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.


Investors look to the E-2 Visa as the Cost of an EB-5 Visa Increases from Thursday

Cost of EB 5 Visa

Duncan Hill is marketing director at Davies & Associates LLC. Duncan is not a lawyer and nothing in this blog constitutes legal advice.

 

Barring an eleventh-hour intervention, the minimum investment required for an EB-5 application is increasing from $500,000 to $900,000 in areas of high unemployment and from $1 million to $1.8 million everywhere else.

 

Given the time it takes our attorneys and paralegals to prove that a client’s source of funds meets with strict US requirements, it is most likely too late to apply for an EB-5 at the current rate. 

 

For those who can afford the higher investment amount, the EB-5 visa remains one of the fastest routes to a Green Card. 

 

For those who cannot afford the higher investment amount there are a range of options available. Here at D&A, the team picking up most of the slack is the E-2 Visa team (although there are a range of other options available and we advise you to discuss them with us.)

 

The E2 Visa is designed for people seeking to move to the United States to own and operate a business. Processing times are quick, and spouses are eligible to apply for work authorization in the United States. It is possible to expand an existing business, open a new one, or buy an off-the-shelf franchise.  

 

Only citizens of countries with a relevant commercial treaty with the United States are eligible for E-2 visas. This excludes some countries where demand for US visas is the highest, including India, China and Vietnam. Citizens of these three countries already face a multiple-year wait for an EB-5 visa because demand has far outstripped supply.

 

Yet at D&A we are part of a wave of pioneering law firms working to help citizens of such countries become eligible. For example, we have helped clients obtain E-2 visas by first becoming citizens of Grenada in the Caribbean. Coupling an E-2 Visa with Grenadian citizenship in this way has allowed people to live and work in the United States while on the EB-5 waiting list. If the business becomes large enough, it is feasible that it could be transitioned to a Green Card via EB-5.

 

Grenada is a cost-effective option with no residency requirement or tax on worldwide income.  Processing times are quick and have just got even faster. It is possible for the whole process of Grenada and E-2 to take just a matter of months. Grenada is not the only option available and D&A works with a range of E-2-eligible citizenship by investment programs around the world, including Turkey, Montenegro, and various EU countries. 

 

Contact our team today to discuss a bespoke immigration solution to suit your needs.


Italy Relocation: Molise, Sambuca & One Euro Homes

David Cantor is a licensed attorney in the State of New York based in our Florence, Italy office. David oversees Client Relations for Davies & Associates Global Investor and Business Visa Practice.

 

Recently, select municipalities throughout Italy (Molise, Sambuca, Mussomeli, Patricia, and others) have launched official economic programs to stimulate and rescue dwindling communities. These unprecedented economic strategies involve marketing lucrative offers for individuals and families to establish residency and businesses in select, dwindling, provincial townships and communities – from purchasing 1 EURO homes to effectively gifting 25,000 EUROS/year to those that qualify.

These “too good to be true” offers have attracted significant international media attention, and consequently a high-volume of candidates who wish to pursue the Italy dream. In fact, you do not have to go far to find information – simply Google: “1 Euro Home” or “Molise Italy”.

 

Yet, like many “too good to be true” offers, these Italy relocation programs come with fine-print and unique challenges. While there is still merit to these official programs and there aim to bolster dwindling rural townships, there are some practical considerations for anyone seriously considering them.

 

At Davies & Associates, along with our Italy-based partners, we have taken our time to perform due-diligence on these various programs, learn more about the practical details, challenges and concerns. We have spoken to official representatives at Molise, and scheduled appointments in Mussomeli, Sicily to visit the 1 Euro homes. To say the least, these provincial townships, once quiet, can barely handle the in-flux of inquiries. Many municipalities have had to hire English-speaking staff to simply answer the phones.

 

All considered, before packing any bags and making plans to migrate with the entire family to collect 700 Euros/month out of thin air, it is necessary to understand some basics with regards Italy’s immigration and residency regulations.

 

“You still need a visa for this program,” comments Pietro Pennisi, Partner & Senior Immigration Attorney at JMU law firm in Italy. “Many of the people interested in this program are being misled, or misinformed. You cannot obtain a visa in Italy through these programs, you need a visa for this program.”

 

For non-EU members, to obtain Italian residency, you need the requisite visa for Italy. If you are a member of the European Union, you need proof of health insurance and the ability to demonstrate you have the required minimum capital in your bank accounts. For Non-European Union residents, it is even more complicated. For example, the Molise program (offering 25,000 EUROS or roughly 700 EUROS/month for three years), which will no longer be accepting applications after November 30th, requires you to establish a business in Molise. This requires a work-permit. A work permit requires a visa. Through the visa, you can then apply for residency.

 

In other words, simply purchasing a one EURO home or being accepted into the Molise program does not grant the immediate right to receive a visa for Italy. This still needs to go through traditional, formal immigration processing channels, and eligibility for obtaining a visa in Italy will vary on a case-by-case basis.

 

At Davies & Associates, we offer a full-suite of relocation and business services for Italy. This includes immigration and residency solutions, real-estate and property representation, business and corporate support, as well as tailored tax advice.

 
In fact, the above programs are simply one part of the bigger picture when it comes to Italy’s efforts to stimulate the national economy (read more about Italy’s new Impatriate Tax Regime for high net worth individuals, investors and pensioners). For those interested in learning more about opportunities to migrate and live in Italy, please contact us today.