For several years now, Italian income tax legislation has allowed a tax credit as a deduction from the taxable income for energy efficient expenses incurred in maintaining, restoring and improving Italian properties (Detrazione delle spese per interventi di recupero del patrimonio edilizio e di riqualificazione energetica degli edifici).
This tax credit (Bonus Fiscale) is available both on costs incurred on individual residential units and on the common parts of block of flats / condominiums and has been increasingly popular in the last few years. In a rather difficult property market, an energy efficient, modern property has the edge over similar, less maintained / outdated properties.
Basically, under this legislation the owner of the residential unit who carried out energy efficient / improvement work on his Italian property is entitled to a tax credit of 36% of the expenses incurred, up to a total of Euro 48,000 to be set against the taxable income of the following 10 years in 10 equal instalments.
Although widely used this tax credit was subject to the restriction that it could only be set against Italian taxable income. If you did not have any Italian taxable income you could not get any benefit – the tax credit was lost. This, unfortunately, applied to most foreign owners who do not have Italian taxable income, but only own one holiday property and usually, a small bank account in Italy.
Over the years the range and extent of “Bonus fiscali ” widened and extended.
A tax credit is now available for the restoration of residential buildings damaged by earthquakes, the building of garages and car park spaces, security and crime prevention measures, reduction of noise and energy efficiency. New “Bonus fiscali ” were also introduced, such as the credit for the creation and maintenance of gardens / green areas (“Bonus verde per giardini ” a 36% tax credit of allowed expenses up to 5,000 Euros) and even the purchase of furniture and white goods (Bonus mobili ed elettrodomestici – up to 50% of the expense up to a limit of Euro 10,000). All these tax credits (“Bonus Fiscali ”) are subject to detailed conditions and come with restrictions and limitations. Rather complex procedures must be complied with to ensure that the tax credit will be available.
However, the main issue, at least with most potential foreign Italian property owners, remained. If you did not have Italian taxable income to set against the tax credit (“Bonus Fiscali ”), you could not benefit from these provisions.
From tax credit to cash-back.
In 2016 new “Bonus fiscali ” legislation was introduced in Italy to deal with this problem.
If there was insufficient Italian taxable income it became possible to transfer most of the “Bonus Fiscali ” tax credit to suppliers, builders and banks involved in the building works, but not to third,
unrelated parties. These suppliers, builders and banks could then set the “Bonus Fiscali ” against their own taxable income.
Different facilities / restrictions apply if the beneficiary of the “Bonus Fiscali ” has sufficient taxable income and wishes, nevertheless, to transfer the tax credit to suppliers / builders.
Currently it is still not possible to transfer the tax credit arising from the restoration / reconstruction of residential properties damaged by earthquakes (“Sismabonus”).
On 30.06.2019 new legislation (“Decreto Crescita”) came into force in Italy.
As an alternative to transferring the tax credit it is now possible to apply for a direct, immediate “Bonus Fiscali ” discount from the supplier / builder`s invoice. So, in order to avoid the problem of insufficient Italian taxable income, this tax credit has firstly become transferable and secondly it can now be used by the foreign owner who does not have Italian taxable income to get an actual discount from the supplier/ builders` invoice (“Sconto in fattura”). This facility applies to particularly effective energy efficient works and to the cost of improving the resistance of residential buildings to earthquakes and other natural disasters / reduction of seismic risk.
These measures are potentially very beneficial to the ultimate consumer, Italian property owner, whatever his / her nationality or residence.
Bonus fiscali – where do we stand now.
Although this legislation is complex, “Bonus Fiscali ” should be considered by anyone improving, restoring or making more energy efficient his / her Italian property.
There is a wide range of tax credits / invoice discounts available, in addition to the provisions mentioned above:
50% of the total cost, up to a maximum of Euro 60,000 for: energy efficient doors and window frames, biomass boilers, class A condensing boilers and solar shading – available in 10 equal annual instalments.
65% of the total cost, up to a maximum of Euro 100,00 for: class A condensing boilers with temperature control systems, condensing hot air generators, high efficiency heat pumps, PDC water heaters, insulation, building automation, global redevelopment – available in 10 equal annual instalments.
70% of the total cost, up to a maximum of Euro 40,000 – energy efficiency work on common parts of blocks of flats / condominiums with enclosure insulation over an area of more than 25% of the dispersing surface – available in 10 equal annual instalments.
75% of the total cost, up to a maximum of Euro 40,000 – energy efficiency work on the exposed common parts of a block of flats / condominium, insulation where the surface area affected is more than 25% of the total and the use of quality insulation materials – available in 10 equal annual instalments.
75% of the total cost, up to a maximum of Euro 96,000 – anti-seismic works on common parts of blocks of flats / condominium resulting in a reduction in the seismic risk that determines the transition to one lower risk class – available in 5 equal annual instalments.
80% of the total cost, up to a maximum of Euro 136,000 – energy efficiency work on the exposed common parts of blocks of flats / condominium, with enclosure insulation over more than 25% of the dispensing surface with a reduction of one seismic risk class – available in 10 equal annual instalments.
85% of the total cost, up to a maximum of Euro 136,000 – energy efficiency work on the exposed common parts of blocks of flats / condominium, with enclosure insulation over more than 25% of the dispensing surface with a reduction of two or more seismic risk classes – available in 10 equal annual instalments.
85% of the total cost, up to a maximum of Euro 96,000 – anti-seismic works on common parts of blocks of flats / condominium resulting in a reduction in the seismic risk that determines the transition to two lower risk classes – available in 5 annual instalments.
The future of “Bonus Fiscali”.
These measures have proved increasingly popular, it is estimated that almost 30% of Italian taxpayers have used them. There is also a positive effect for the Italian building industry and economy.
However, there has been some resistance / lively opposition of small Italian family builders who do not have the necessary administrative organization, taxable income and cash-flow to deal with such requests for the transferal of the tax credits / granting of invoice discounts, “Bonus Fiscali ” on large amounts. There is the risk that these measures may work as a discrimination in favour of large companies / builders who have the necessary taxable income, cash flow and organisation to deal with large scale requests for transfer of the tax credits / invoice discounts and then claim the amount from the Italian Revenue.
Currently various amendments to the legislation in force are being considered.
It may be made possible to transfer the tax credit to third, unrelated parties so that a “Bonus Fiscali ” market is created and could work with the assistance of specialised intermediaries/ internet platforms.
The State may agree to refund builders and suppliers, within a statutory very reduced time frame.
Meanwhile, because of the technicalities, it may be necessary to seek the assistance of a surveyor and an Italian lawyer (their fees may be claimed too) in order to benefit from applicable “Bonus Fiscali “. One point to consider is that because “Bonus Fiscali” are granted over a period of years, if the relevant Italian property is sold, the benefit of the balance of “Bonus Fiscali ” still outstanding, should be transferred to the new buyer, with the Italian property.
However, one thing appears to be certain. Building and energy efficiency “Bonus Fiscali ” are going to remain and become further established in Italy. With all their conditions, complications and limitations they are available now to the Italian property owner, whatever his / her nationality or residence, whether he / she has a taxable Italian income or not. An opportunity not to be missed.
Dr Claudio Del Giudice, 04.10.2019, Copyrights reserved.