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ATAD implementation in Italy: significant impact on real estate financing


On 28 November 2018, the Italian government approved the final version of the decree which implements the Anti-Tax Avoidance Directive 2016/1164 (“ATAD1”) as amended by Directive 2017/952 (“ATAD2”).


According to the final version of the ATAD implementing decree, starting from FY 2019 the deductibility of interests related to mortgage loans subscribed by real estate companies will be subject to the general 30% EBITDA threshold.


Such provision will have a significant impact on real estate financing considering that such interests are fully tax deductible under the current rules.


In particular, according to article 1 paragraph 36 Law 244/2007, passive interests related to mortgage loans secured by immovable properties meant to be leased are fully tax deductible for companies that mainly carry on real estate activity (“Real Estate Company”). In order to qualify as a Real Estate Company: (i) real estate assets meant to be leased shall represent more than 50% of the aggregate fair market value of the company’s assets and (ii) at least two thirds of the company’s revenues shall derive from the lease of real estate assets or from the lease of business going concerns whose value is mainly represented by the fair market value of real estate assets.


According to article 14 paragraph 2 of the ATAD implementing decree, the above provision will be repealed starting from FY 2019. Therefore, the general 30% EBITDA threshold will apply also to interests related to mortgage loans subscribed by Real Estate Companies.


No grandfathering clauses for mortgage loans subscribed before the entry into force of the ATAD Directive seem to be included in the ATAD implementing decree. This aspect will be clarified once available the entire final version of the decree.


Starting from 2019, this new rule could have a significant impact on the cash flows of the existing Italian Real Estate Companies and on the financing of future Italian Real Estate investments.


If further information is required, please refer to your LED Taxand contact: gpetraroli@led-taxand.it or jpbaroni@led-taxand.it.




The information provided in this newsletter cannot be regarded as legal advice. LED Taxand cannot accept any liability for the consequences of making use of this publication without their cooperation.

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