Tax Incentives for Investing and Renting Residential Properties in Italy

By Matteo Tisato

The lure of Italy is undeniable. Stunning landscapes, historic cities, culture, design, culinary tradition. Before Covid-19 hit Italy so badly in early 2020, Rome was the country’s most popular destination with almost 27 million of visitors every year, or 6.4 percent of the total, followed by Milan and Venice (both 2.8 percent), and Florence (2.4 percent).

However, in the recent years, Italy has become an excellent place attracting not only tourists but international investors as well, who are finding always more opportunities and great deals even on tax regimes.

Today we dig into the international real estate business and want to share something that most potential investors in the real estate market do not know: A 10% flat rate for incomes coming from renting out residential properties. 

A 10% flat rate for incomes coming from renting out residential properties. 

If in most cases a rate of 21% is applied to these incomes, for lease contracts that meet certain requirements it is possible to qualify for a 10% flat fee, which is certainly more convenient for the investors/owners. Here are the main criteria to qualify for this special taxation regime:

  • Firstly, the residential lease must be in the form of 3 plus 2 years, or Interim contracts (up to 18 months) or student contracts (up to 36 months).
  • Secondly, the 10% flat rate applies only to leases for which the maximum amount is not freely established by the parties but is determined in accordance with agreements made by the local authorities and the most representative tenant organizations.
  • Thirdly, the 10% flat rate applies exclusively to homes located in specific areas, including the biggest cities such as Bari, Bologna, Catania, Florence, Genova, Milan, Naples, Palermo, Rome, Turin, and Venice. Buying a property in these cities may also include further reductions on IMU, which is the Italian property tax.

International investors are always more interested in investing in the Italian real estate by taking advantage of the above tax regime. In addition, house expenses are usually paid by the tenant, and these include water-sewer taxes, condominium taxes, gas, electricity, Internet/Wifi, and Tv/cable tax.

In addition to reduced rental taxes, Italy offers a range of tax benefits to attract foreign workers and retirees. This includes a generous time-limited reduction on income tax for workers who move their tax residency to Italy. As well as a 7% flat tax on overseas pensions for retirees who switch their tax residency to Italy. Conditions apply.

Italy also attracts high-net-worth-individuals (HNWIs) through a €100,000 flat tax for up to 15 years. This has proved popular with 784 people taking up this offer over the past three years. The majority of HNWI applicants (10%) are from the United Kingdom, where Brexit uncertainty coupled with Italy’s generous tax provisions, have spurred people to act.

For anyone interested in moving to Italy, there are a range of options available. Including the investor visa – for which the Italian government has just reduced the investment amounts; the elective residency visa – for which you need to prove annual stable income in excess of €32,000; the European Blue Card – for highly-skilled individuals; and naturalization by proving Italian ancestry.

Learn more in our podcast.

Contact Us to discuss your case.

This article is published for clients, friends and other interested visitors for information purposes only. The contents of the article do not constitute legal advice and do not necessarily reflect the opinions of Davies & Associates or any of its attorneys, staff or clients. External links are not an endorsement of the content.


Italy Flat Tax for HNWIs Leads to 784 New Tax Residents

The Italian authorities have announced that 784 high-net-worth individuals have applied for tax residency in Italy over the first three years of the program. The reason? A €100,000 flat tax on income for up to fifteen years.

The country with the most applicants (10%) was Great Britain, followed by France (58 applicants), the United States (20 applicants) and Russia (19 applicants).

Italy’s attempts to attract foreigners to obtain tax residency does not stop with high-net-worth individuals. The country has attempted to attract retirees to switch their tax residency with the lure of a 7% annual flat tax on overseas income (e.g. pension), with an emphasis on retiring to the southern regions of Italy.

Italy is also seeking to attract more people of working age, especially the self-employed. A generous tax incentive for workers includes a 70% reduction in income tax on Italian income for five years, with the potential to increase and extend the discount if settling in the South or bringing family members.

In addition to tax residency, Italy offers a range of residency and citizenship options. The country offers and investor visa program, and recently offered substantial discounts to attract more investors to obtain residency.

Other options include obtaining the European Blue Card for highly skilled workers, or obtaining an Elective Residency Visa if you can prove you have a steady income of at least €32,000.

An alternative pathway to Italy is by claiming a right to citizenship through an Italian ancestor. Given high levels of emigration in the early twentieth century, a surprising number of Americans, Brazilians, Argentinians, Venezuelans and Mexicans can claim Italian citizenship.

Given the favourable flat tax and the high quality of living, it is little surprise that Italy has registered almost 800 new HNWI tax residents. It is also understandable that Brits are among the highest applicants, given that British citizens will lose their automatic access to reside in European Union countries after Brexit.

As with anything to do with tax, there is considerable nuance in the details. It is vital to engage tax counsel before planning your move. Please contact Matteo Tisato in our Italy team to discuss your specific circumstances in greater detail.

This article is published for clients, friends and other interested visitors for information purposes only. The contents of the article do not constitute legal advice and do not necessarily reflect the opinions of Davies & Associates or any of its attorneys, staff or clients.


Positano Italy

Podcast: Chasing the Italian Dream: Residency & Citizenship Options

Matteo Tisato, Senior Immigration Analyst at Davies & Associates takes you through various options for moving to Italy, including:

The Italian Investor Visa.

Matteo discusses recent changes to the Investor Visa. The Italian Investor visa has long been considered uncompetitive on price in relation to other, similar European programs. To attract more high-net-worth individuals as a result of Covid. The government has halved the minimum investment requirement of certain investor visa criteria. The pathway to citizenship is also discussed.

The Elective Residency Visa

Matteo discusses the benefits of one of the most popular visas for people looking to work or retire in Italy. The core requirement of the Elective Residency visa is to rent or lease a house and have an income of 32,000 Euros or more.

Italian Citizenship Through Ancestry

In the late nineteenth and early twentieth centuries, Italy experienced mass migration on a vast scale. Many people around the world, especially in the United States, Mexico, Brazil, Venezuela, and Argentina, can claim Italian citizenship through an ancestor. Matteo talks us through the main requirements, including the need to provide documentation to support the claim.

EU Blue Card

The European Union offers a “blue card” program to attract highly skilled workers from around the world. So-named to infer a link to the US Green Card. As you will hear, it is actually more similar to the H-1B visa.

Italian Tax

The Italian tax system can be daunting even to the initiated. Many of our clients want to know the best way to structure their taxes when moving to Italy from abroad. Italy has recently made it more attractive for workers, retirees and high net worth individual to become tax resident.

Hosted by Duncan Hill. Neither Duncan nor Matteo are licensed lawyers in the US or Italy and nothing in this blog constitutes legal advice. Contact Davies & Associates to discuss your circumstances with an attorney.


The Italian Dream is now Half Price

The Italian government is reducing key investment requirements for its Investor Visa by 50%.

By Matteo Tisato, Senior Immigration Analyst, D&A Italy

Just yesterday, the Italian Parliament passed into law a governmental Decree with a number of measures aimed at relaunching the Italian economy as a response to the dramatic impact that the Covid-19 health emergency had on the Italian and global economy.

In particular, the Italian government has taken actions in order to attract and encourage foreign capitals and investments from abroad, by reducing by 50% some of the minimum thresholds of the “Investor Visa for Italy”. 

In light of the above said, citizens from all around the world are now entitled to apply for and obtain this visa and its related Permesso di Soggiorno (Permit of Stay) by performing one of the following investments in the country:

• at least 250.000 Euros (previously was 500.000 Euros) in an innovative start-up company incorporated in Italy; 

• at least 500.000 Euros (previously was 1 Million Euros) in equity instruments of companies incorporated and operating in Italy; 

• at least 2 million Euros in Government Bonds issued by the Italian Republic (no changes in the new law)

• philanthropic donations of at least 1 million Euros, in the field of culture, education, immigration, scientific research, recovery of cultural assets and landscapes. (no changes)

The above change in the law does not affect the practical aspects of the procedure. Once the Investor Visa has been issued, the investor (and their family) is entitled to enter Italy and to apply for the Permesso di Soggiorno (permit of stay), which will be issued on the sole condition that the applicant performs one of the above-listed investments within 3 months after the date of first entry in the country. 

The Permesso is issued for an initial period of 2 years and can be renewed for further periods of 3 years, provided that the investment has been fully executed according to the Italian Immigration Law

The steps for obtaining the citizenship of Italy, which is the 3rd largest economy in the European Union, and the 8th largest by nominal GDP in the world, can be quite extended unless all the documents are prepared in accordance with the requirements imposed by the Italian authorities. 

If you think of applying for the Investor Visa for Italy, contact our offices in Florence or Miami, and our attorneys will assist you step by step with this process.

mtisato@usimmigrationadvisor.com

This article is published for clients, friends and other interested visitors for information purposes only. The contents of the article do not constitute legal advice and do not necessarily reflect the opinions of Davies & Associates or any of its attorneys, staff or clients.


Live your Italian Dream through the Elective Residency Visa

By Matteo Tisato. Matteo is a Senior Immigration Analyst in our Italy Practice Group. Connect with Matteo on LinkedIn.

With offices across Italy, Davies & Associates is able to help foreign nationals obtain the right to live, work or claim citizenship, collect debts, and pay taxes in the country.

In the first of a series of blogs from the Italy Practice Group, Matteo Tisato examines the benefits, requirements, and timelines of the elective residency visa.

The Italian elective residency visa allows entry into Italy for an open, long-term visit to foreigners who intend to establish their residence in Italy and who are able to do so by showing financial incomes without the need of employment.

Individuals must submit suitable and documented proof of housing (to be purchased or rented) in Italy and an income of more than EUR 32,000 of regular and stable financial resources which are likely to remain steady in the future. Resources must derive from prolific revenues (annuities, rents, pensions, bonds), properties ownership, stable economic-financial activities or other sources other than subordinate employment. This type of visa allows these individuals to enter Italy for an indefinite period of time.

The visa application will involve completing the relevant application form and providing supporting documentation. The Consulate has the right to issue the visa within 90 days, but the processing time is usually between four to eight weeks, depending on the Consulate’s workload, time of year, and applicant’s nationality. The applicant will need to show assets from a portfolio. The Consulate may request original financial statements from banks, investments/brokerage firms, or social security, all indicating current balances.

As soon as the Elective Residence Visa is issued, the foreigner may enter Italy and apply for the Permit of Stay, also called “Permesso di Soggiorno”, within eight days of arrival. Once the Permit of Stay is issued, the immigration process is completed and the foreigner will have proper legal status in Italy.

An individual who obtains an elective residence visa shall not pay taxes in Italy if: (1) is not registered in the City Hall (Comune) of the place where living; (2) and lives in Italy less than 183 days during the fiscal year (January to December); (3) and does not have his habitual abode in the country (e.g. his family lives in Italy and he has in Italy his principal center of business and interests)

Holders of an elective Permit of Stay can apply for the EC Permit of Stay for long-term residents after 5 years of legal stay in Italy. In order to be eligible, they must have registered as residents of Italy and filed tax returns. After 10 years of legal residency in Italy, an individual should be eligible to apply for Italian citizenship.

TIMELINE

Elective Residence Visa Application2-6 Weeks
Residence Permit Application3-5 Months
Residency Registration1-3 Months

This blog is for informational purposes only. Nothing in this blog constitutes legal advice. Please contact us to discuss your specific circumstances.