Italian property leaseback scheme: buying a house in instalments
In 2016, the Italian Stability Law introduced a property leaseback scheme. In effect, this allows buyers to purchase an Italian property without a mortgage.
The property leaseback scheme is available to those whose annual income does not exceed 55,000 Euro. and who do not already own another property.
As this is a financial product, only banks and leasing companies offer property leaseback contracts. The bank or leasing company commits to buy, or to build, a property on behalf of a client, who then becomes the property lessee. The lender therefore owns the property and the lessee has the right to use the property. The lessee pays of an initial instalment and a monthly rent thereafter.
Residence rules apply to the property leaseback scheme
The lessee must be resident at the property. This means the lessee or the lessee’s family must live at the property and use it as their main residence. The lessee must take up residence at the property within one year of taking possession of the property.
Costs and buy back rights
Annual interest payments and fees apply to the Italian property leaseback scheme. These are calculated on the basis of the property purchase price and the duration of the leaseback contract.
When the leaseback contract expires, the client can exercise the right to buy the property through payment of a final instalment. This final payment is established at the outset of the leaseback contract. If the client has a change of heart, the lessee can relinquish the property without any penalty payments.
If the lessee is unable to make the monthly rent because of a loss of employment, there is a one-off right to suspend payments. Rent suspension lasts for a maximum period of twelve months.
Tax incentives to promote uptake of property leaseback
The 2016 Stability law also introduced a series of tax incentives on both direct and indirect taxes. This aims to boost the uptake of the property leaseback scheme.
More specifically, people under the age of 35, can benefit from income tax deductions in the form of a 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. This is available for an annual sum not higher than €8.000. In addition, lessees under the age of 35 can benefit from a 19% deduction on the buy back cost, if the lessee decides to exercise the right to buy the property. This benefit is applicable to sums not exceeding € 20,000.
People over 35 years of age can also benefit from income tax incentives in the property leaseback scheme. A 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. This is applicable to an annual sum not higher than €4.000. A 19% deduction on the buy back cost is also available should the lessee decide to exercise the right to buy the property. This benefit is available on sums not exceeding Euro 10,000.
The key to making your Italian property project as safe and smooth as possible is to appoint a legal team that speaks your language. De Tullio Law Firm has a thorough understanding of Italian property law and decades of experience managing all types of Italian property transactions. Get in touch with us: firstname.lastname@example.org