“Legge di stabilita` 2016 ” is the new Italian budget. It came into force on the 1st January 2016 after protracted political negotiations. As for similar earlier legislation, it is made up of just one very long Section (Articolo 1 ), which in its turn is divided into 999 numbered paragraphs without headings to assist in the navigation of this complex, extremely detailed and often confusing raft of new legislation.
Trying to make sense of this legislation and how it interacts with the existing Italian legal and fiscal system is the arduous task facing Italian lawyers and anyone else wishing to keep up to date with Italian legislation. Several provisions relate to property matters, this legislation will affect a wide audience in Italy.
Here follows my summary of the main provisions of interest to Italian property owners.
Buying a property in Italy – First time buyers get considerable support with the new “first home leasing contract” or “Contratto di locazione finanziaria di immobile da adibire a prima casa ”. This is a new form of property leasing (Locazione finanziaria) / buying, available to young buyers, up to 35 years of age with an annual income not exceeding Euro 55,000 who wish to acquire their main residence (Prima casa) in Italy. It will only be available for non-luxury homes, as defined by legislation. In these cases, Registration Tax (Imposta di registro) payable on acquisition of the property is reduced to 1.5% (the current standard rate is 9%). In addition, 19% of the rental periodical payments, up to a total of Euro 8,000, and 19% of the final payment (up to Euro 20,000) will be income tax deductible. Periodical rental payments can be suspended for up to a year, where the buyer loses his job. Reduced benefits are available where the buyer is 35 or older.
Where the property buyers are a young couple aged less than 35 and of at least three years standing, a further deduction is granted for up to 50% of the costs of furnishing their first home, up to a grand total of Euro 16,000 to be applied in 10 equal instalments against their income tax liabilities.
“Prima casa ” is a generous tax rebate, available to anyone buying their main home in Italy and taking up residence at the property within a stated time. Italian Registration tax (Imposta di registro) is reduced to 2%, compared with its standard 9% rate. This rebate was not available to anyone who already owned a property in Italy. This new legislation will now extend the “Prima casa ” benefit to anyone who already owns another home in Italy and wishes to buy a new one, provided the earlier property is sold within 12 months from the date of the acquisition of the new main home.
Under this new legislation, the direct purchase from builders of energy efficient homes, classed either as “A” or “B” by the relevant legislation, will now entitle the new owners to an income tax rebate equivalent to 50% of the Italian VAT (IVA) paid on their property acquisition. This rebate is to be spread over a period of ten years and could be significant for anyone having Italian income tax exposure.
The rate of Italian Registration Tax on farming land or farm buildings has been increased from 12% to 15 %, for anybody other than farmers.
Further penalties are introduced against Italian notaries (Notai ), the only Italian professionals / public officials entitled to transfer the legal title to Italian properties. Italian Notaries are under a duty to collect and account, to the Italian Revenue, for Italian taxes arising out of their property transactions. Apart for the current penalties and criminal prosecutions, defaulting Notaries who fail to account for property taxes will now risk having to pay the unaccounted for property taxes out of their pension and being permanently disqualified, debarred from their profession.
Running a property in Italy – Under the new legislation, no Italian council tax (IMU and Tasi ) will be payable on the taxpayer`s main residence (Abitazione principale ) except where the property comes within the statutory definition of luxury property, historical property or a “villa ”. The definition of “Abitazione principale ” has been extended to a further number of exceptions, including any property used by the separated spouse of the taxpayer.
A reduced rate of local council tax will also apply to residential units which are being granted under a free licence (Comodato ) to the parents, or the children of the taxpayer. A long standing dispute has been settled. Up to the end of 2015 limited companies and traders were compelled to pay local council tax on the value of their properties, including any machinery or equipment permanently bolted to the premises (Imbullonati ). This was widely regarded as unfair, and such machinery and equipment will no longer be considered for the purposes of local council tax.
Professional farmers (Imprenditori agricoli professionali e coltivatori diretti ) have been exempted from local council taxes. This will not apply, however, to anyone else owning farming land, who will have to continue to pay tax. A 25% discount on local taxes is granted to landlords who let their property at a “social” (reduced) rent (Canone concordato ).
A whole range of income tax deductions are either confirmed or introduced. 65% of the cost of energy efficient equipment installed in residential properties and remotely controlled or operated, will be deductible from any liability to income tax. The income tax deduction for the purchase of furniture and white goods (50% of the amount paid, up to a maximum of Euro 10,000) (Bonus mobile e grandi elettrodomestici ) is extended to the whole of 2016.
Letting a property in Italy – Sweeping provisions are added to the legislation regulating residential tenancies. Any agreement or informal “understanding” between landlord and tenant, whereby the landlord collects rent for an amount that is greater than the rent stipulated in the tenancy agreement, is now totally null and void. The tenant may apply to the Courts for a refund of the rent paid in excess, up to six months after the termination of the tenancy.
Landlords are required to register the tenancy (Registrazione del contratto) and to pay tax within 30 days from the commencement of the tenancy. Within 60 days landlords must notify any new tenancy to the manager of the condominium (Amministratore del condominio).
The new limit to cash transactions – The limit to the use of cash is increased. Under the new legislation cash payments of up to Euro 3,000 are allowed from the 1st January 2016. This will not, however, apply to Money Transfers, for which the overall limit remains at Euro 999.
Conclusion – Several other, new provisions are introduced with the same new legislation (“Legge di Stabilita` 2016”), which are not reported here. Hopefully these provisions will help with the recovery of the Italian economy, and will ease the burden on some taxpayers.
Dr Claudio Del Giudice – 16.01.2016 Copyrights reserved