating abroad for work. However, DL No. 69/2023 introduces a refined framework, emphasizing stricter residency and property location criteria. These changes ensure that benefits are directed towards individuals with substantial ties to Italy.

Rectification Procedures and Self-Certification

In cases where applicants fail to declare their residency status abroad at the time of purchase, rectification procedures exist. Italian citizens residing abroad can rectify their status through self-certification, as clarified by the Revenue Agency. This ensures compliance with residency prerequisites and maintains continuity in benefit entitlement.

Changes Introduced by DL No. 69/2023

DL No. 69/2023 introduces a new discipline regarding first home benefits for expatriates. This decree stipulates that individuals who transfer abroad for work reasons must have resided or carried out an activity in Italy for at least five years prior. Additionally, the property must be located in the municipality of birth or where they previously resided or conducted business.

Finally …

Understanding these legislative changes is crucial for expatriates considering property investments in Italy. With over five decades of experience, De Tullio Law Firm has been consistently delivering expert legal advice to international clients. Moreover, while we offer comprehensive legal services across all domains of Italian law, our particular emphasis is on real estate, residency, family law, and inheritance matters.

We take immense pride in providing personalized legal services to our clients. Additionally, we have a strong reputation for delivering pragmatic and efficient solutions. If you are exploring investment opportunities in Italian real estate, don’t hesitate to get in touch with us. We are right beside you, guiding you every step of the way.

 

You may also be seeking information about how to obtain an Elective Residence Visa for Italy or you might like to peruse our series of informational videos.

 

Italian Golden Visa: Unlocking Opportunities

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Dreaming of a life in Italy? The Italian Investor Visa, also known as the Golden Visa is an interesting solution for non-EU citizens who choose to invest in strategic assets that benefit Italian economy and society.

In this blog post we explore eligibility, investment options, and the application process. To discuss your situation and eligibility, get in touch for a free consultation.

What is the Italian Golden Visa?

The 2017 Budget Law introduced the Italian Golden Visa. It allows foreign investors residency in Italy for 2-5 years as well as travel within Schengen countries. This initiative bolsters Italy’s economy and visa system, offering a gateway to long-term investments.

Requirements for the Golden Visa in Italy

To apply, non-EU citizens must:

– Be 18+ or a legal entity’s representative.
– Meet investment thresholds.
– Provide an Anti-Money Laundering Declaration.
– Demonstrate financial stability.

Eligibility of Family Members

Family members can obtain visas and residence permits, fostering family reunification or cohesion.

Types of Golden Visa Investments

Options include government securities, company shares, or philanthropic donations, each with specific investment criteria.

Italian law outlines the eligible investment options for the investor visa application as follows:

– Securities issued by the Italian government: Requires a minimum investment of €2,000,000.00, which must be held for at least 2 years.
– Stocks or shares of an existing capital company operating in Italy: Involves a minimum investment of €500,000.00, to be held for at least 2 years. However, if investing in an existing innovative Italian startup, the amount is reduced to €250,000.00.
– Philanthropic donation to an Italian non-profit organization: Supporting public interest projects in sectors such as culture, research, migration management, or restoration of natural/artistic resources requires a donation of at least €1,000,000.00.

Additionally:
– The applicant must demonstrate ownership and be the beneficial owner of at least €2,000,000.00 (in the case of securities) or €1,000,000.00 (for shares/stocks or philanthropic donations), which must be available and transferable to Italy.
– A written declaration committing to using the funds for eligible investments or donations within three months of entry into Italy is required.
– Sufficient resources, beyond the investment funds, must be demonstrated to cover the applicant’s living expenses during their stay in Italy, exceeding the minimum level for exemption from healthcare expenditure as per the law.

Anti-Money Laundering Declaration

Only single investments are permitted, with funds verified for legitimate origins.

Transferring Funds and Nationality Considerations

Transferring funds to Italian banks may ease the application process. Nationality doesn’t directly affect eligibility, but origins of funds may trigger scrutiny.

Additional Considerations and Investment Types

Ensure compliance with Italian law when choosing investments, whether in companies or bonds.

How to Obtain the Golden Visa in Italy

The Investor Visa falls outside the annual entry quotas set by the Italian Government, allowing applications at any time without quota restrictions.

The initial step involves applying for a Nulla Osta, available through the Ministry of Economic Development’s online portal. The application requires submission of:

– Personal details
– Passport copy
– Applicant’s CV
– Investment type indication
– Evidence of investment ownership
– Clean criminal record confirmation
– Investment description and recipient consent attestation

Following a preliminary review by the Committee’s Secretariat, the application undergoes evaluation, with the Committee typically issuing the Nulla Osta within thirty days.

Subsequently, applicants have six months to visit an Italian diplomatic mission in their home country to finalize the investor visa application. Entry into Italy is permissible within two years of visa issuance.

The investor visa grants a two-year validity period in Italy. Upon arrival, applicants must apply for a residence permit for investors at the Questura within eight days. This permit remains valid for two years from the date of entry into Italy.

Issuance and Maintenance of Residence Permit

Investors must fulfill investment commitments and maintain original investments for permit validity. Renewals and citizenship opportunities follow.

Incentives for Investments in Italy

Tax incentives and work permit options enhance the allure of Italian residency for investors and their families.

Special Italian Tax Regimes

Impatriates Regime

Designed for employees and self-employed individuals relocating their tax residency to Italy for work. Income from dependent work or self-employment in Italy is taxed at 30% for 5 years, or 10% in Southern Italy. The regime can extend for 5 more years under specific conditions, with 50% of income taxable during this period.

New Tax Regime for Resident Pensioners

Non-resident pensioners in Italy receiving foreign pensions can opt for a 7% flat tax on foreign source income if they meet certain criteria and reside in qualifying municipalities.

Special Tax Regime for High Net Worth Individuals

Available to those not tax residents in Italy for 9 out of 10 years preceding their transfer. Exempts them from applying a substitute tax to foreign income.

Italian Tax Incentives for Foreign Professors and Researchers

Offers a 90% reduction in taxable income for researchers and professors, with durations of 8, 11, or 13 years, contingent upon residency in Italy.

Finally …

To navigate the complexities of the Italian Golden Visa, expert legal counsel is essential. With over five decades of experience, De Tullio Law Firm is your trusted partner, offering personalized advice to international investors. Specializing in real estate, residency, family law, and inheritance matters, we ensure pragmatic solutions tailored to your needs. If you’re considering investment in Italian real estate, contact us today. We’re dedicated to guiding you through every step of the process with confidence and clarity.

Italian Tax Residency Changes 2024

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Italy’s fiscal landscape recently underwent significant change with the enactment of Article 1 of Legislative Decree No. 209 on December 27, 2023, titled “Implementation of the tax reform on international taxation.” This pivotal decree ushered in Italian tax residency changes, particularly impacting existing favourable tax regimes. In this guide, we explore these changes.

Italian Tax Residency Changes Revise Residency Criteria

Effective January 1, 2024, the amended Article 2, paragraph 2, of Presidential Decree No. 917 of December 22, 1986, introduces new criteria for determining fiscal residency in Italy. Individuals are now considered fiscally resident if, for the majority of the tax period (over 183 days, fractional days included), they domicile in Italy, hold residency in Italy as per Article 43 of the Civil Code, or are physically present in Italy. This marks a significant departure from the previous criteria.

Furthermore, if individuals register at a local municipality for the majority of the tax period, authorities presume residency unless proven otherwise. It’s crucial to note that this registration is a relative legal presumption, providing an opportunity for “presumed” residents to present contrary evidence demonstrating their actual residence abroad or non-fiscal residency in Italy.

Italian Tax Residency Changes Impact Domicile Interpretation

Notably, the interpretation of domicile has undergone a paradigm shift. The exclusion of the civil code in interpreting domicile now places exclusive importance on the “place where personal and family relations primarily develop.” This legislative change establishes a clear hierarchy among the linking criteria, emphasising personal and family relationships over economic and work-related interests.

However, the reference to the civil law definition of residency under Article 43 of the Civil Code remains unchanged, creating an interesting interplay between the two criteria.

Italian Tax Residency Changes Link Criteria to Physical Presence

Starting January 1, 2024, authorities have introduced a new criterion linking physical presence within national borders for the majority of the tax period. This criterion, however, does not align with the expectations set by the Delegated Law for the tax system reform (Law No. 111 of August 9, 2023), as it does not introduce the provision for tax year fractionation, commonly known as the “split year.”

Impact on Tax Regimes

The practical implications of these legislative changes on tax regimes are paramount. Let’s delve into two significant regimes affected by these changes: the new-resident regime under Article 24-bis of Presidential Decree No. 917 of December 22, 1986, and the expatriate worker regime regulated by Legislative Decree No. 147 of September 14, 2015, modified by Article 5 of Legislative Decree No. 209 of December 27, 2023.

New-Resident Regime Changes

Article 5 of Legislative Decree No. 209 of December 27, 2023, introduces sweeping modifications to the “new-resident regime.” This regime, in its current formulation, extends tax benefits to income from dependent work, similar income, and income from self-employment produced in Italy by workers transferring their fiscal residency.

Notably, these incomes, up to a limit of six hundred thousand euros per year, now contribute 50% tax. This represents a notable reduction from the previous regime. The new-resident regime is applicable from the tax year of acquiring fiscal residency and for the four subsequent tax periods.

The New-Resident Regime is Contingent on Conditions

 

Workers must commit to fiscally residing in Italy for at least four tax periods.

Workers cannot have been fiscally resident in Italy in the three tax periods prior to their transfer.

If a worker conducts work in Italy for the same employer they worked for abroad before the transfer or for an employer within the same corporate group, they must meet the minimum foreign residency requirement:

  • Six tax periods if the worker was not previously employed in Italy by the same employer or a subject belonging to the same group.
  • If the worker was employed in Italy for the same employer or a group-affiliated employer before transferring abroad, the minimum foreign residency requirement is seven tax periods. Additionally, the worker must carry out work activities in the Italian territory for the majority of the tax period.
  • Workers must possess qualifications or specialisation as defined by Legislative Decree No. 108 of June 28, 2012, and Legislative Decree No. 206 of November 9, 2007.

Additionally, the contribution on overall income is now reduced to 40% if the worker relocates to Italy with a minor. If a child is born during the regime period, application of this benefit starts from the ongoing tax year at the time of the child’s birth. To qualify, during the regime period, the minor child must remain resident in Italy.

These new provisions will apply to individuals transferring fiscal residency to Italy starting from the 2024 tax year

Individuals who transferred their registry residence by December 31, 2023, will continue to apply the previous provisions regarding the application of the new-resident regime.

For individuals transferring registry residence to Italy in 2024, the application of the regime can extend to an additional three years if they became residential property owners, by December 31, 2023, or within twelve months prior to transferring to Italy.

The property must however be the main residence in Italy. The percentage of non-contribution income, for the additional three years, is 50%.

Increase in IVIE Tax Rate

Law No. 213 of December 29, 2023 (Budget Law 2024) introduces an increase in tax rate due on real estate held abroad (IVIE). The rate rises from the current 0.76% to 1.06%. The determination of the taxable base remains unchanged from current legislative provisions. The determination relies on whether the property is in an EU/EEA member state or an extra EU/EEA state. The revenue agency calculates the taxable base on the cadastral value, acquisition cost, or market value.

Increase in IVAFE Rate for Financial Assets Held in Privileged Tax Jurisdictions

Law No. 213 of December 29, 2023 (Budget Law 2024) also raises the rate of the tax due on financial assets (IVAFE) held in states or territories with privileged tax regimes identified by the Ministry of Economy and Finance Decree of May 4, 1999, and subsequent amendments. The rate increases from the current 0.2% to 0.4%.

IVAFE continues to apply to the value of financial products, current accounts, and savings accounts held abroad. The calculation considers the percentage of ownership in the case of joint ownership and the number of days of possession.The value of the financial asset as of December 31 of the tax year or the market value recorded at the end of the holding period in the case of intra-annual transfers represents the taxable base. In the case of current accounts, tax is payable at a fixed rate of 34.20 Euros, indexed based on the number of days of possession.

Note that Switzerland does not fall within the scope of the provision concerning the increase in the IVAFE rate. Starting from the 2024 tax year, Switzerland is no longer listed among the countries and territories in the May 4, 1999 decree. Therefore, financial assets held in Switzerland will remain subject to the 0.2% IVAFE rate.

Changes in Italian Tax Residency apply to the 2024 tax year

The changes in Italian tax residency criteria bring forth a dynamic landscape with profound implications for individuals and their tax obligations. The revised criteria not only redefine the notion of fiscal residency but also reshape the benefits and conditions associated with specific tax regimes. Navigating this new terrain requires a nuanced understanding of the amended regulations and their far-reaching consequences. As individuals and tax professionals adapt to these changes, staying informed and proactive becomes imperative in ensuring compliance and optimising financial outcomes in the evolving Italian tax framework.

Finally …

Understanding and adapting to the changes in Italian tax residency in 2024 may necessitate professional assistance. For those seeking support, the De Tullio Law Firm team, specialists in Italian and cross-border property, inheritance, and tax matters, is “right beside you”. For a free consultation on new regulations or compliance with Italian tax matters, contact us.

Italian Budget Law 2024: Property Matters

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Effective from January 1, the Italian Budget Law 2024 has ushered in a number of changes to Italian property-related matters. This blog post explores the key aspects of changes, shedding light on the implications for homeowners, landlords, and the real estate market. Read the full text of the law in the Italian Gazzetta Ufficiale.

Facilitating Homeownership: Mortgage Innovations under Italian Budget Law 2024

Taking a proactive stance to enhance homeownership accessibility in Italy, the Italian Budget Law 2024 allocates EUR 282 million to bolster the First Home Guarantee Fund. The primary objective is clear: to provide robust support to family units aspiring to step onto the property ladder. Families meeting distinct criteria, such as having three or more children under 21 and meeting specified ISEE (Equivalent Economic Situation Indicator) thresholds, now enjoy prioritized access to mortgages for their first home purchases.

However, this support comes with a critical condition. The continuity of the Fund’s guarantee is contingent on Italy maintaining economic equilibrium. This condition is designed to ensure the ongoing effectiveness of financial support while deterring potential negative impacts on the stability of the fund.

Tax Shifts in Short-Term Rentals

The Italian Budget Law 2024 triggers a recalibration in tax dynamics for short-term rentals (up to 30 days). Landlords who have opted for the flat-rate tax system over progressive income tax will witness a rise in the taxation rate for short or tourist rentals from 21% to 26%, if they allocate more than one unit to short-term rentals. Conversely, the rate decreases to 21% for incomes derived from short-term rental contracts linked to a single real estate unit identified by the taxpayer in their income tax return.

Rental management intermediaries are now mandated to play an expanded role, requiring them to withhold a 21% prepaid tax on the properties they manage. Taxation on rental income will occur during income tax return filing, inline with deadlines set by the Revenue Agency. This shift in taxation underscores the government’s concerted effort to balance revenue streams while acknowledging the pivotal role of the short-term rental market in Italy

Collaboration and Enforcement: A Unified Front Against Evasion in the Italian Budget Law 2024

Emphasizing collaboration between entities, the Italian Budget Law 2024 aims to combat contributory and tax evasion in the field of domestic work. For instance, those involved in cleaning short-term rental properties. To this end, the National Social Security Institute (INPS) and the Revenue Agency will work on achieving full interoperability, exchanging and analyzing information.

The Revenue Agency will make information they acquire available to taxpayers, using it to prepare pre-filled tax returns and notify taxpayers of any discrepancies.

Superbonus Updates: What to Expect from Italian Budget Law 2024

The Italian Budget Law 2024 introduces significant restrictions for the Superbonus, marking the culmination of extensive debate and controversy.

New provisions, effective from January 1, 2024, narrow down the scope and reduce available rates. This is primarily aimed at alleviating the state’s coffers from the excessive costs of the previous 110% Superbonus measure.

In summary, the Superbonus decreases to 70% in 2024. This will further decrease to 65% in 2025 and is now exclusively applicable to condominiums.

Main Superbonus changes for 2024

  • The 110% rate is only applicable to those who assigned their tax credit or the invoice discount for certified interventions by the end of December 2023.
  • Lower-income households, with an ISEE lower than EUR 15,000, qualify. They must have completed 60% of interventions by December 31, 2023. Compensation from the Poverty Fund aims to cover the difference between the 70% and the previous 110% incentive.
  • From January 1, 2024, the Superbonus for single-family homes no longer exists. The extension of the benefit for those who had completed at least 30% of the overall works by September 30, 2022, expired at the end of December 2023.
  • Starting January 1, 2024, the Superbonus switches to a tax credit system only, applicable to 70% of the costs incurred. In case of failing to achieve a double energy efficiency improvement (e.g., from energy efficiency class E to C), the ordinary tax regime applies at 50%.
  • Property owners who have availed of Superbonus 110% and subsequent associated incentives must file a cadastral declaration to rectify the property’s cadastral income. The budget law tasks the Revenue Agency with scrutinizing submissions to guarantee precise data adjustments in the land registry. Anticipate an increase in tax due to the augmented cadastral income for these properties.

Other related changes

  • For the Sismabonus, more stringent controls are anticipated. This aims to reserve the tax incentive exclusively for buildings genuinely damaged by seismic events.
  • The Architectural Barrier Bonus is a tax benefit related to enhancing accessibility for individuals with disabilities or the elderly. It is open to both private citizens and businesses. From January 1, tax credit transfers are available for common areas of residential condominiums. In addition, individuals with incomes below EUR 15,000 can apply for the scheme. This income limit does not apply to disabled individuals.

IMU Exemptions

Italian Budget Law 2024 introduces exemptions from the municipal property tax (IMU) for properties owned by certain categories of individuals. To qualify, you must be engaged in activities providing for the well-being, care, and support of individuals or communities. It encompasses various sectors such as health, welfare, accommodation, education, culture, sports, recreation, and scientific research. Essentially, it denotes activities that contribute to the overall betterment and support of individuals and society. To qualify for IMU exemptions, these activities cannot be of a commercial nature.

Withholding Tax on Property-related Bank Transfers and Real Estate Agency Commissions

Expect a rise from 8% to 11% in withholding tax. This is applicable to recipients of deductible charges – expenses subtracted from taxable income – and those eligible for tax deductions, such as individuals who can reduce their taxable income through specified deductions. Withholding tax extensions encompass various commission categories.

Ivie and Ivafe Increases

The 2024 Budget Law sees an increase in mini-wealth taxes on real estate and financial products held abroad by Italian residents.

It includes raising the IVIE (Imposta sul Valore degli Immobili all’Estero), tax on foreign real estate from 0.76% to 1.06%, impacting properties outside the EU or EEA.

IVAFE (Imposta sul Valore delle Attività Finanziarie detenute all’Estero), tax on financial products, bank accounts, and savings held abroad by Italian residents will double from 0.2% to 0.4%. The Budget Law only impacts assets in blacklisted countries. From January 1 2024, Switzerland is no longer on the blacklist. Consequently, the taxation of financial products held there will remain unchanged.

Notably, the increase won’t affect those under the ‘regime for new tax residents,’ exempt from monitoring and taxes on foreign assets and investments.

RAI Television Licence

The Italian Budget Law 2024 decreases the RAI television licence fee, from EUR 90.00 to EUR 70.00 per year.

Finally …

Understanding and adapting to the changes brought about by the Italian Budget Law 2024 may necessitate professional assistance. For those seeking support, the De Tullio Law Firm team, specialists in Italian and cross-border property, inheritance, and tax matters, is “right beside you”. For a free consultation on new regulations or compliance with Italian tax matters, contact us.

House in Italy: Online Registration of Preliminary Contracts

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Buying a house in Italy?

The preliminary contract is a crucial document when buying a house in Italy, as it outlines the specific terms and conditions of the transaction.

It is often necessary to carry over the terms and conditions from the reservation offer to the preliminary contract. Moreover, the notary public will use the preliminary contract, or “contratto preliminare di vendita” to prepare the deed of sale during the final stage of the purchase process.

Fortunately, buying a house in Italy has recently become easier. On March 7, 2023, the Italian Revenue Agency launched an online system that allows buyers to register their preliminary contract of sale. Prior to 7 March 2023, registering a preliminary contract entailed visiting a local tax office, within 30 days from the date of signing. The new online development removes the need to visit the tax office. In effect, it simplifies the registration process, saving buyers and sellers both time and effort.

Why register a preliminary contract when buying a house in Italy?

In Italy, it is not mandatory to register the preliminary contract with the Revenue Agency. However, it is recommended to do so. Registering the preliminary contract can be done either by the buyer or the seller. The registration of the preliminary contract can be helpful for several reasons:

Legal protection

Registering the preliminary contract provides legal protection to both the buyer and the seller. It establishes a written record of the agreement between the parties, which can help prevent disputes and misunderstandings later on.

Prevents double-selling

Registration of the preliminary contract can help prevent the seller from selling the property to another buyer. This is because the registration creates a public record that the property is under contract, which can be viewed by anyone.

Avoids disputes

Registering the preliminary contract can help avoid disputes between the parties, as it provides evidence of the terms and conditions agreed upon by both parties. If a dispute arises, either party can use the registered contract as evidence in court to support their position.

Protects the buyer’s rights

Registering the preliminary contract can protect the buyer’s rights in case of any issues that may arise during the sale process. For example, if the seller fails to transfer ownership of the property, the buyer can use the registered contract as evidence of their right to the property.

Clarifies the sales process

Registering the preliminary contract can help clarify the sales process for both parties. It sets out the terms and conditions of the sale, including the agreed purchase price, payment terms, and deadline for completion of the sale. This can help ensure a smooth and transparent transaction for both parties.

Buying a house in Italy: registering the Preliminary contract online

The new online service makes it possible to send the preliminary contract registration request for a house in Italy directly from your computer. It will also allow you to attach all the necessary documentation, including the preliminary contract and any plans relating to the property. Since there is no need to submit hard copies of the documents, the registration process will be faster and more efficient.

To register online, you will have to log in through the required procedure in the new RAP service. The new format facilitates the registration process and ensures that users submit all the necessary information correctly.

How to use the online service

The new form requires that the user indicate the necessary data and attach a signed copy of the contract along with any other relevant documents, including private deeds, inventories, maps, plans, and drawings.

Once the user enters the required information, the system will automatically calculate the stamp duty and registration fee, which the user can directly pay online.

Finally …

If you are thinking about buying an Italian property, why not talk to us? De Tullio Law Firm can advise and guide you throughout your Italian property purchasing journey. We have over 55 years of experience working with clients on their Italian and cross border property, family and inheritance matters. Get in touch.

 

You may also be interested in Buying property in Italy.

 

Italian Budget Law 2023. Property-Related Measures.

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Italian Budget Law 2023

The Italian Senate approved Italian Budget Law 2023 on 29th December, 2022. The Budget Law came into effect on 1st January, 2023.

In this article, we outline the main budget and bonus measures pertaining to Italian property.

Superbonus: anti-seismic renovations and energy efficiency improvements

During the COVID pandemic in 2020, the Italian government launched its Decreto Rilancio. This decree introduced the Superbonus 110%. It aimed to kick-start the Italian economy by incentivising property owners, tenants, those with usufruct or comodato d’uso to carry out anti-seismic renovations and energy efficiency improvements on Italian properties. Examples of work that qualify for the Superbonus include installation of photovoltaic systems and electric vehicle charging stations inside a property.

Qualifying renovation work attracts a tax credit of up to 110% of installation expenses. You can offset this tax credit against your tax liability in 5 equal instalments, or pass on the costs to the contractor or, alternatively, you can sell the costs to a financial institution.

Legislative Decree Aiuti quater, which will soon become law, reduces the Superbonus for 2023 from 110% to 90% and extends the possibility of applying the discount to invoices or assigning the tax credit – in 10 instalments instead of 5.

In addition, the Legislative Decree Aiuti quater also sees the Superbonus continuing into 2024 and 2025. However, tax credits will decrease from 90% to 75% for 2024 and then to 65% in 2025.

That said, Italian Budget Law 2023 grants the possibility to remain at the full 110% version of the Superbonus for condominiums which submitted a CILA (Comunicazione di Inizio Asseverata) before 31st December 2022. The full 110% Superbonus also remains available for single-family properties provided at least 30% of renovation work was completed by 30th September, 2022 and that all work is finished by 31st March 2023.

Green Home Bonus for New Property Purchases from Builders

Italian Budget Law 2023 provides for a deduction of 50% on VAT for purchases of energy-efficient homes (Class A and B).

Purchases must be made by Dec. 31, 2023 – directly from the builder.

Italian Budget Law 2023. First Time Buyer Bonus

 All deeds of sale signed in 2023 for first homes purchased by those aged under 36 can benefit from tax relief.

– Those property purchases not subject to VAT, are exempt from registration, mortgage and land registry taxes.

– For property purchases subject to VAT, in addition to exemptions from registration, mortgage and land registry taxes, a tax credit of the amount equal to VAT paid to the vendor is also available. 

Mortgage Rate Switches

Italian Budget Law 2023 reintroduces a measure relating to mortgages. This allows people to switch from a variable to fixed rate mortgage. This is particularly relevant given current increases in interest rates.

Borrowers who have a variable rate mortgage of less than €200.000 (threshold amount) and a current ISEE[1] not exceeding €35.000 can renegotiate their mortgage terms from variable to fixed.

This facility also extends to the previously mentioned first time buyers under the age of 36.

Furniture Bonus for Property Renovations

Italian Budget Law 2023 sees an extension to the furniture bonus. This provides a 50% deduction on purchases of furniture and household appliances, provided purchases are in the context of a general renovation of a property.

The minimum expenditure for furniture and appliances in order to claim the bonus is €8,000. To qualify, the furniture must be new, not second hand. Furniture that qualifies for relief includes cabinets, chests of drawers, desks, bookcases, chairs, sofas, armchairs. However, curtains, doors and any flooring work are excluded.

The bonus is also available for the purchase of appliances such as refrigerators, freezers, washing machines, electric heating appliances, etc., provided the appliances meet basic energy-saving requirements. Class A for ovens, Class E for washing machines, dryers and dishwashers, Class F for refrigerators and freezers.

Architectural Barriers – Accessibility And Mobility Bonus

Italian Budget Law 2023 also confirms the extension of the accessibility bonus until 2025. This measure consists of a 75% tax deduction for work to remove obstacles to mobility. The bonus is applicable for any work that makes a property accessible and usable to people with disabilities or reduced mobility. All eligible work must be documented. You can choose to offset this tax credit against your tax liability in 5 equal instalments, or, alternatively, you can sell the costs to a financial institution.

Italian Budget Law 2023. IMU Exemptions 2023

The Single Municipal Tax (IMU – Imposta Municipale Unica) is a compulsory tax on Italian property. The 2023 Budget Law continues to exempt properties used as primary residences from IMU, provided they are classed as NON-luxury in the land registry category. That is, properties other than those in categories A/1, A/8 and A/9. Also exempted are their outbuildings, up to a maximum of three, each belonging to cadastral category C/2, C/6 and C/7.

As of January 1st 2023, properties that are squatted are exempt from paying IMU. This exemption is only valid for the months of the year in which the building is squatted, and the exemption is not automatic. You must first make a report to the competent judicial authority, following which, you can make an application for exemption to the municipality in which the squatted property is located.

Simplified tax liabilty settlements and waivers

The Italian Budget Law 2023 introduces a simplified settlement on tax demands, assessment notices and pending tax disputes. It also provides for a so-called ‘special’ regularisation for formal breaches and other irregularities concerning certain tax periods.

In addition, Italian Budget Law 2023 makes provision for tax liability waivers. These write-offs are valid on amounts of up to €1,000, subject to specific conditions. Under other circumstances, there is provision for facilitated settlement of tax liabilities for certain tax periods. This aims to reduce penalty and interest payments as well as provide the taxpayer with the option to pay tax liabilities in instalments.

Finally …

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice throughout Italy. We are specialists in cross border property, inheritance and family law.

If you would like further information about Italian property and tax matters, we are here to help. For more in-depth information about anything mentioned in this article, please get in touch with us.

You may also be interested in Buying property in Italy. You may also like to watch some of our info videos on Italian property, succession and family law.

[1] The ISEE, or Indicator of Equivalent Economic Situation, is the main tool for accessing certain bonuses or subsidised social benefits. It is basically the economic “identity card” of the household, i.e., of all the people reported on the so-called “family status” who are found to be cohabiting at a given dwelling.

 

Resident in Italy for tax purposes?

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One or more of the following conditions makes you resident in Italy for tax purposes

According to the provisions of Article 2 (2) of the Italian tax code, Testo Unico delle Imposte sui Redditi (TUIR), if you spend more than 183 days per fiscal year in Italy, the Italian tax authorities will consider you resident in Italy for tax purposes.

If you meet one of the following conditions, you qualify as a resident for Italian tax purposes:

– you have registered at your local town hall’s (comune) registry office;

– you have your domicile in Italy, i.e. your principal centre of business, economic and social interests, e.g. your family, as defined by paragraph 1 of Art. 43 of the Civil Code;

– you have your residence in Italy, i.e. your habitual abode, as defined by the paragraph 2 of Art. 43 of the Civil Code.

The requirements indicated by TUIR are stand-alone: the occurrence of one of the above conditions is sufficient for the Italian tax authorities to consider you resident in Italy for tax purposes.

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Registration at your local comune confirms your residence for tax purposes in Italy

If you spend more than 3 months in Italy you must register at your local comune.

Your registration with a comune presumes your residence in Italy for tax purposes.

At the end of your stay in Italy, you should de-register from your comune.

Double Taxation Agreements for residents of two countries

Double taxation agreements (DTA) protect a government’s rights to collect tax and protect against attempts to avoid or evade tax. DTA contain provisions for the exchange of information between national taxation authorities. There are more than 3,000 DTA world-wide.

If you can prove you are resident in two countries, you may have recourse to the application of Article 4 of the relevant DTA in order to resolve any conflict of dual residence for tax purposes. You can find more information about DTA here.

The onus is on the taxpayer to provide documented evidence of tax residence outside Italy

You will need to request a certificate of tax residence under the relevant DTA. It is also important to keep records such as travel documents and receipts. These help evidence how long you were physically present in Italy in any given fiscal year.

Finally …

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice. If you need support with your Italian and cross border tax matters, we are here to help.

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Italian Inheritance Tax

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Do beneficiaries need to pay tax on Italian inheritance?

This is a question we are often asked at De Tullio Law Firm. The answer is yes. Beneficiaries need to pay Italian inheritance tax.

Who calculates Italian inheritance tax?

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When you become the beneficiary of an inheritance you may have to submit a statement of succession, “Dichiarazione di successione”  to the Italian tax authorities, “Agenzia delle Entrate”.

Firstly a succession procedure needs to be opened. Once this has happened, you can file the statement of succession. Although it is not always the case, the opening of a succession procedure usually coincides with a testator’s death. Your filing with the tax authorities should take place within 12 months of the succession procedure opening.

Once they receive the statement of succession, the tax authorities will calculate the amount of tax due on your inheritance.

It is worth noting however, that there is no obligation to file a statement of succession if the estate does not comprise any real estate. Likewise, if assets are valued at less than Euro 100,000 and the beneficiaries are a spouse, children and/or other direct heirs.

What is taxable?

In effect, Italian inheritance tax applies to the entire net value of the deceased’s estate. This therefore includes both movable and immovable assets.

Immovable assets include houses, shops, buildings, agricultural or building land.

Movable assets could for example include, boats, jewellery, works of art, bank and post office current accounts, money, investments such as shares, bonds, trust funds.

In addition, companies and shareholdings in companies are taxable. However, there are exceptions to this which would exempt heirs from inheritance tax.

How is Italian inheritance tax calculated?

Basic inheritance tax in Italy, “Imposta sulle Successioni” equates to 8% of the estate.

However, rates depend on the relationship of the beneficiary to the deceased.

The Italian inheritance tax rate drops to 6% between siblings, relatives up to the fourth degree cousins and relatives up to the third degree. This might for instance, be a spouse’s uncle. In the case of direct heirs such as the deceased’s children, spouse or registered partner, the applicable tax rate is 4%.

Summary of Italian inheritance tax rates

Heir Rate (Aliquota) Exemption up to
Spouse, relatives in the direct line of descent  (parents, grandparents, children, children’s children…) 4% 1.000.000 euro
Brothers and sisters 6% 100.000 euro
Other relatives up to grade 4, related in the direct line of descent, related in a collateral line up to grade 3 6% No exemption
Other subjects 8% No exemption

Finally …

Because Italian inheritance can be a complex matter and each case is different, we recommend that you seek expert support and advice.

If you wish to discuss your case with us or you are feeling unsure about anything related to Italian inheritance, do not hesitate to contact us for a free preliminary consultation.

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You may also like to watch our info videos on the subject of Italian inheritance law.

Budget Law 2020 – Imposta Municipale Unica (IMU)

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Budget Law 2020 merges former Italian property taxes to create a new IMU

Italy’s 2020 Budget Law (art. 95) has seen the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

However, tax payments for garbage collection and disposal, known as TARI (Tassa Rifiuti), remain separate.

By switching to a new version of IMU, the Italian government aims to afford more autonomy to local municipalities (comune) in setting their IMU rates.

In addition, the government is looking to shore up tax evasion. Annual differences between expected property tax revenue and what actually lands in the state coffers runs at about EUR 5 billion.

The 2020 Budget Law also allows for reduced penalties if property owners the opportunity to make voluntary corrections to remedy delays or omissions for past IMU.  This opportunity also extends to non-Italian nationals, who may not be aware that they have Italian tax liabilities and payment deadlines.

Overall, the new version of IMU facilitates the application of what was previously a cumbersome system. Moreover, from 2021, the government has started making pre-filled tax return forms available to taxpayers.

Budget Law 2020: Who pays the new IMU?

Because IMU is a tax on second homes, principal residences are exempt – unless they are luxury properties categorised as A1, A8 or A9 in the land registry.

For legal purposes a principal residence is the property in which the owner and/or members of the family habitually live and have their registered residence. If however, members of the same family have their habitual residence and registered residence in more than one property located in the same municipality, the new IMU payment exemption will only apply to one of those properties.

Property owners, or those with rights to use the property pay IMU. There are some exceptions to this and if you need any advice or guidance related to the new IMU, we are here to help.

Budget Law 2020: How is the new IMU calculated?

IMU is a municipal tax. Although rates are capped, each local municipality sets its own rates on an annual basis.

In order to calculate your IMU payments, you need to consult property records to ascertain its tax value category. Additionally, you will also need to know the tax value of any outbuildings on your property. Check the property records at your municipal land registry or, in some municipalities, you can retrieve property information online.

Depending on the land registry category, the following coefficient multipliers apply to a revalued taxable annuity of 5%:

Land Registry Category Coefficient
Group A (excluding A/10) and cadastral categories C/2, C/6 and C/7 160
Group E and cadastral categories C/3, C/4 and C/5 140
Group D5 80
Group A/10 80
Group D, except buildings in cadastral category D/5 65
Group C/1 55

To demonstrate how to calculate the new IMU, let’s take a practical example:

A second home in category A/3 with a property tax value of €600:

Property tax value €600 + 5% revalued annuity = €630

€630 x 160 (coefficient for category A/3) = €100,800

€100,800 divided by 1000 by 10.6 = €1068.48 (we applied an IMU rate of 10.6 set by the municipality)

€1068.48 is thus the new IMU amount payable in two equal instalments.

You may be able to benefit from a 50% IMU reduction for buildings of historic or cultural interest, buildings registered as uninhabitable and/or uninhabitable and unused. Likewise a reduction is available for properties on loan between parents and children, so long as they are used as a principal residence.

When is the new IMU payable?

In the same way as the old system, the new IMU tax is payable in two instalments. Payment deadlines are mid June and mid December every year. In other words, each June, taxpayers must pay half of the annual total of IMU due, applying the rate and making any applicable deductions from the previous year.

The balance of the new IMU tax is due each December, calculated on the rates approved by local municipalities, which issue their local rates by the end of October each year.

How do you pay the new IMU?

There are several options for payments of the new IMU tax. Either you can fill in an F24 form online at your Italian bank’s website or you can print off a filled-in F24 form and pay at a post office or bank counter. On the other hand, you can use a payment slip at the counter of an Italian post office or use the Italian post office website.

Although they are not yet widespread,  local municipalities have started introducing their own public administration digital payment platforms.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 


You may also like to read about tax measures in the 2020 Italian Budget Law.

Italian Income Tax – New Measures from 2020

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Italian Income Tax Relief

In order to foster economic growth, as part of the Italian budget law, art. 5 of, “Decreto Crescita” came into effect in December 2019. Legislation provides for significant changes to the Italian income tax system for anyone who transfers their tax residence to Italy from 2020.

The law is retrospectively applicable to anyone who transferred their tax residence to Italy from 30th April 2019.

Who can benefit from Italian income tax measures introduced in the 2020 budget law?

Legislation on income tax now extends to foreign football players and other professional sportsmen and women. The law establishes a 50% reduction on income tax. It applies for 5 years provided the sports professional maintains their tax residence in Italy for at least two years. For those not from the sports arena, tax relief of 70% is also available. If for example you generate an income in Italy through employment, self-employment or from business start-up activities.

Income tax relief of up to 90% is available for those who transfer their residence to one of the following regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily.

In order to take advantage of tax benefits, certain conditions apply. You can transfer your tax residence so long as you were not resident in Italy for the previous 2 tax years. You must undertake to reside in Italy for at least 2 years and, your work-related activity should mainly be in Italy.

There is no requirement for Italian citizens returning to Italy as tax residents from 1st January 2020 to have previously been registered with AIRE (the Registry Office for Italian Citizens Residing Abroad).

Tax relief is applicable for 5 tax years. However, a 50% income tax reduction is available on income you generate in Italy for a further five tax years if you have at least one minor or dependent child. This also applies if the child is in pre-adoptive foster care.

In addition, you must become the owner of at least one residential property in Italy. Your property purchase can take place either following your transfer to Italy or in the twelve months preceding your transfer. You can purchase property in your name, a spouse or partner’s name, in your children’s name or in co-ownership.

High net worth individual Italian income tax system

The 2017 Stability Law remains in force regarding foreign income from real estate investments, dividends, capital gains and other income.

This high net worth individual tax regime  is available if you have not been a tax resident in Italy for the nine (out of ten) years prior to transferring to Italy. The advantage consists in paying a substitute tax of € 100,000 on all income derived from abroad. Sports professionals (football players, basketball players, etc.) can benefit from this tax system.

Flat Tax

The Stability Law of 2019 includes a flat tax regime. This regime is aimed at individuals with a pension or another source of income from outside Italy. You can transfer residence to certain municipalities in the south of Italy and, provided you were not resident in Italy in the five previous tax years, you can opt to pay a flat-rate tax of 7% on your income from abroad.

Building-related taxes

Deductions for energy re-qualification (65%), building renovation (50%) and furniture and household appliance bonuses (50%) concerning the purchase of new furniture for renovated buildings are available.

A new “Facade Bonus” allows for 90% deductions on documented expenses relating to refurbishing or restoring external facades of buildings. As any work to facades must comply with technical regulations, work needs prior assessment and permission.

Capital Gains

The budget law also introduces changes to real estate capital gains. A substitute tax is available if a principal residence or a second home sale meets certain conditions. The substitute tax starts at a rate of 20% on sales of properties that took place until 31 December 2019. It rises to 26% for property sales from 1 January 2020. The application of this regime is optional and should be requested by the notary on the date set for the completion of the sale.

Company shares

The budget law offers terms for recalculating the value of investments in unlisted companies up to January 1, 2020. The drafting and certification of the appraisal, as well as the payment of the substitute tax is due by 30 June 2020.

These terms only apply to private individuals with equity investments unrelated to business operations. In particular, the aforementioned legislation allows the revaluation of equity investments held in companies not listed on regulated markets. Individuals must hold investments at 1 January 2020 and require a sworn appraisal report by 30 June 2020 when the substitute tax of 11% is payable.

Company assets

The budget law allows the revaluation of company-owned assets. Based on 2019 financial statements, the law introduces reduced substitute tax rates:

– from 16 to 12 per cent for depreciable assets;

– from 12 to 10 percent for non-depreciable assets.

In addition, a new provision allows companies to release credit balances recorded in their accounts against the recognition of higher values ​​at a rate equal to 10%.

This option does not concern IRPEF entities with simplified accounts.

New IMU

The budget law introduces a new version of IMU. It sees the merger of former property tax IMU (Imposta Municipale Propria) and the municipal service tax  TASI (Tributo Servizi Indivisibili) to create a new IMU (Imposta Municipale Unica) tax.

Finally …

With over 55 years experience of cross border and Italian property transactions, we understand that Italian property-related tax matters can be confusing. If you would therefore like further clarifications or want to discuss your situation, please contact us for a free consultation. We are here to help. 

 

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