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.

House prices in Italy: 51% lower since 2008

The price decline seems to be contained, but there is no recovery despite an increase in sales MILAN – The Italian real estate is struggling to get rid of the waste of the crisis. The main investment of the Italians, the house, remains on valuations still far from the levels of the beginning of the decade: compared to the average level of 2010 (first year of availability of the historical series), in the second quarter of 2018 it had decreased by 15,8%. This is shown by the ISTAT data, which explain the decline exclusively in relation to existing homes, whose prices fell by 22.1%, while new homes recorded a slight increase (+ 0.8%). The price impact of the 2008 crisis As far as prices are concerned, a study carried out by Technocasa, the first network of real estate agencies in Italy, showed that, from 2008 to 2015, the trend has always been negative, in big cities, in the hinterland large cities and in provincial capitals. The value of buildings fell by 37.1% in the major cities, by 38.1% in the hinterland and 39.3% in the provincial capitals. Therefore, in 2018, if inflation is estimated at about 1% per year, the calculation of the price decrease is as follows: -37.1% (from 2008 to 2015), -3% (from 2015 to 2018 approximately), – 11% (cumulative inflation since 2008) = about -51%. In the second quarter of this year, the price index for households increased 0.8% from the previous quarter and was down 0.2% from the same period in 2017 (from -0.5% in the first quarter of 2018). In this case too, the slight downward trend is entirely attributable to the prices of existing homes, which recorded a negative variation of -0.7%, down from -1.0% in the previous quarter. On the other hand, new home prices accelerated on a trend basis, rising from + 1.0% in the first quarter of 2018 to + 1.6% in the second quarter of 2018. These trends are reflected in the confirmation of a phase of growth in sales volumes (+ 5.6% of the trend increase recorded for the second quarter of 2018 by the Agency’s Real Estate Market Observatory for the Residential Sector. ).

Buying a house in Italy – taxes to pay, fiscal aspects

When you have to buy a house, you must keep in mind certain tax aspects. Let’s see what they are depending on whether you buy a house from a construction company or an individual. As noted by the National Council of Notaries, the purchase and sale of construction or renovation companies, except in special cases, are subject to VAT, which is paid directly to the seller. The VAT rate to be applied on the sale price will be: Equal to 10% in the absence of first housing benefits; Equals 4% if first home benefits are requested. The same tax treatment is applied to the allocation of housing to members of a housing construction co-operative. In the case of a purchase subject to VAT, the following taxes will also be paid to the notary, who will then pay it to the Tax Agency (Agenzia delle Entrate): Registration fee: 200 euros. Mortgage tax: 200 euros. Cadastral tax: 200 euros. If, on the other hand, you buy a house from individuals, the registration, mortgage and registration taxes are paid by the buyer to the notary who will in turn pay them to the Tax Agency (Agenzia delle Entrate) during your registration. In the absence of facilitations: Registration fee: 9%. Mortgage tax: 50 euros. Cadastral tax: 50 euros. Rates are normally applied to the stated selling price; in the case of transfer of residential properties to natural persons, the buyer may request payment of the registration tax on the “cadastral value” (value-price) of the property (i.e. the resulting value of the multiplication of cadastral income for the legal coefficient, which is 115.5), regardless of the actual amount of the sale price, even if it is higher than this value. The minimum tax is always € 1,000. In the presence of subsidies for the purchase of the first residential house: Registration fee: 2%. Mortgage tax: 50 euros. Cadastral tax: 50 euros. Rates are normally applied to the stated selling price; in case of transfer of residential properties to natural persons, the buyer may request the payment of the registration fee (imposta di registro) on the “cadastral value” (value-price) of the property (i.e. the resulting value of the multiplication of cadastral income for the legal coefficient, which is 115.5), regardless of the actual amount of the sale price, even if it is greater than this value. The minimum tax is always € 1,000.

Italian preliminary contract for the purchase and sale of real estate

Italian preliminary contract for the purchase and sale of real estate, what you need to know When you buy a house, you start a multi-step process. It is important to know each phase 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 that he wants to buy a certain property at a certain price. Normally, this is a pre-printed form provided by the real estate agency and accompanied by the payment of a sum of money as a deposit. We can also make a purchase proposal a bit special, without a real estate agency. Signed, the purchase proposal contains commitments that already engage the buyer, while the seller remains free to evaluate other offers. The purchase proposal is binding only on the party who signed it. Once accepted by the seller, the purchase proposal is automatically converted into a preliminary contract. The preliminary contract The Italian 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 price, the house to buy, the address and a precise description with the land register data and the date of the final contract. In the case of the sale of goods under construction, special rules are required by law for the preparation of the preliminary contract. It is not mandatory that the preliminary contract be signed by a notary, but it is good to specify with the notary or with a real estate lawyer what the obligations that result are. Preliminary contract for real estate purchase, transcription in real estate registers The transcription figures as a real purchase reservation of the property, it means that the seller can not sell the property to anyone else, or grant a mortgage on the property, or constitute a passive servitude or any other prejudicial right. The creditors of any seller will not be able to register a mortgage on the goods promised for sale, nor seize them. Since the registration of the preliminary contract, the property is “reserved” to the future buyer, and any transcript or registration would not be applicable. When registering the preliminary contract, the following fees must be paid, which will then be recovered upon signature of the definitive contract: 0.50% on the deposit 3% of the amounts paid as down payment.  

Buying a home that has been given, risks and remedies

Buying a donation house in Italy, what are the risks and how to avoid them Buying a home from a vendor who has received a donation may be risky and the bank may not grant the loan. Let’s see why and how, thanks to a recent decision, it is possible to avoid problems. Donation may be contested within 20 years of being transcribed or within 10 years of the donor’s death. A long time. And with the protest the heir can recover the given property, even if his property has already been transferred. In order to protect the gift, the heir may waive the action by signing an official document when the donor is still alive. To clarify it there is the judgment of the Court of Pescara n. 250/2017. This decision is based on what has already been expressed by the Court of Turin (Judgment No. 2298/2014). In the case of a donation, it is therefore good to defend oneself against the heirs and their actions. First of all, it should be remembered that the person who gives a home to a parent or a third party performs an act that could harm the so-called legitimate heirs, to whom Italian law always grants a minimal share of the estate of the deceased, even in spite of his will. They are the spouses, their children, the parents and the brothers and sisters of the deceased. This means that if a person, while still alive, make donations depleting his assets, or with his will, leaves most of his property to persons other than the legitimate heirs, they may experience the so-called “action of reduction of the legitimate part “. The action aims to recover the part of the inheritance that is due to them by law. In this way, those who benefit from a donation of the deceased are obliged to return the property to the heirs even after the transfer of ownership in their favor. Not only that. If the donor sells the property to another person, the lattermay also be the subject of the heirs reduction action and, therefore, be obliged to return the property to the legitimate ones. The reduction action can no longer be experienced beyond a certain term. The right of the heirs to recover the property dumped from the estate of the deceased, who damaged their rights,  prescribes alternatively under: 20 years from the transcription of the donation in the public register; 10 years from the opening of the succession, that is to say the death of the donor. After this period, if no action is taken, the gift becomes unassailable. But the practice of the notary has developed a faster solution, validated now by the judges. It is a question of having the legitimate heir sign a waiver to contest the donation: he thus undertakes not to proceed with the restitution of the property. If the legitimate heirs are more than one, the signature must be collected by everyone. The waiver can be signed when the donor is still alive, that is, shortly after the donation itself. The judgment states that the renunciation of the legitimate heir to the action of restitution of the given property is valid even if it is completed before the death of the donor and before 20 years from the transcription of the donation. If made with a notary act, it can be noted in the real estate registers on the sidelines of the donation in order to be public and knowable by anyone. It is necessary to emphasize however that with this agreement the legitimate heir does not lose its legitimate part, that he can always claim also against the donor; he undertakes not to claim the object of the agreement, without prejudice to the possibility of defending his rights in a different way. Therefore, the situations that may arise are as follows: if the donor is still alive, the legitimate heir can only give up the action to recover the property, it means that he will no longer be able to claim the property object of worship, but can still act against the donor to obtain (in a different way) his legitimate share. If the donor is dead, the legitimate heir may renounce both the action to obtain restitution of the property, and the action of reduction of the legitimate share.  

Buy an auction house in Italy and save 20%

Buy an auction house in Italy with or without bank loan Real estate auctions are a good opportunity to buy quality property at affordable prices, stipulating, if necessary, even a special mortgage. Real estate auction: how does it work In any case, it is always possible for those who know how to choose, to find good buying opportunities in real estate auctions, even if the available liquidity does not always make it possible to realize the real estate dream. In this case, it is possible a mortgage loan by auction. When a property is auctioned as part of a legal proceeding, its selling value may fall by 20% of the market value, which is a benefit from the point of view of the accessibility of the purchase. The amount financed by the mortgage can instead reach 100% of the value of the sales and 80% of the value of expertise, thanks to an agreement between Abi (Italian Banking Association) and the courts (the list of participating banks is available on the Abi site). Before establishing the amount of a mortgage by auction, it will then be up to the forensic expert to set the value of the property, once established its cadastral parameters and general conditions. These characteristics will be recorded in a document that each participant in the auction will be able to consult. The court then sets the base price, the filing date and the duration of submission of tenders, as well as the date of payment of the balance. Information, these, which are made public in the court register and with advertisements in the sections devoted to auctions in newspapers and other media. Loan auction: no notary fees Once the property is granted, the winner pays the balance: if he wants to buy by loan, the signature of the latter is done at the same time as the transfer of ownership decreed by the judge (which does not involve notary fees, which constitutes an additional advantage). The loan is then granted only on the condition that the participant in the auction, who must have signed and presented at the auction stage a preliminary document to this effect, actually gains ownership. If the award does not take place, the preliminary document does not imply any obligation. If the loan is not sufficient to cover the total cost of the purchase, the borrower will have to cover the remaining part (with its own cash or with a loan or mutual liquidity). Mortgage bids, like all other mortgages, will have an amortization period and procedures similar to “traditional” loans. In addition, if the property purchased will be a first home, it will receive the associated tax benefits.

Increase the value of your home in Italy and elsewhere

What increases the value of a property: Here are some of the most useful interventions. From the renovation of rooms to energy certification, here are the most useful interventions to increase the value of your house or apartment and make it more attractive to potential buyers. Space is never enough. When the surface of a house can not be changed, how can this limit be solved? One of the added values ​​of a home is certainly the ability to be ready for any need or unforeseen: from the arrival of an extra person (be it a baby or an elderly parent) to the sudden need to work at home. the House. With the help of an expert, it will be much easier to rethink the premises and optimize the spaces to get an extra room. Simply divide a very spacious room, or badly cut, into two different rooms and you will get a second bathroom, a room for guests, or a small studio to devote to work from home! If the house is not big enough for this type of intervention, something can be the use of a sliding door that can still guarantee privacy. Restructure the most used parts Renewing the most used spaces of the house, such as the living room, kitchen and bathroom will give the impression of a well maintained home. Operations that can give the rooms a whole new atmosphere: for example, the coating of walls with soft colors illuminates the rooms and gives them a much larger and more spacious appearance. Outdoor spaces Outdoor spaces are an excellent business card! Fortunately, this is the right time for interventions concerning the layout of green spaces. From the renovation of the terrace to the garden design: the green bonus, launched in the budget law of 2018, is a tax benefit that allows Irpef (income tax) to deduct an amount equal to 36% of their expenses related to the maintenance of green spaces. Thermal insulation Carpentry maintenance has an influence on the cost savings of heating and cooling the house, as well as the insulation of the walls with the thermal layer or the installation of solar panels allow a considerable saving in the energy bill. Energy efficiency measures have benefits not only in terms of well-being, but also in terms of savings: a cost-effective and sustainable solution that will appeal to potential buyers.

Buying a house for 1 Euro in Italy, instructions for use

Update of Jan. 17th, 2019: There are still some 18 houses at 1 € in Italy, Sicily,  click here for further information. How does the project house for 1 € work? These houses are owned by individuals who want to get rid of them often so as not to pay taxes. We are talking about dilapidated or dangerous buildings that require major renovations. The buildings are sold as donations to the municipalities which, by public procedure, sell for the symbolic amount of 1 euro. In other cases, it is the municipal governments that vouch for the owners of these properties. Naturally, there are commitments for those who buy with a project of houses for 1 €, which must guarantee: To plan a restructuring and reevaluation project within 365 days of purchase (approximately 20-25 thousand euros). To support notary fees for registration, transfer and registration. Two months to start working when all permits are obtained. To ensure the security of the purchase by the buyer, the municipality asks to stipulate a deposit of 5 thousand euros for a period of three years, which is then refunded at maturity. For more details, contact directly the construction offices of the concerned municipalities and consult attentively the corresponding opinions. The advantages of buying a house for one euro This long-term strategy is attractive for those looking for a home cheap and simple to restore the brilliance of the Italian villages that the whole world envy us for their extraordinary beauty, and for that spirit of the past that is so sought after today. In addition, the Case 1 Euro (houses for 1 €) project could shake up the real estate market by facilitating access to youth-owned homes, for which the possibility of accessing a mortgage is often an insurmountable obstacle today. The repopulation of these small towns will promote the birth of tourist activities, activating the economy of the whole area concerned. Always with a view to welcoming tourism, you can explore the possibility of redeveloping the property with a small hotel, a B & B, or think of a larger project that also involves more properties in the same village with the possibility of creating an extended hotel. In short, the possibilities and implications are numerous and very interesting.