Italy likes to bike. The rise of cycle tourism: + 41% in 5 years

The choice of routes and holidays on two-wheel pedals is becoming more and more common. The point at BikeSummit 2019: “Growth is good, but infrastructure and security are needed”. There is an Italy pedaling and going further and further. It crosses the land without polluting and helps to enrich the country, both economically and environmentally. This is the Italy of two wheels, where more and more travelers travel by bicycle: in 2018, the number of cyclotourists encountered between accommodation and private residences amounted to 77.6 million, or 8.4% of the whole movement of tourists. A real boom This is a real boom: it is estimated that at least 6 million people have spent a holiday cycling and cyclists have increased by 41% between 2013 and today. At a time when we are looking for strategies to curb climate change and systems for reducing emissions and pollutants also linked to transport, increasing the number of bicycles is a real remedy in environmental terms. And also in economic terms: cyclists generate a value of 7.6 billion euros per year. A figure that brings the current value of so-called GDP of the bike to almost 12 billion euros: that’s the internal product, or the volume generated by those who travel by pedal, from the production of bicycles to cycles vacation. All this was proudly told in Rome during BikeSummit2019 in the report produced by Isnart-Unioncamere and Legambiente and with the participation of Legambici. The summit emphasized Italian cycling, recalling that it “could make an extraordinary contribution to tourism given the landscape and the territorial context of the country” and underlining that it “is still too underdeveloped”. HOW WE USE THE BIKE According to the report, about 1.85 million tourists each year in Italy bicycle travel a full itinerary, “while those who use it to – to have in tow or rent on site – are about 4, 18 million people” recalls the study. Added to this is the fact that more than 700,000 urban cyclists use bicycles every day on their commute and bring the total to about 6.73 million people. Also, because of an insufficient bicycle network for the moment, despite the growth, in Italy, we are not yet at the level of other European countries. We have about 440 bikes per thousand inhabitants, while in the Netherlands or Germany this ratio is almost 1 to 1. BIKE ECONOMY Pedaling Italy also contributes to economic growth: 1.3 billion euros per year come from the bicycle manufacturing sector, for more than 1.7 million pieces sold, with a growth of exports of 15.2% (2017 data). The funds are then increased to implement the Italian system of cycle paths: “The current government has indeed confirmed the construction and financing of the cycle lanes system with an allocation of 361.78 million euros for the birth of the national tourist cycle routes system, imagined as a widespread infrastructure that promotes soft mobility and sustainable tourism “, explain the speakers of the summit. Participants remember, however, that in order to ensure the proper functioning of the bicycle, it is necessary to strengthen road safety: “There is an urgent need to reform the Highway Code, which provides for the definition of a high-cycle road for secondary roads. These mixed traffic roads, more used by cyclists than motor vehicles, require lowering their speed limits and increasing their safety for cycle tourism “. “A path is defined and it’s a bike lane. It is now necessary to provide our country with a cycling observatory able to produce a data stream that is a valid support for policy decisions and practical and productive solutions in order to continue to operate”.  

Sambuca (Sicily) – 1 Euro Houses for Sale

Call for bids Update On February 19th the Municipality has published a new call for bids (i.e., “Bando di Gara”, in Italian) for a second slot of properties in its historical district. The new slot includes 16 properties. A brief description of these properties, including few pictures and indicative site plans, are available on the Municipality’s website at: http://www.comune.sambucadisicilia.ag.it/Case%20a%201%20euro/Immobili%20a%201%20euro.htm On the same webpage, the Municipality has made available a document, in both Italian and English versions, describing the rules governing submission of bids and final assignment of the properties. The English version of the document can be found at: http://www.comune.sambucadisicilia.ag.it/Case%20a%201%20euro/Bando%20case%20ad%201%20Euro%20-%20English.pdf Similarly to the prior call expired in May 2018, properties are assigned based on a silent auction with a starting price of 1 €, with participating bidders submitting their private offers and the highest bidder winning the property. The new deadline for submitting the bids is April 19th 2019 by 1pm. Given the high visibility and foreign interest that this initiative has been recently attracted, our firm is currently committed to offer professional assistance to anyone interested in submitting bids to the call. We are offering support in all steps of the process, from forwarding additional professional pictures of the properties on sale as well as preparing the required documentation for the bids. We are also committed to assisting the auction winners in the preliminary contractual stage with the Municipality and presenting the necessary renovation project within 90 days from the preliminary contract. Please, don’t hesitate to contact us at info@studiolegalemagaraggia.it for further info.

This is why Italian real estate continues to depreciate

Old houses and short-term rent boom: this is why Italian real estate continues to depreciate. While new properties are seeing rising prices, existing real estate continues to decline, a unique case among emerging economies. Why? On average, in the first three quarters of 2018, compared to the same period in 2017, house prices fell by 0.6%. Existing home prices (over 80 per cent) are down 1.0 per cent and new homes are up 1.2 per cent. Compared to the 2010 average, the first year for which the historic series of housing price index is available, housing prices fell 16.7% in the third quarter of 2018, due exclusively to existing housing that has slid by 22.9%, while new housing has seen an overall increase, although low (+ 0.2%). The rate of change in the housing price index for 2018 is negative and equal to -0.5% . Curious reality: housing prices started to fall, but at the same time, trade continues to increase. As the law of supply and demand teaches, the price of the most demanded commodity starts to increase, precisely because there are more and more people wishing to buy it. Apparently, in Italy, this law does not work. But only in appearance: actually, in Italy only buy those who can afford it: those who have a stable job, who sell their property, or the parents for their children. With the complicity of interest rates on mortgages that are at a historical low in this period. It remains nonetheless that, despite the recovery of 2015, sales are still far from pre-crisis levels. The data released by ISTAT, the National Institute of Statistics, are quite true, but it is not quite true that Italian real estate depreciates. In fact, in the third quarter of 2018, the value of new homes increased by 1.2% compared to the same period of the previous year. And in the second quarter, the increase was 1.4%. The problem lies in the existing houses. This is due to many factors, including a physiological devaluation, because in recent years, the price of these properties had increased too much, and the fact that Italians maintained on average very few homes. The price of a house that has never been renovated collapses. Whoever buys wants a beautiful house, but on the market, he finds mainly ugly ones. The result can be twofold: either you do not buy, or you do it at reduced prices, because the buyer has to take into account the costs of the restructuring. Indeed, the new houses, built in the city, are selling well and even quickly. The increase in rentals To depress the real estate market, there is also another factor: Italians are starting to rent again. Conventional 4 + 4 contracts are on the rise, but there has been a boom in short-term rentals especially in large cities, or in tourism. A house that, a few years ago still, would have been on sale is now rented, perhaps on platforms like AirBnB – and it’s clear that, if I remove a stock of well-maintained properties in an excellent position, the average quality of homes for sale decline. Real estate in Italy, a unique case Italy is still lagging behind the most advanced economies. Because in the rest of Europe and in the world, the real estate market started to recover from 2012 to return to pre-crisis levels in some cases. According to data from the BIS (Bank of International Settlements), between the end of 2017 and the end of 2016, in the most mature economies, the price of real estate rose by 3% in real terms. Future scenarios The situation remains that of a depressed market. In Italy, most people over 65 own one or more properties. When these people die, a generation of Italians will inherit. But this stock of homes is destined to end up on the market, both because not everyone has the means to keep them and the number of houses will be higher than the number of people who inherit them. The result? The price of real estate will go down. According to the President of Scenari Immobiliari, it is only a matter of time: the real estate market in Italy depends on inflation. As soon as it resumes, even housing prices will rise. Provided that the construction sector is also taken over. So far, the recovery has been observed only in Milan.

Purchase proposal of property & preliminary contract, what is it?

When you buy a house, you start a multi-step process. It is important to know each step to complete the operation in the best possible way. Let’s see in particular what the purchase proposal and the preliminary contract are. The purchase proposal The purchase proposal is the declaration of the buyer wishing to buy an asset at a given price. Typically, this is a pre-printed form provided by the real estate agency, along with the payment of a sum of money as a deposit. Signed, the purchase proposal contains commitments already binding for the buyer, while the seller remains free to evaluate the other offers. The purchase proposal commits only the party who signed it. Once accepted by the seller, the purchase proposal is automatically converted into a preliminary contract. The preliminary contract The preliminary contract (or compromise) is a real contract that obliges both parties to sign the final contract. The preliminary must indicate the main elements of the sale: the price, the house to buy, the address, a precise description with the cadastre data and the date of the final contract. In the case of the sale of buildings under construction, special rules are defined for the preparation of the preliminary contract. It is not mandatory that the preliminary contract be stipulated by a notary, but it is good to specify with the notary what the resulting obligations are. The transcript is valid as a real reservation of the purchase of the property, this means that the seller cannot sell the property to anyone else, nor grant a mortgage on the property, nor constitute a passive servitude or any other prejudicial right. The potential creditors of the seller will not be able to register a mortgage on the property promised for sale or seize it. From the moment of the transcription of the preliminary contract, the property is “reserved” to the future purchaser, and any transcription or recording would have no effect on him. When registering the preliminary contract, the following taxes must be paid and will be recovered at the time of finalization: 0.50% on the deposit 3% of the amounts paid as down payment.

7% income taxes to attract retirees. Italy’s fiscal advantages.

Easier tax regime for retirees, the Italian novelty Italy wants to attract retirees and is determined to compete with countries like Portugal and Spain. The government grants, starting from 2019, fiscal advantages for individuals establishing their residence in Italy, but exclusively in the South and in towns with less than 20,000 inhabitants. Indeed, these are the places which most need newcomers, since they suffered from a slow but constant migration of their residents in the last two decades. Let’s see what the new retiree tax system is, who it is for and for how long. The new subsidized scheme provides for a minimum rate of 7% on foreign source pension income and any other foreign source income. It is intended for people, Italians and foreigners, who have been abroad for at least 5 years before moving to Italy and who want to live in the southern regions of Italy: Abruzzo, Basilicata, Calabria, Campania, Molise, Apulia, Sardinia and Sicily. And in municipalities with fewer than 20,000 inhabitants. The new regime is scheduled for the 2019 tax period. The new regime, provides also an exemption from reporting foreign asset and investment in annual income tax returns. It also exempts from annual property taxes on foreign property and foreign financial assets. A five years duration limit This convenient regime has a duration of only 5 years, starting from the moment when residence is transferred to Italy. This new scheme represents an opportunity for all those who have not resided in Italy for at least 5 years and who are receiving retirement income and other foreign sources of revenues, such as financial income, rents, etc. I added that actual convenience must of course be assessed on a case-by-case basis, taking into account the heritage / income situation, the family context and the State of origin. However for the measure to register certain results, it is important to reassure about the stability of the system and the adequate services. But not only. It is also essential to deploy specialized operators able to facilitate the transfer of residence and the treatment of different bureaucratic requirements.

Exemption IMU 2019, first home and second home

Facilitations or reductions not only for the main house News of the stability law of 2016: exemption of the IMU and TASI The new Stability Law of October 2015 introduces the abolition of IMU and TASI on the main house, provided that they do not fall under the A1, A8 A9 cadastral categories, namely luxury houses, villas and castles. The reduced rate for luxury homes, villas and castles The last three categories may, however, benefit, if they are used as principal residence, from a reduced rate of 0.40% which can be further reduced or increased by 0.2% by municipal resolution, as well as a deduction of 200 euros. The same goes for the outbuildings, one for each category C2 (warehouses, depots, cellars), C6 (parking spaces, garages, garages, etc.) and C7 (closed or open roofs). Local social housing units as well as those owned by construction companies with undivided properties will be exempt from paying the IMU as long as they are still used as main dwellings. Even those for university students will be eligible for the exemption. Exemption granted to the house of the separated spouse Another novelty concerns the exemption granted to the house allocated to the spouse as a result of the legal separation, but also in case of annulment or dissolution of the civil effects of the marriage. Italians enrolled in AIRE Even for AIRE registrants, there is some news as they will also be able to enjoy the benefits, but only for a house in case of purchase or usufruct with the corresponding dependencies (up to one for each category). see above) and provided that the local unit is not rented or loaned. If they have more, they can choose the one that asks for an exemption. Also with a specific municipal resolution, municipalities may also introduce other forms of facilities, within the limits of fiscal balancing objectives, that provide for reductions or exemptions for persons admitted to health facilities as a result of hospitalization, whether elderly or disabled. Foreigners residing abroad We see the case of natural persons residing abroad who own real estate in Italy for the purposes of facilities for IMU and TASI. It often happens that husband and wife have a house in Italy. The wife and her children moved to a residence abroad or vice versa, while her husband continues to reside in Italy. In these cases, it is necessary to determine whether the property in Italy can be considered as the main residence of the family and thus benefit, for IMU and TASI purposes, from the “first home” facilities. Criteria for an alien to be considered resident in Italy First of all, I remind you of the criteria for establishing a residence in Italy by a foreign person. In this regard, it is necessary to clarify how to apply the “first home” for the purposes of IMU (and TASI), specified the legislator, pursuant to art. 13 (2) of D.L. 201/2011 that “the main dwelling refers to the property, registered or entered in the land register of urban constructions as a single real estate unit, in which the owner and his family unit usually reside on a random basis”. Therefore, in the light of the above-mentioned regulations, property owned in Italy by natural persons (ie entire families) who do not reside can not be considered as “principal residence” and benefit as a such, exemptions IMU and TASI.

House purchase by auction: the first home bonus is valid

The application for tax relief for the purchase of the first house must be made before the transfer order. Buying an auction house can be a big plus. With the online auction portal, you can stay informed of the progress of judicial sales of all assets attached or for which bankruptcy proceedings are ongoing. Research may be limited to houses located in a specific geographic area and within specific price limits. You should almost never participate in the first sale because, in the event that the auction is deserted (that is, in the absence of bidders), at subsequent auctions, the judge may order a reduction of 25%. This is certainly a speculative attitude that is in the end very often the goal of those who buy at auction. In addition to the normal rebate in relation to the market price, home buyers can also benefit from the first housing bonus, ie the tax advantage reserved for those who buy real estate – the first real estate – in the municipality where they have their home or transfer it 18 months after the purchase. A recent decision of the Sondrio Provincial Tax Commission confirmed this. The pronunciation has the important merit of establishing what you need to do to use the first home bonus on the auction purchases. Let’s see more in detail what was said. We do not need to repeat, in this article, all aspects of tax relief for the first home, including the IMU exemption, the property tax. Just remember that it applies to those who have never benefited from the same bonus before and have no other property in the municipality where the house to buy is located. You can get the bonus if you transfer your home within a maximum of 18 months from the purchase in the municipality where the house is located. The first home bonus Does the first home bonus apply to real estate purchases at court auctions? When claiming the first home home bonus for forensic sales? The first home bonus The bonus brings a significant advantage in terms of paying taxes. If the seller is an individual or a company that sells VAT-free, you pay: Proportional register fee of 2% (instead of 9%); Fixed mortgage tax of 50 euros; Fixed register tax of 50 euros. If the seller is a company, with a sale subject to VAT (typical of the manufacturer), you pay: VAT reduced to 4% (instead of 10% VAT for buildings A / 1, A / 8 and A / 9 is 22%); Fixed registration fee of 200 euros; Fixed mortgage tax of 200 euros; Fixed register tax of 200 euros. Does the first home bonus apply to real estate purchases at court auctions? The first house bonus also applies to those who buy a property at auction at the courts. But beware: in order to benefit from the subsidy, it is necessary that the application to benefit from the benefit is presented before registration of the transfer decree with the relevant tax agency. Later, it is impossible to get the bonus. This is the clarification provided by the Sondrio CTP. When to apply for the first house bonus for judicial sales? The judge pointed out that auctions can certainly benefit from the first housing subsidy if the taxpayer declares that he wants to make use of the facilitation at the same time as he asks to be auctioned. This declaration can therefore also be inserted later, with a supplementary act, even after the publication of the decree of transfer, but with the insurmountable delay of the moment of registration of this decree with the Revenue Agency. On this point, the Supreme Court also agrees that it has adopted the same interpretation in the past. Therefore, if the application for use of the bonus is submitted after the registration of the transfer decree, there is no longer any possibility of obtaining the tax benefit.

Criteria for determining the tax residence in Italy

The criteria for determining the tax residence of natural persons in Italy They are dictated by Article 2 of the D.P.R. 917/1986 (“TUIR”), which states that for the purposes of income tax, are considered to be residents of the State natural persons who for most of the tax period are registered in the population registers of the resident population, or have their residence or domicile in the territory of the State under the Civil Code. The conditions mentioned above are alternatives; this means that the existence of only one of them is sufficient to suggest that a person is qualified as residing in Italy for tax purposes. Residence for civilian purposes As expressly provided by the tax law, reference should be made to the concepts of the Civil Code which, in Article 43, provides that “the domicile of a person is situated at the place where he has established the seat of his business and the residence is where the person lives habitually”. Difference between residence and domicile Whereas the residence is linked to the permanence of the subject in a sufficiently stable place and with the intention of settling there (objective data), the domicile consists of the concentration of the affairs and interests of the person at a particular place without the need for his actual presence in that place (objective data) and the desire to establish and maintain in a particular place the main “center” of the generality of relations (subjective data). The notion of interests to which reference should be made, once limited to the economic and financial sector of the subject, must be understood as referring, by unanimous jurisprudential interpretation, to the moral, social and family sphere of the subject. With regard to the temporal aspect, the criterion retained by the legislator is that of the temporal prevalence during the tax period. With regard to the precise definition of the tax period, reference is made to Article 7 of the TUIR according to which the reference period is therefore the calendar year. Residents who have been in one of the above conditions for at least 183 days (184 days in leap years) are considered residents. Tax havens In this regard, the legislator has recently introduced paragraph 2-bis of Article 2 of the TUIR which states that ” are considered as residents, unless proven otherwise, Italian citizens removed from the population register of the resident population and transferred to states or territories other than those identified by decree of the Minister of the Economy and Finance … “In practice, Italians who have transferred their homes and / or their residences to tax havens are considered as residents in Italy, unless proven otherwise. Residency in tax havens To be complete, note that the above-mentioned list of countries, “tax havens”, may be updated in accordance with the guidelines of the OECD and other international and / or community organizations. In this regard, we mention some of the preferential tax countries included in the above-mentioned list in 2011 to name a few: Andorra, Bahamas, Barbados, Bermuda, Philippines, Hong Kong, Lebanon, Liechtenstein, Macao, United Arab Emirates , Monaco, San Marino, Singapore, Switzerland, Vanuatu.

The real estate market is picking up in Italy

More purchases and the boom of luxury properties, the real estate market is picking up. According to the data of the notaries of the first half, the trend favored by the fall in prices is confirmed. The amount of loans granted also increases. Real estate transactions are increasing and prices continue to fall. A trend which means that the apartments purchased, mainly as first residences, are more than half in the upper price-range. One third are low-cost, while the purchase and sale of properties worth about one million Euros is also increasing. At the same time, the amount of loans granted is also increasing. The semi-annual notarial survey, based on sales from January to June, is an overview of the market trend. More purchases and prices still contained. The survey therefore shows that 443,337 real estate sales of all types were recorded in the first half of 2018. Of these, 334,979 acts are related to buildings that recorded a 10.72% increase over the previous year, thanks to continuous price reductions. Indeed, if 2017 had already recorded a -17% decrease on the average value of property sales (from € 147K to € 126,512), this decrease would be even more pronounced, by -5% in the first half of 2018 (118,356 €). However, the + 26.73% increase in sales and purchases over € 900,000 should also be recorded. First houses purchases are still growing The first residential installation was requested on 177,212 residential buildings out of 246,539, confirming the trend that more than half of the homes are purchased with first-residence facilities. Properties for which the most requested facilities are those listed in category A / 2, ie civilian-type buildings, were 50% of the sample; secondly, economic type A / 3 dwellings, accounting for 30% of the total, while dwellings (category A / 7), represent only 10% of the sample. Acts in 90.78% of cases were considered private sellers, while corporate transactions showed a decline of 9.23%. The increase in residential property donations is also continuing, with an increase of 4.6%, with operations mainly in the South. More real estate loans The market trend is also reflected in loans granted. In the first six months of the year, 193,102 new transactions were completed, representing an increase of 5.92% over the same period in 2017. In terms of amounts, the prevalence of loans up to 150 000 euros is confirmed, but an increase is also noted: 8 to 10% of mortgages between 200,000 and 300,000 euros, very moderate in the past. The sale of building land is decreasing Finally, a larger market is confirmed for the sale of agricultural land (57,284) compared to building land (13,624). Sales and purchases increased by 2.83% in the first half of 2018 compared to the previous year, with the amounts totally concentrated in the first price bracket (less than 100,000 euros).

Real-estate investment tax savings for Italian citizens residing abroad

1) UP-FRONT TAX SAVINGS UPON THE PURCHASE OF A PROPERTY IN ITALY 1a) Requirements These tax savings apply to anyone (national or foreigner) who buys a “Prima Casa” in Italy. The tax savings amount is significant and pegged at 7% (i.e., 2% instead of the 9% ordinary tax rate) of the cadastral value of the property, not the transaction price. Although there can be substantial variations on the difference between the cadastral and commercial value of Italian properties, cadastral values usually fall in the 40%-60% range of the commercial values (source: OMI – Osservatorio Mercato Immobiliare, Italian Ministry of Economy and Finance). Please note that the normal conditions for a property to classify as a “Prima Casa” and thus for the buyer to be advantaged of these up-front tax savings are that: 1) he/she does not already own any other residential property in the same Italian municipality; 2) he/she did not already benefit from “Prima Casa” relief when purchasing another residential property in Italy; and that 3) the property becomes his/her “Main Residence”, which implies that the buyer has to transfer his/her residence to the municipality where the property is situated within 18 months from the date of purchase. For Italian nationals officially residing abroad and registered with AIRE (“Anagrafe dei Cittadini Italiani Residenti all’Estero”), however, although the first two conditions still apply, the third condition does not apply, which means that they are NOT required to move their residency to the property’s municipality to qualify for a “Prima Casa” tax relief. Finally, the “Prima Casa” tax savings apply to any Italian residential property except for those coded as A/1, A/8, and A/9 on the cadastral registry. Please note that these properties only constitute about 0.2% of the entire Italian residential assets (source: OMI’s Cadastral statistics, 2017). 1b) Upfront tax savings – Example For a property with a market value of e.g., Euro 1,000,000 and a corresponding cadastral value of Euro 500,000, the law would allow for an up-front tax saving of Euro 35,000 (i.e., 7% of the cadastral value). 2) ADDITIONAL ANNUAL TAX BENEFITS FOR ITALIANS RESIDING ABROAD 2a) Requirements Section 9 –bis of Law Decree 47/2014, effective from 2015, has introduced further tax benefits to Italian nationals residing abroad who purchase a “Prima Casa” in Italy.  These benefits include a full exemption from the IMU (“Imposta Municipale Propria”) and a 67% tax reduction on the TARI/TASI (“Other municipal properties taxes”). The law states that these further benefits apply to “one property unit only, owned by Italian nationals registered with AIRE, who are retired in their states of residence, providing that such property is not rented or given in use to third parties”. This means that, beyond the conditions that define a “Prima Casa” stated above, two additional requirements must be met to benefit from further tax relief: 1) the owner must receive a pension from his/her country of residence (this condition leaves out Italians who, having moved abroad after retiring, receive an Italian pension); and 2) the property must not be rented out or given in use to third parties. Please note that a potential Italian resident living abroad can therefore benefit with two options: a) buying the property as a “Prima Casa”, benefitting from the municipal tax savings (i.e., IMU, TARI/TASI) but without being able to rent; or b) buying the property as a “Prima Casa”, paying the full IMU/TARI/TASI taxes, but with the option of renting it out. Please note, however, rental taxes amount to 21%. 2b) Upfront and annual tax savings – Example (cont’d) For a property with a market value of e.g., Euro 1,000,000 and a corresponding cadastral value of Euro 500,000, the law would allow for an up-front tax saving of Euro 35,000 (i.e., 7% of the cadastral value) and annual municipal property tax savings of about Euro 5,000 in IMU tax (i.e., full exemption) and Euro 3,500 in TARI-TASI tax (i.e., 67% exemption). Based on these estimates, the present value of the up-front savings of Euro 35,000 and annual tax savings of Euro 8,500 would amount to about Euro 74,000 (i.e., 7.4% of the original investment) over the first 5 years of ownership of the property, Euro 107,500 (i.e., 10.75%) over the first 10 years, Euro 136,500 (i.e., 13.65%) over the first 15 years, and Euro 161,500 (i.e., 16.15%) over the first 20 years of ownership. Values discounted based on the 3% Italian government long-term bond yields. We are experts in Italian real estate law and our practice is happy to provide and determine each individual’s qualification for the legislated tax benefits and best assure each client captures the maximum tax benefits under the law.