We summarize hereinafter the main tax news regarding Italian real estate related to L. 27 December 2019, No. 160 (“Budget Law 2020”).
- Step-up of real estate assets
Article 1, para. 696-704, of the Budget Law 2020 introduces for Italian GAAP entities the step-up of business assets, including immovable properties (excluding real estate assets held by real estate trading companies), which result from the balance sheet related to 2018, for calendar year companies. The step-up must be made in the balance sheet related to 2019 for calendar year companies.
The higher value is subject to a substitute tax equal to 12% for depreciable assets and 10% for non-depreciable assets (e.g. land). For calendar year companies such higher value is recognized in 2022 for tax purposes and in 2023 for the determination of the capital gains or losses in case of disposal.
A 10% substitute tax is also due in order to freely distribute the equity reserve booked for step-up purposes.
In addition, Budget Law 2020 introduces for Italian GAAP and IAS/IFRS entities the realignment of the lower tax values of business assets with their higher accounting values. In such a case, the higher values of real estate assets are recognized for tax purposes from 2021 for calendar year companies.
Substitute taxes can be paid in 3 installments for amounts up to euro 3 million and 6 instalments for amounts over euro 3 million and they can also be offset.
- The new deductibility of IMU
The new Budget Law 2020 provided for new rules for the deductibility of IMU on instrumental properties related to tax periods 2019, 2020, 2021, 2022 and following. In particular, pursuant to article 1, para. 4 of Budget Law 2020, IMU is deductible for IRES purposes up to 50% for the tax period 2019.
Conversely, according to article 1, par. 773, IMU will be deductible for IRES purposes at 60% for tax periods 2020 and 2021. Lastly, the full deductibility of IMU is due to apply from tax period 2022. However, IMU remains not deductible for the Italian tax on regional productive activities (IRAP) purposes.
- The renegotiation of the lease agreement by the Public Administration
Pursuant to article 1, para. 616-619 of the new Budget Law 2020 the lease agreement of private properties used for institutional purposes still in force at the time of entered into force of the Budget Law 2020, can be renegotiation by the Public Administration. In particular, the Administrations are entitled to propose the renegotiation of the terms of the aforementioned agreements, until 150 days by the entered into force of the Budget Law 2020, by the signing of the new one for 9 years, in which the value of the price is represented by the minimum value issued by OMI, less 15%. The owner is entitled to accept this negotiation within 30 days from the offer, otherwise the terms of the agreement in force remains valid until the date of expiration.
- The increase of the substitute tax on the capital gains from the sale of properties realized by individuals
According to the Budget Law 2020, which entered into force on the 1st of January 2020, the rate of the substitute tax of the personal income tax (IRPEF), applicable to the acquisition for consideration of non-building lands or properties realized by individuals, has been modified. In particular, pursuant to article 1, par. 695 of the new Budget Law 2020, the rate of the substitute tax on the aforementioned acquisitions, that took place from the 1st of January 2020, has increased from 20% to 26%.
- “Bonus facades”
Article 1, pars. 219-221, of the Budget Law 2020 introduced an IRPEF deduction from the gross tax amount of 90% of the expenses documented and incurred in 2020 related to renovation works, including those of external cleaning or painting, aimed at the recovery or restoration of the exterior facade of buildings situated in specific areas. However, this benefit is addressed exclusively to works carried out on the opaque structures of the facade, on balconies or on ornaments and friezes.
It is also worth noting that, given the general formulation of the rule (“deduction from gross tax”), it would seem that both individuals and companies would be considered beneficiaries, thus being able to apply the benefit also in relation to capital goods.
The existing benefits relating to energy recovery and redevelopment of buildings referred to in article 16-bis of the Income Tax Code (“TUIR”), article 1, pars. 344-349, of Law No. 196/2006 and article 1 of the Decree Law No. 63/2013 remain in force.
- Extension of tax deductions
Article. 1, par. 175, of the Budget Law 2020 extended IRPEF deductions until 31 December 2020. In particular:
- 50% deduction relating to energy efficiency works, i.e. the costs relating to the purchase and installation of windows including fixtures, sun screens and replacement of winter air conditioning systems with systems equipped with condensing boilers with efficiency at least equal to the product class A provided by the delegated regulation (EU) n. 811/2013 (so-called “ecobonus”);
- 65% deduction relating to energy efficiency works for the purchase and installation of solar screens as set out in attachment M of Legislative Decree No. 311/2006, for a maximum amount of the deduction of 60,000 euro (so-called “ecobonus”);
- 65% deduction relating to energy efficiency works for the purchase and installation of micro-cogenerators to replace existing plants, for a maximum deduction of 100,000 euro (so-called “ecobonus”);
- deduction or immediate discount on the invoice relating to the seismic risk reduction measures carried out on common parts of buildings. The deduction is 75% if the risk reduction is of one class and 85% if of two classes (so-called “seismabonus”);
- 50% deduction relating to the documented expenses (of a maximum amount of 96,000 euros) for building renovation works pursuant to article 16, par. 1, Legislative Decree No. 63/2013;
- taxpayers who benefit from the deduction for building renovation in relation to works started from 01.01.2019 are also granted a deduction from the gross tax, up to their amount, for the additional documented expenses incurred in the year 2020 for the purchase of furniture and large appliances of a class not lower than A +, as well as A for ovens, for equipment for which the energy label is envisaged, aimed at furnishing the property being renovated (so-called “home furniture bonus”).
- “Bonus property security”
Article 1, par. 118, of the Budget Law 2020 introduced, with the aim of increasing the security level of buildings, a tax credit for income tax purposes for documented expenses related to the acquisition and provision of property safety continuous structural monitoring. Even in this case it seems that both individuals and companies would benefit from the deduction. The criteria and procedures for accessing the benefit must be adopted within ninety days from the Budget Law’s entry into force.
- “Bonus invoice discount”
Art. 1, par. 70, of the Budget Law 2020, stated that, starting from 01.01.2020, if:
a) major renovation works of 1st level referred to Ministerial Decree 26.06.2015 are performed,
b) in common parts of condominium buildings,
c) for an amount of 200,000 euro or more,
the taxpayer benefiting from the deductions has the possibility to opt, instead of the direct use of these deductions, for a contribution of equal amount, in the form of a discount on the consideration due, anticipated by the supplier who carried out the work. The supplier recovers the relative amount in the form of a tax credit, which can be used in compensation in 5 annual installments of the same amount, regardless of the limits set out in article 34 Law No. 388/2000 and article 1, par. 53, Law No. 244/2007.
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