Tag Archive for: Italy

Abuso edilizio (Unauthorised Construction) in Italy

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Abuso edilizio (Unauthorised Construction) in Italy is not uncommon

Abuso edilizio, or anauthorised Construction, in Italy is a common issue that you might have encountered if you have bought, or are in the process of buying, an Italian property.

What constitutes unauthorised construction in Italy?

In general terms, unauthorised construction occurs when someone makes changes to a property without obtaining legally required permission.

Depending on the seriousness of the offence, a range of sanctions is applicable. There are three categories of unauthorised construction offences in Italy.

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1) Total violation

Work without a building permit or where the work is in total breach of permission. In other words, there is no permit or the building completely differs from the provisions of the permit.

2) Substantial violation

This is work that substantially diverges from the building permit. The work comprises significant qualitative and quantitative differences compared to the authorised project.

3) Partial violation

Here, work partially deviates from the building permit. That is to say, although the work has authorisation, it is not in accordance with the permit.

Unauthorised construction in Italy is a criminal offence

All of the above violations are criminal offences. As such, they are subject to criminal prosecution as well as sanctions. Building offences are punishable not only with administrative sanctions but may also involve arrest and a fine.

In some cases, where someone has unlawfully developed land not zoned for construction purposes, a judge may order the confiscation of the land and property. The land and property therefore become the property of the local municipality and owner receives neither compensation nor damages.

Article 44 of the Consolidated Law on Construction (Presidential Decree no. 380/2001) provides for fines ranging from a minimum of €10,328.00 to a maximum of €103,290.00 depending on the type of offence. In addition, offenders may receive a custodial sentence of up to two years.

Remedial action is possible

For example, you may have increased the volume of your property or carried out renovation work without following the legally required administrative procedure. Or, perhaps you have inherited a property along with zoning and cadastral discrepancies. In both cases legal remedies are available.

Regarding total and substantial violations of building permits you will need a, “Permesso di Costruire in sanatoria”. This may provide an amnesty (condono) which regularises the property. However, this remedy is not applicable to properties in heritage zones or on land in zones where property development is unlawful.

The process of obtaining a Permesso di Costruire in sanatoria is both complex and costly. It involves paying the municipality the normal fee to obtain a building permit to start a new construction project. In addition, penalty payments may amount to double the fee for a building permit. Precise amounts are set by the Italian Regions in accordance with the Consolidated Law on Construction.

A CILA offers a retroactive remedy for partial violations. CILA stands for Comunicazione Inizio Lavori Asseverata (Notice of commencement of certified works). It is a notice you must submit to the municipality prior to undertaking non-routine work on a property. For example, work that does not change the structure of the building but impacts internal layout.

If you submit a CILA once work has started or after the work has finished, this is a CILA “in sanatoria”. Because it is a communication after the event, it entails a fine. €1,000 if the work is already complete and a penalty of €333.33 euros if the work is still in progress.

Finally …

The Office for Italian Statistics (ISTAT), estimates that nationally, some 20% of Italian properties constitute unauthorised constructions. Even more in the southern regions of Italy. On top of these statistics, many properties partially violate legal requirements. For example, they comprise an unauthorised outbuilding or extension.

When you buy an Italian property, it is impossible to tell if there is any unauthorised construction work just from viewing it. To avoid issues such as finding your property is difficult to sell or even unsaleable later on, you should check municipal planning and zoning records and land registry files to ensure that the whole property has all the relevant consents.

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 Italian property transactions.

Get in touch with us: info@detulliolawfirm.com

You may also be interested in Italian Property: Who Is Liable for Defects in Building Work in Italy?

COVID-19: Effects on Italian property prices

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Three main impacts of COVID on the Italian property market but the outlook is optimistic

The Italian Property Market And COVID. What Is The Outlook?

The Italian property market has taken a hit from the COVID health and economic crisis.

Wide-ranging central bank and government policies and stimulus packages are supporting the economy. As emergency restrictions ease, the outlook is optimistic.

The impact of COVID-19 on the Italian residential property market is threefold. Firstly, it creates a natural tendency to worry, making all but the most committed buyers more cautious in the short term. Secondly, on a practical front, travel restrictions have impinged on buyers’ and sellers’ ability to transact, as restrictions limit people’s ability to go about business as usual. Thirdly, the situation generates economic effects which impact the traditional drivers of affordability.

Prior to the COVID pandemic, Italy was experiencing a healthy upturn in its economy

The residential real estate sector particularly in the north of the country was showing a rise in demand for properties and residential construction was increasing.

The uncertainty surrounding the health situation and its duration have seen many would-be investors put their plans on hold. Data for online property listings show a fall in the number of Italian properties on the market. In addition, searches by potential buyers has decreased sharply.

Essentially, the impact of the pandemic on the economy and on property markets extends worldwide. It is not restricted to Italy. Provided that the situation continues to improve, we will likely see a negative effect in the short and medium-term on the real estate market in Italy. However, we expect to see that bounce back as vaccination continues apace and economic recovery gathers momentum.

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The Italian luxury real estate sector reports decreased activity but it is far from paralysed

Initial information shows that luxury real estate is weathering the storm. Although they have slowed, transactions are continuing. It is too early to tell how the situation will evolve economically. However, it seems likely that investors will seek to protect their assets by focusing on safe securities such as luxury real estate. The perceived safe-haven of bricks-and-mortar investments in times of uncertainty helps to underpin values of high-end properties.

Experience from crises such as the recession in 2012, shows that once the most critical period passed, the Italian real estate sector gradually recovered.

Volatility in financial markets and low-interest rates continues. This means the real estate sector could again become a strong investment opportunity as we emerge from the COVID pandemic.

Italian property prices may fall before they rise

There is a general expectation that there will be a fall in property prices for a while. This would make Italy a buyers’ market. Thereafter, in the medium term, prices should increase to previous levels. This means sellers will need to be pragmatic on pricing in the short term, as demand becomes more dependent on needs-based and opportunistic buyers.

Having come through a global financial crisis in 2008, governments and central banks have a better understanding how to act in the face of uncertainty. Since then, they have moved quickly to implement measures to combat economic downturns. The approach of the European Central Bank’s (ECB) and the Bank of Italy’s monetary policy suggests that the low-interest-rate environment is likely to continue.

The Italian government has introduced stimulus packages to support property investments

During the pandemic, the Italian government quickly activated its wide-ranging fiscal easing measures in its, “Cura Italia” decree.

The government later announced a further stimulus package in its “Rilancia Italia” decree. Measures include property-related subsidies and tax benefits to support relaunch and investment in the Italian housing and construction sectors.

The combination of the central bank and government policies should support the economy through the current recession and what could otherwise have been a much stronger blow to economic growth. Furthermore, since the 2008 crisis, obtaining mortgage financing in Italy has become easier and this looks set to continue.

The pandemic has driven new ways of working

Many real estate agents and legal professionals took advantage of the pandemic lockdowns to plan how they will manage business in the future.

As restrictions lift, professionals have turned to technological innovation to serve clients. For example the use of using video calls. This could become the new normal.

At De Tullio Law Firm we have seen an increase in clients using our Power of Attorney services. This allows us to organise clients’ property sales and purchases remotely as well as manage many other property-related matters on our clients’ behalf.

Finally …

If you are thinking of investing in Italian property and would like to talk to us about any aspects mentioned in this article, please get in touch.

We are aware that the pandemic has left the signing of many Italian residential property transactions in the air. Many are worried that they may be in breach of contract. This is particularly relevant if there is no specific reference to a pandemic as a force majeure in their contracts. If you need a legal strategy session to discuss your situation, we are here for you.

You may like to watch our useful info videos about buying property in Italy.

Italian EPC (Attestato di prestazione energetica )

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What is an Italian EPC (Attestato di Prestazione Energetica) ?

An Italian EPC (Attestato di Prestazione Energetica or APE) describes the energy characteristics of a property.

In Italy an APE is mandatory in order to sell or let a property.

When is an APE mandatory?

An APE is a legal requirement that came into effect on 1st July 2009 for property sales and 1st July 2010 for property lets.

Since January 2012, real estate advertisements must include a property’s energy performance index (value in kWh / sqm per annum).

In most cases, an APE is valid for 10 years. In order to maintain the validity of the Attestato di Prestazione Energetica, property owners must have their boilers serviced in accordance with requirements of the Italian law.

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How do you get an Attestato di Prestazione Energetica?

An APE can only be issued by a qualified professional called a,  “certificatore energetico”. Italian Regional administrations are responsible for training and accrediting technicians according to their own regulations.

At the time of writing, about half of the Italian Regions have yet to adopt their own regulations. Where a Region hasn’t implemented its own regulations, national law (Legislative Decree 192/05) applies.

The certificatore energetico is a technical expert with specific skills in the field of building and systems energy efficiency. For example, an architect, an engineer or a surveyor.

How is an APE issued?

An onsite inspection of the property is mandatory.

The certificatore energetico uses software to assess the characteristics of the property. This includes input about structural aspects of the building, walls and frames – both doors and windows. The inspection also takes into consideration the efficiency of heating, ventilation, air conditioning, hot water and energy production systems such as photovoltaic panels.

Based on all the input, the software calculates the property’s level of energy efficiency and the certificatore energetico issues the APE. In addition, the certificatore energetico submits a copy of the APE to the competent Regional authority.

You should keep your APE with your boiler manual and, when you sell or let your property, provide it to the new owners or tenants.

If you are buying a property in Italy, you should request its APE well before you sign a deed of sale.

How much does an APE cost?

There is no set fee. Costs depend on the location and the characteristics of the property. As a guideline, the price of an APE for an apartment varies on average between € 150 and € 250. For bigger properties such as villas, townhouses, shops and offices, the cost is higher.

Why do you need an Attestato di Prestazione Energetica?

As previously mentioned an APE is a statutory requirement.

Its main purpose is to evaluate the financial implications of energy consumption when buying or renting a property. An APE also provides recommendations to reduce energy consumption and costs.

Although, it may seem like just another bureaucratic process, the APE is a document that can help with marketability. Properties with lower energy consumption are more sought after when it comes to selling or letting them.

In addition, the Italian government offers green incentives for energy efficient new build constructions and renovations to existing properties that improve energy efficiency. For renovation-related incentives, you can use before and after APEs to prove that you have improved energy efficiency.

Avoid Attestato di Prestazione Energetica scams!

There have been a number of scams associated with APE issuance. Our advice is to make sure you check that your certificatore energetico has been accredited by your Region. Compare estimates in your area. Make sure that the estimate includes VAT, postal costs, expenses and any other additional costs. Be wary of excessively low prices or anyone who tells you that you don’t need an onsite inspection. And watch out for intermediaries who offer their own expert at an excessive price.

Finally …

An APE is also useful when obtaining a Certificate of Habitability for a property.

If you have any questions about an Attesto di Prestazione Energetica, or if you need support or help with getting an APE, we would always advise that you seek independent legal advice.

 

You may also be interested in What is an italian Energy Performance Certificate?

You may also like our info videos about Italian property 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.

Renovating a house in Italy: Safety Requirements

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Renovating a house in Italy. Health and safety law

Who is liable for compliance with safety requirements when renovating a house in Italy?

In the case of even minor construction work the, “works manager” is responsible for safety. This is usually an architect, engineer or designer. However, if the owner of a property directly procures the services of a worker, the homeowner is acting as the works manager.

This means that the homeowner is responsible for safety. Likewise if there is an accident, the homeowner is liable to criminal and civil consequences.

Imagine you hire a plasterer to render a wall and the plasterer falls off a ladder. Or, you find an electrician to rewire your property and the electrician gets electrocuted.

You, as the homeowner, are liable. Even if you are not around at the time of the accident. As the legal owner of the property, in the eyes of the law, you are the employer of the injured worker.

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The risk of criminal and civil prosecution

Your liability for the accident is not only of a criminal nature, for culpable injuries caused to the worker, but also of a civil nature.

In other words, you may be liable to pay compensation. Compensation for a broken limb can amount to several thousand euros. In a worst-case scenario, compensation may be enough to see your property seized.

This is a very intricate legal issue based on technicalities regulated by Italian law. If you are planning refurbishment work on your property in Italy, make sure you meet  safety requirements.

Homeowner liabilities

When renovating a house in Italy, you are legally responsible for ensuring safety requirements.

Italian law takes the view that anyone regarded as, “non-professional”, such as a homeowner, who procures the services of a third party to carry out any type of home improvement, is responsible for ensuring that workers operate in accordance with health and safety legislation.

Safety requirements. A case study

Recently, the Supreme Court examined an appeal filed by a homeowner plaintiff who had commissioned a construction company to paint the exterior walls of a cottage. During the work, a painter fell through a hole in the paving. The painter fell several metres into the basement and tragically later died. The hole that caused the accident had previously been covered with boards. However, the boards had been removed by another worker and replaced with polystyrene, which was not strong enough to bear the weight of the painter.

The court of appeal upheld previous rulings which established that the homeowner had a duty of care in relation to the execution of the contract. In this case, the court identified several failures. In the first instance, the absence of a risk assessment plan. Secondly, a lack of maintenance on walkway around the cottage and risks posed by the opening into the basement. Thirdly the court considered that there had been a failure to supervise and inform workers at the property.

Safety requirements are an employer’s responsibility when renovating a house in Italy

The court found the homeowner at fault for these failures. Safety obligations are the exclusive competence of an employer, who in this case was the homeowner. In effect, the homeowner was acting as the painter’s employer. While the work was of a “domestic” nature, the court found that the homeowner was not exempt from performing the duties of works manager. In other words the accident occurred because of the homeowner’s failure to take responsibility for his employee’s safety. And the homeowner’s negligence to act in the role as designated works manager.

In cases such as this, it is, therefore, crucial to underline the homeowner’s obligation to point out any dangers on site and wherever possible, to provide for their elimination before work starts. Unless a homeowner can prove they exercised a duty of care and took all measures to provide a safe working environment, they will be held liable.

Health and safety requirements in Italian building contracts

When a homeowner engages a contractor, it is important to have a written contract. This should indicate that compliance with safety regulations is the contractor’s responsibility. This way it becomes clear, from a legal point of view, that the contractor is responsible for safety on home renovations in Italy.

Finally …

Whether you are building a new property in Italy, or renovating an existing Italian property, having the right building contract is vital to ensure that everyone involved knows their rights and responsibilities.

De Tullio Law Firm is a legal firm present throughout Italy. We have over 55 years of specialist experience dealing with issues related to property, construction and renovation matters. If you are thinking of undertaking building or refurbishment on your property in Italy, or if you are in a difficult situation concerning liabilities and safety requirements through refurbishment work, we are here to help. Get in touch with us at: info@detulliolawfirm.com

 

You may also be interested in Off-plan property in Italy – Where do you stand legally?

You may also like our info videos on the subjects of Italian property, succession and family law.

De Tullio Law Firm in Fortune Italia Magazine

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De Tullio Law Firm and luxury real estate in Italy

In the April 2019 edition of Fortune Italia Magazine, De Tullio Law Firm contributed to a discussion about the state of the luxury real estate market in Italy.

A world apart

The luxury real estate market in Italy is booming – indifferent to market fluctuations. Who buys luxury properties and furnishings?

Italy’s Luxury real estate market sector “is less exposed than other property segments to economic conditions. The uniqueness of the Italian offer, which is inextricably linked to our architectural, landscape and cultural heritage, represents a strong element of attraction”, says Giandomenico De Tullio, Managing Partner at De Tullio Law Firm. The company provides legal services in the Italian luxury real estate market – mainly serving US and UK clients.

Italy’s luxury property market is particularly healthy. Compared to the same period in 2017, the first half of 2018 saw an increase of 26.73% in real estate transactions in excess of 900 thousand euros. Real estate of more than one million euros saw 1,028 properties sold compared to 865 in the previous year. This represents an increase of 18.84%.

De Tullio Law Firm: we are specialists for cross border property law throughout Italy

Generally, we are talking about properties that mainly appeal to international clients, which De Tullio calls, ‘High Net Worth Individuals’. ” This is a clientele with high expectations that demand high levels of competence and professionalism”.

Choosing a property

In the main, investors are foreign so they often need a guide. Perhaps they don’t know Italy very well, or are unfamiliar with the dynamics of its real estate market.

Lionard, is one of the most important players at national level in the luxury real estate sector. The company is involved in the buying and selling process. They have a real estate portfolio of 13.32 billion euros. The average value of real estate for sale is 5.01 million euros.

Lionard has bases in Florence, Milan and – soon – Rome.

The company currently represents 51% of Italian properties with a value of more than 3 million euros. “The real estate market historically follows the macro-economic trend of the world’s major markets,” says Ian Heath, real estate advisor at Lionard. “For this reason, the sector has also faced and suffered from the economic crisis over the past decade. However, the luxury real estate segment, in terms of the type of clientele and internationality of the audience it addresses, is able to offer growth beyond what is happening on a local economic level”.

A growth that Lionard capitalises on with satisfactory results. “In terms of real estate portfolio, we are the first real estate operator to have over 2,500 properties offered for sale directly by owners. With regards to the company’s balance sheet, we were the first among Italian luxury sector real estate operators, to achieve a turnover of over 9 million euros with an EBITDA of over 60%”. In 2018 alone, Lionard properties valued at 106.5 million euros changed hands.

Of course, to impact such a market, the right tools are a pre-requisite. In addition to the professionals who make up the team, “the pearl of the company is undoubtedly our management system. This is the primary national resource in terms of the luxury market in Italy”, says Heath. “We cross-reference the most in demand areas and the most desired types of property with current data. This provides our target audience with a survey of more than 45,000 properties nationwide. More than 2,500 of these are officially for sale. This helps the customer to form an independent idea of all the options available”.

The right decor

Once you have purchased a luxury home, you need equally luxurious furnishings. Pasquale Natuzzi Junior Says, “high-spending clientele is undoubtedly different. It is a group of consumers for whom it is necessary to transform the purchase into a unique experience.” Pasquale is creative director and stylist at Natuzzi.

The business started life in Puglia in the ’60s. It has since become one of the few Italian companies listed on Wall Street. Natuzzi totalled 449.6 million euros of turnover in 2017 and is present in 123 markets worldwide. Pasquale Natuzzi Senior, who is still company president, founded the company.

Natuzzi enjoys recognition as the “most famous lifestyle brand in the world in the premium furniture sector”.

And, according to Pasquale Junior has built its success, “thanks to our identity, our style and our product offering”.

In addition, the luxury consumer scene appreciates, “dealing with contexts where quality of service is everything. This is  especially relevant in our sector, where cooperation with customers can continue for several months. It is important to offer an experience that goes beyond a simple visit to the store: it is a relational investment that requires time, trust and competence”.

Harnessing this market sector naturally requires special business skills, which enable, “the customer to entrust the whole process to the company”. The shop team, according to the creative director, “is engaged in customer projects that can last well over six months”.

Success depends on the ability to transmit to the customer a dedication and professionalism, taking care of every aspect of the project. An approach that is only possible, “thanks to the continuous training and development of our sales staff, evolution of our collections and investments in our points of sale. In our stores we have reliable, well-prepared professionals, with a solid background in the design sector, perfectly able to interact with our clients, an architect or an interior designer. For highly sensitive projects, we also involve other professionals (colour experts, technicians specialised in 3D modelling, 3D, designers). Experts who can provide further support at the definition phase of a project”.

Finally… De Tullio Law Firm on Fortune Italia magazine

Please, contact De Tullio Law Firm for a free preliminary consultation if you would like to discuss your property purchase or you would like further information about our services.

For over 55 years, we have been providing legal services to clients at an international and local level, gaining a strong reputation for quality, expertise, and professionalism.

You may also be interested in Buying Property in Italy

Elective Residence visa Italy

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What is a national visa for elective residence?

Elective residence in Italy requires a national visa. This grants access to Italy for overseas nationals wishing to reside in Italy. Applicants must be able to support themselves financially, without carrying out any type of work.

Article 13 of Attachment A of the inter-ministerial Decree MAE n°850 defines the types of Italian entry visas and requirements to obtain them.

What paperwork is necessary to obtain an elective residence visa?

Foreigners wishing to obtain an elective residence visa will have to provide documentary proof that they own or rent a property in Italy. This will be where you  will be living. In addition, proof of adequate financial resources is necessary.

Successful applicants for an elective residence visa should have annual funds of at least €31,000. This equates to approximately triple the required per diem amount, on an annual basis, as estimated in Chart A. This chart is an attachment to the Ministry of Internal Affairs directive of March 1st 2000.

Annual income may derive from savings, pensions, annuities, real estate, businesses or from other sources. However, it cannot be from employment.

Who is entitled to an elective residence visa in addition to the applicant?

A cohabiting spouse or registered partner, minors and adult dependent children will receive the same visa, so long as financial means are adequate to support them. This means your total amount of annual income should include an extra 20%, if the visa is for a spouse whereas an additional 5% is necessary for each dependent child.

What level of annual finances do you need to gain elective residence in Italy?

The “minimum financial requirement” in accordance with Italian legislation is approximately €31,000 per annum. However, it is likely that authorities will assess the situation on a case by case basis.

How long is an elective residence visa valid and, can it be renewed?

An elective residence visa is valid for 1 year. Thereafter, the visa is renewable at provincial police headquarters on the condition that the previously mentioned original requirements remain unchanged.

You must apply for an elective residence visa at an Italian Consulate in your home country and convert it into a residence permit within 8 days of your arrival in Italy – as is the case for all other types of extended stay national visas.

It is not possible to renew or reinstate a residence permit if you interrupt your stay in Italy for a span longer than six months, unless you can prove that the interruption was for significant motives such as military duties.

Is any type of employment permitted with an elective residence visa?

No. This type of visa does not permit any employment activity in Italy. You must therefore be able to support yourself on an income that derives from other sources.

Is there any other type of visa for a long-term stay in Italy?

After 5 years of residence in Italy, you can request a permanent EU residence permit. This means that a holder will be able to benefit from the same terms as those of EU citizens.

Finally …

We have over 55 years of helping overseas nationals obtain Italian residence. If you need help or would like to discuss your situation, please get in touch with us.

You may also find our guide to buying property in Italy useful.

European Mortgage Credit Directive. The Italian Perspective

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The European Mortgage Credit Directive creates a single mortgage market across the EU

In a previous article, we addressed the possibility of non-Italian nationals obtaining a mortgage to purchase an Italian property. This article explores the main provisions in the European Mortgage Credit Directive (EMCD). This came into force across all EU Member States in 2016.

During the global financial crisis of 2008, the EU launched a process to draw up prudential measures aimed at containing risk in real estate credit agreements. The  majority of sub-prime mortgage problems occurred outside the EU. Nevertheless, consumers within the EU hold significant levels of debt related to residential property. 

The EU process resulted in the introduction of the EMCD. The purpose of which is to create a single, harmonised residential mortgage credit market across the EU with a high level of consumer protection.

The European Mortgage Credit Directive is part of Italian legislation

Italy’s Council of Ministers through Legislative Decree no. 72 of 21st April, 2016 approved the EMCD, (2014/17/EU) known as Direttiva Mutui in Italian. The Directive then became a national law on 20th May, 2016 and has been in force since 4th June, 2016.

In Italy, Bankitalia, ensures enforcement and application of the EMCD.

The EMCD applies to credit agreements entered into with consumers that are secured by a mortgage, or equivalent security, on residential property. It is also applicable to credit agreements for the acquisition or a retention of property rights on buildings or land. Italian law defines a consumer as, ‘a natural person acting outside their trade, business or profession’.

Get Your FREE Guide to Buying Property in Italy

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The European Mortgage Credit Directive impacts EU and non-EU residents alike

For example, a UK consumer takes out a Euro mortgage to buy property in Italy. However, their main income is derived in Pounds Sterling. 

In the first instance, because of the risks attached to borrowing in a foreign currency, the EMCD therefore provides for measures to ensure that consumers are aware of the risk they are taking.

If a credit agreement relates to a foreign currency loan, EU Member States must ensure that the consumer has the right to convert the credit agreement into an alternative currency. This will be subject to specific conditions. Additionally, EU Member States must ensure that there are other arrangements in place in order to limit exchange rate risks to the consumer.

Main provisions of the European Mortgage Credit Directive 

Standardised Information

The EMCD stipulates that information must be provided to consumers at the pre-contractual stage.

In Italy lenders provide pre-contractual information in a prescribed form, the European Standardised Information Sheet (ESIS), or Prospetto informativo europeo standardizzato (PIES)” in Italian. This is to assist consumers in comparing lenders and their products. Furthermore, additional information must be attached to the PIES. This includes the identity, status, capacity and remuneration of any credit intermediary involved in the application.

Creditworthiness

Lenders must conduct a rigorous assessment of the proposed borrower’s creditworthiness prior to granting credit. In Italy, this includes an assessment of the borrower’s income, expenses, financial and economic circumstances. In accordance with Central Individual Credit Register (CICR) regulations, Italy grants cross-border access to its creditworthiness databases. Lenders in EU Member States use these databases to assess a consumer’s ability to comply with the financial obligations for the duration of a credit agreement.

Code of conduct

Lenders and their intermediaries must act honestly, fairly, transparently and professionally. They must take into account the rights and interest of consumers.

Bankitalia has an obligation to protect these consumer rights. It ensures that Italian lenders and their intermediaries have an appropriate level of knowledge and competence regarding their credit products.

Once authorised in italy, a credit intermediary gains passporting rights to operate in any EU Member State.

Forbearance on foreclosures

EU Member States must adopt measures encouraging creditors to exercise reasonable forbearance before the initiation of arrears and foreclosure proceedings.

The aim is to encourage creditors to deal proactively with any emerging credit risk. In effect, this means ensuring that creditors have adequate measures in place so that they can exercise reasonable forbearance. Thus they can make reasonable attempts to resolve the situation through other means before initiating foreclosure proceedings.

Italian legislation prohibits foreclosure on a main residence. This is subject to the condition that this home is the only property the debtor owns. However, this is not applicable to luxury homes, such as a castle or villa.

The EMCD provides discretion about applying certain provisions

In Italy, prior to the conclusion of a credit agreement, the consumer has the right to a cooling-off period of at least seven days. This is in order to allow for comparison of different loan offers on the market. In addition, the cooling-off period aims to provide enough time to evaluate implications and make an informed decision. During this period of reflection and comparison, the offer remains binding on the lender. The consumer may accept the offer at any time.

While the EMCD permits consumers to repay their loan before the term expires, EU Member States may impose restrictions on rights to early repayment. Creditors may make a charge for early repayment to cover any losses directly arising from the repayment. In Italy, however,  in accordance with Bersani’s Decree, Law No. 40, 2nd April, 2007, a consumer cannot be charged for early repayment.

Finally …

If you are seeking a mortgage or loan for an Italian property investment, we would recommend you seek independent legal advice to ensure you receive fair treatment and protection.

De Tullio Law Firm specialises in Italian and international property law. If you need advice or help with matters related to a mortgage for Italian real estate property, please contact us for a free consultation.

 

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Resident or Domiciled in Italy for tax purposes?

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Are you resident or domiciled in Italy?

In this article, we compare being resident or domiciled in Italy and explore the tax implications.

According to Italian tax law, individual tax residency is pursuant to tests. An individual may find themselves tax resident although they only have relatively minor contacts with Italy. This might be property ownership, frequent visits to the country, or business interests in Italy.

If the Italian tax authorities determine that an individual is tax resident in Italy, the taxpayer is subject to worldwide taxation in Italy.

Tax would therefore be applicable for both income and estate tax purposes. It would include an obligation to report all assets wherever they are in the world. In addition to financial assets and accounts, it requires an individual to report all non-financial assets such as, cars, houses, planes, artworks.

Non-Italian nationals with interests in Italy should pay particular attention to these matters to avoid becoming an unintended Italian tax resident. Because this is a complex topic and, each case is different, we recommend that you seek advice and guidance from your lawyer and accountant.

Applicable tax laws determine whether an individual is resident or domiciled in Italy

Domicile

Domicile is generally determined by an individual’s intention to permanently or indefinitely reside in Italy. Often, an individual will physically have a presence in the country. Domicile is a legal concept. Its rules have been established by way of case law rather than a statutory definition. There are three types of domicile.

Domicile of Origin

This is usually acquired from an individual’s parents.

Elected Domicile

By actually residing in Italy, the individual demonstrates the intention of remaining permanently or indefinitely in Italy. In this way, an individual may acquire an elected domicile – also known as a domicile of choice. Where an individual later gives up elected domicile, domicile of origin is automatically re-acquired.

Domicile of Dependency

This is the domicile a minor holds. When the minor reaches 18 they then acquire elected domicile.

Residence

Domicile takes into account subjective elements of an individual’s intentions. The country where an individual habitually lives determines residence.

The EU test for habitual residence is based on an individual’s interests rather than by a particular duration of residence. In 2014, the European Commission published a practical guide on the Habitual Residence Test.

Fiscal implications

Under Italian tax law, three alternative tests determine an individual’s tax liability in Italy. The tests are registration, residence and domicile. If an individual meets one of the three tests for more than 183 calendar days per annum, this triggers an Italian tax liability.

Registration test

This is a straightforward test. If an individual has registered as a resident with their local municipal office – in the comune where the individual’s residential address is located, they are liable to pay tax in Italy.

Residence test

The residence test comprises two components.

The first component looks at whether physical presence in Italy is regular and continuous, as opposed to sporadic and occasional. If an individual spends time both in Italy and another country, periods of presence outside of Italy are compared with the periods of presence in Italy. This ascertains where presence is prevalent for tax purposes.

The second component of the residence test is more subjective. It is based on an individual’s intention to stay and live in Italy for the foreseeable future. A variety of aspects will determine an individual’s intention to live in Italy on a regular basis. In order to determine intentions, authorities will look at an individual’s conduct, social and personal habits. Authorities will also consider working relationships, family relationships, business and personal activities.

Italian tax liabilities arise if an individual’s physical presence in Italy is prevalent compared to an individual’s presence outside of Italy. For example, a regular and continuous presence in Italy is deemed to exist even if an individual travels abroad on a frequent basis. In other words, if an individual is away from Italy for extended periods of time but then returns as soon as possible. This would denote that an individual maintains Italy as the principal centre of their social and family relations.

Domicile Test

This third test aims to define the place where an individual has their principal centre of interests for business and or social reasons. In this context, ‘interests’ include personal, social, moral, familiar, economic, professional and business interests and relationships.

The domicile test revolves around an individual’s intention to establish and maintain their main centre of relations and interests in Italy.

There are tax implications based on the nature, extent and quality of the connections between an individual and Italy, compared with an individual’s connections with any other country.  As a result, an individual who primarily lives abroad but, maintains their principal centre of interests in Italy satisfies the domicile test.

The domicile test therefore requires careful and comparative evaluation to balance all the facts related to business or personal relationships and connections with Italy.

Case Law regarding the legal concept of domicile

In 2011, the Italian Supreme Court referred to a 1991 decision of the European Court of Justice relating to a non-tax matter. The Italian Supreme Court concluded that, in the case of multiple relations and ties with different countries, where the location of the principal centre of an individual’s interest cannot easily be determined, a prevalent consideration should be given to the relations of a personal nature.

However, more recent decisions suggest that extensive economic interest may outweigh personal connections in establishing an individual’s domicile. Thus, an individual may still be liable to pay tax in Italy.

In a ruling in April 2012, the Italian Supreme Court held that a tennis player living in Monaco qualified for tax residency in Italy. This, despite the family proving that they lived in Monaco. They provided proof through children’s school attendance records, household utility bills, membership of local clubs. The ruling took into consideration the fact that the tennis player maintained significant interests and management positions at several family-owned Italian companies. The individual mainly managed these matters from Italy.

In this case, residence identified the taxpayer’s habitual and regular place of living, while domicile identified the taxpayer’s main center of personal, financial and business interests.

Resident or domiciled. Tax guidance

The Italian tax authorities have issued specific guidance on determining whether individuals are resident or domiciled in Italy. Circular n. 304/E of December 2, 1997. Circular 304 provides instructions for the tax agency’s control and audit activities, which should include the collection and review of the following.

– All information contained in the tax agency data base system.

– Copies of all public documents relating to purchases. This includes real estate, gifts, formation of companies and entities, capital contributions to companies and entities.

– All information on transfers of money from or to foreign countries.

– Information regarding the taxpayer’s family relations in Italy.

– The taxpayer’s economic interests in Italy.

– Information about taxpayer’s intention to remain and live permanently in Italy.

Finally …

De Tullio Law Firm specialises in Italian and international property law. We have over 55 years of helping overseas nationals obtain Italian residence. If you need help or would like to discuss your situation, please get in touch with us.

 

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