Real Estate Investment in Italy

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Real Estate Investments in Italy
made by foreign investors:
Investment through
Italian company
Direct investment
Investment through
Italian Real Estate
Investment Fund (REIF)
FOREIGN COUNTRY
RE Co.
REIF
income
ownership

income
ownership

income
ownership

Ordinary income in the hands of the foreign investor
Direct
Through Italian company
Through Italian REIF
IN ITALY:
• Income from Italian real estates is subject to
taxation in Italy with progressive rates (from
23% up to 43% plus local surcharges up to 2,6%)
in case of individuals, or to a 27.5% rate in case
of other entities;
• Italian taxable income from ownership of Italian
real estates is determined as follows:
• taxation on the higher among 85% (75% in
specific cases, such as Venice) of the actual
rent and cadastral income, if the asset is
rent;
• cadastral income increased of 1/3 if the real
estate is held vacant and/or available;
• no taxation if the asset is the main residence
of the owner or of its relatives;
• 19% of interest due for the purchase of the
main residence can be offset (up to the
amount of Euro 760 per year) against the
Italian income tax;
• individuals may opt for a substitute taxation
regime with a rate of 20% for rents on civil
buildings;
• obligation of filing a tax return in Italy.
IN ITALY:
• Dividends and interest paid by Italian companies
to foreign subjects are subject to a 20% (*)
withholding tax in Italy;
• in case of dividends, the following favorable
regimes may apply: (i) withholding tax exemption
on payments to certain UE companies holding at
least 10% of the equity share capital of the Italian
company, to investment funds and SICAVs, to real
estate funds, to pension funds; (ii) withholding tax
rate reductions are acknowledged to EU resident
shareholders (rate of 1,375%) or may be granted to
other shareholders benefiting from treaties to
avoid double taxation on income providing lower
rates (generally ranging from 10% to 15%; the
relevant Treaty may provide specific rules for real
estate companies);
• in case of interest, the following favorable
regimes may apply: (i), withholding tax exemption
on payments to certain UE companies holding at
least 25% of the equity share capital of the Italian
company, in case of loans; (ii) withholding tax rate
reductions may be acknowledged to other lenders
Co.
benefiting fromRE
treaties
to avoid double taxation
on income providing lower rates (generally
ranging from 10% to 15%; the relevant Treaty may
provide specific rules for real estate companies);
IN ITALY:
• Proceeds distributed by REIFs
are subject to a final 20%
withholding tax in Italy;
• exemptions from said
withholding tax is
acknowledged on proceeds
received by: (i) pensions funds;
(ii) collective investment
undertakings established into
white list countries; (iii)
international entities or bodies
established pursuant to
international agreement
executing in Italy; (iv) central
banks or bodies which manage
also the Italian State official
reserves;
• withholding tax rate reductions
may be acknowledged to other
unit holders benefiting from
treaties to avoid double
taxation on income providing
REIF
lower
rates (for these
purposes, the Italian Revenue
deems that proceeds
distributed by REIFs qualify as
interest).

IN THE FOREIGN COUNTRY
• the relevant treaty to avoid double taxation on
income between Italy and the State of
residence of the foreign investor, if any, may
exempt the Italian real estate income already
subject to taxation in Italy or acknowledge a
tax credit to be offset against taxes applied in
the State of residence on said income.


(*) rate applicable starting from 1 January 2012
IN THE FOREIGN COUNTRY …
IN THE FOREIGN COUNTRY …
Ordinary income in the hands of the Italian entity
Italian company
• Italian companies are subject to corporate income tax with a rate of 27.5%
(IRES) and to regional tax on producing activities with a rate of 3.9% (IRAP) :
• for IRES purposes only, interest on financings is deductible up to 30% of
EBITDA net of extraordinary items of income (no limitation for interest due: 1.
by real estate management companies; 2. on financings secured by
mortgages given on the real estate asset to be purchased and destined to be
rented out);
• for IRES and IRAP purposes: (i) real estate strategic business assets can be
depreciated with linear deductible depreciation (in general over 33 years),
related maintenance costs are fully deductible, can give raise to a
presumption of minimum income deriving from said assets (varying from 0.9%
up to 4.75% on the relevant cost); (ii) portfolio assets can be devaluated for
tax purposes; (iii) other estate assets are deemed producing income as
higher between the cadastral rent and 85% (75% for real estate in Venice) of
the actual rent and related maintenance costs are not deductible.
REIF
REIFs are not subject to taxation on income produced by
their assets.
Capital gains in the hands of the foreign investor
Direct
Through Italian company
Through Italian REIF
IN ITALY:
• Income from the disposal of Italian real
estates held for less than 5 years is subject to
taxation in Italy with progressive rates (from
23% up to 43% plus local surcharges up to 2,6%),
in case of individuals, or to a 27.5% rate in case
of other entities;
• the taxable capital gain in Italy is determined
as difference between the sale price and the
purchase cost;
• obligation of filing a tax return in Italy;
• alternatively to the above, the seller may opt
for a substitute taxation regime with a rate of
20% on the capital gain.
IN ITALY:
• Capital gains realized on non qualified
participations into Italian companies (for non
listed companies, 20% of ordinary voting rights or
25% of the net worth) are subject to a 20%
substitute tax in Italy(*);
• Capital gains on qualified participations are
subject to taxation in Italy (with progressive
rates from 23% up to 43% plus local surcharges up
to 2,6%, in case of individuals, or to a 27.5% rate in
case of other entities) limited to 50.28% of their
amount;
• Capital gains on non qualified participations into
Italian companies are not subject to taxation in
Italy when realized by: (i) taxpayers resident into
white list countries; (ii) entities or bodies
established pursuant to international
agreements executing in Italy; (iii) foreign
institutional investors, even if not having tax
personality (i.e., not subject to tax), established
into white list countries; (iv) anybody, if realized
on listed stocks. RE Co.
IN ITALY:
• Capital gains realized on units
issued by a REIF are subject to a
20% substitute tax in Italy(*);
• exemptions are acknowledged
from said taxation in Italy in the
following cases: (i) taxpayers
resident into white list countries;
(ii) entities or bodies established
pursuant to international
agreements executing in Italy; (iii)
foreign institutional investors, even
if not having tax personality (i.e.,
not subject to tax), established
into white list countries.

IN THE FOREIGN COUNTRY
• the relevant treaty to avoid double taxation
on income between Italy and the State of
residence of the foreign investor, if any, may
provide the irrelevance of the capital gain for
Italian tax purposes or, alternatively, may
provide a tax credit to be offset against taxes
applied in the State of residence on the
income already subject to taxation in Italy.


(*) rate applicable starting from 1
January 2012
REIF
(*) rate applicable starting from 1 January 2012
IN THE FOREIGN COUNTRY …
IN THE FOREIGN COUNTRY …
For any further queries, please contact:
Dr. Gianluigi Strambi
E-mail: [email protected]
Raynaud and Partners
Studio Legale
Via Santa Maria Segreta, 6
20123 – Milan (Italy)
Tel.: +39 02 7217091
Fax: +39 02 72170950
www.raplex.it
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