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TABLE OF CONTENTS
Investment Entities............................................................................1
Real Estate Companies .......................................................................1
Real Estate Investment Funds (“REIFs”) .........................................................1
Listed Real Estate Investment Trusts (“SIIQs”) ...................................................1
Real Estate SICAFs ...........................................................................1
Direct Investment ............................................................................2
DEAL STRUCTURES .........................................................................2
Asset Deal ...............................................................................2
Share Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
LETTING IN ITALY ............................................................................2
Commercial Property Lease Agreements ...................................................2
Commercial Property Lease Agreements—Tenant as Retailer .................................2
Deregulation of “Large” Lease Agreements..................................................3
Business Lease Agreements ...............................................................3
TAX CONSIDERATIONS .......................................................................3
Income Taxation—Real Estate Companies ..................................................3
Income Taxation—Real Estate Investment Funds (REIFs) .....................................5
Income Taxation—Listed Real Estate Investment Trusts (“SIIQs”) ..............................7
Income Taxation—SIINQs ..................................................................8
Income Taxation—RE SICAFs ..............................................................8
Income Taxation—Direct Investment ........................................................8
Local Taxes on Real Estate Assets Explained................................................8
Indirect Taxes Relating to Real Estate Assets ................................................9
Asset Deal—Sale of Real Estate Assets (other than Land)....................................9
Asset Deal—Sale of a Business (Going Concern) ............................................12
Share Deal—Transfer of an Equity Interest in an Italian Limited Liability Company...............12
Transfer of Shares in an Italian Joint-Stock Corporation ......................................12
Leases...................................................................................12
LAWYER CONTACTS ........................................................................ 13
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Jones Day White Paper
INVESTMENT ENTITIES
Real estate investments in Italy are mainly carried out via one
(or a combination) of the following types of investment vehicles.
REAL ESTATE COMPANIES
Real estate companies are special purpose vehicles carry-
ing out the purchase, management, leasing, building, and sale
of Italian real estate assets (società immobiliari). Real estate
companies are generally formed as limited liability companies
(società a responsabilità limitata, “S.r.l.”) or joint-stock compa-
nies (società per azioni, “S.p.A.”).
With a few exceptions, real estate companies are generally not
listed on an exchange.
REAL ESTATE INVESTMENT FUNDS (“REIFs”)
Real estate investment funds (“REIFs”) are undertakings for
collective investments formed pursuant to contract law and
generally utilized to invest in a plurality of real estate assets,
carry out large-ticket real estate investments, and then defer
the management of such real estate assets to a professional
licensed entity.
REIFs must be managed by licensed Italian managers, or
alternatively by nondomestic European Union (“EU”) licensed
managers passporting their management license into Italy to
manage a REIF.
REIFs must invest at least two-thirds of their assets into real
estate assets (including rights in rem on such assets, equity
interests in real estate companies, and units of other REIFs).
The remaining one-third may be invested in listed or nonlisted
financial instruments.
REIFs may not directly carry out building activity, and more
importantly, REIFs may not directly own business activities. As
a result, while REIFs may own retail real estate assets, they
may not hold the trading licenses. Certain deal structures are
commonly used, however, in order to allow REIFs to own the
retail real estate assets and indirectly control the related trad-
ing licenses through an affiliate.
LISTED REAL ESTATE INVESTMENT TRUSTS (“SIIQs”)
Listed real estate investment trusts (società di investimento
immobiliari quotate, “SIIQs”) are Italian investment vehicles
having certain features resembling some found in a REIF,
although they do not qualify as undertakings for collective
investments. SIIQs must comply with the following features:
• SIIQs must be formed as joint-stock companies, and their
shares must be listed on a regulated stock exchange of
a EU Member State or a European Economic Area (“EEA”)
Member State, provided that such country is included in
the list of countries that allow an adequate exchange of
information (so-called “White List Countries”);
• SIIQs must be resident for income tax purposes in either
Italy or in another EU Member State or a EEA Member
State that is a White List Country;
• No shareholder can own, directly or indirectly, more than
60 percent of the voting rights or have right to more than
60 percent of the company’s profits;
• At least 25 percent of the shares must be owned by share-
holders who do not own, directly or indirectly, more than 2
percent of the voting rights nor have the right to more than
2 percent of the company’s profits; and
• SIIQs’ main business must be the leasing of real estate
assets according to criteria set forth in the law.
SIIQs do not need to be licensed by the Bank of Italy nor do
they fall under the Bank of Italy’s supervision.
REAL ESTATE SICAFs
Real estate SICAFs (“RE SICAFs”) are a new kind of undertak-
ing for collective investments formed pursuant to company
law. They may be utilized to invest into a plurality of real estate
assets and to carry out large-ticket real estate investments.
A RE SICAF is an Italian joint-stock company with fixed corpo-
rate capital and that has its registered office and headquarters
in Italy. A RE SICAF collects investment funds via the offering of
its shares, and sometimes other equity instruments, and then
places those funds into real estate assets.
The same considerations applying to REIF investments apply,
mutatis mutandis, to RE SICAF investments.
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Direct Investment
In this scenario, the investor directly invests in real estate prop-
erties without interposing any vehicle. Unless required by spe-
cific circumstances, this is not very common.
DEAL STRUCTURES
Real estate investments in Italy are commonly implemented
through one (or a combination) of the following acquisition
structures.
Asset Deal
Asset deals entail the direct acquisition of “hard” real estate
assets (e.g., land, buildings, or portions thereof) or going con-
cerns that include real estate.
Commonly, the main advantage of the asset deal is that it
excludes the risks associated with the acquisition of the exist-
ing corporate entity that has legal title to the real estate asset.
Share Deal
Share deals, typically, entail the acquisition of the shares of real
estate companies. Share deals are commonly preferred when
the investment involves the transfer of the real estate asset
together with the administrative authorizations required to run
the relative business activity. This is the case, for example, in
the acquisition of shopping centers or retail parks where, in
addition to the real estate asset, investors are normally also
interested in owning the related trading license.
LETTING IN ITALY
In Italy, contractual relationships aimed at the letting of com-
mercial assets are normally governed either by property lease
agreements or business lease agreements.
Commercial Property Lease Agreements
In a property lease agreement, the landlord grants to the ten-
ant the right to occupy a real estate property for a certain
period of time, against the payment of rent.
Normally, commercial property lease agreements are exe-
cuted when the activity to be carried out within the property
does not require an administrative authorization (e.g., offices,
logistics complex, etc.) or when the administrative authori-
zation is directly held by the tenant and not the owner (e.g.,
single retail units, hypermarkets, etc., although it is not entirely
uncommon for the owner of the real estate asset to also hold
these administrative authorizations).
Italian commercial property lease agreements are regulated
by Law no. 392 of July 27, 1978 (“Tenancy Law”). The Tenancy
Law contains various mandatory provisions in favor of the ten-
ant that may not be departed from. Any departure from this to
the benefit of the landlord, if challenged by the tenant, can be
declared null and void and automatically replaced by the rela-
tive mandatory provision of the Tenancy Law.
Some of the main mandatory provisions of the Tenancy Law
include:
Minimum Duration and Renewal. The minimum duration is of
six years, with automatic renewal for additional minimum six-
year periods at each expiration.
Exit Rights. The landlord is not entitled to withdraw from
lease outside of expiration and, in any case, at expiration
of first term the landlord’s withdrawal is limited to where it
intends to occupy premises for own use, or where it intends
to renovate the leased premises. The tenant is always entitled
to withdraw from the lease in the case of “serious reasons”
(gravi motivi).
Rental Increases/Indexation. The rent indexation is capped
at 75 percent of variation of the National Institute of Statistics
(“ISTAT”) index for leases having the minimum mandatory dura-
tion (i.e., 6 + 6 years). The rent indexation is capped at 100
percent of variation of the ISTAT index for leases exceeding
minimum mandatory duration.
Sublease and Assignment of Contract. The tenant has the
right to freely sublease or to assign contract within the scope
of lease or sale of relevant going concern.
Registration Costs. No more than 50 percent of contract reg-
istration costs are chargeable to tenant.
Commercial Property Lease Agreements—Tenant
as Retailer
With respect to lease agreements where the tenant is a
retailer—i.e., it carries out an activity that involves direct con-
tact with clients and consumers (contatti diretti con il pubblico
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degli utenti e dei consumatori)—the following additional man-
datory provisions of the Tenancy Law apply:
Goodwill Indemnity. At the term of the lease, the tenant is
entitled to a goodwill indemnity equal to 18 times the monthly
rent. Such indemnity equals to 36 times the monthly rent if the
landlord re-let the property to a to tenant operating in same
product category within the following 12 months.
Preemption Rights. The tenant is entitled to a preemption right
in case of sale of the property as well as re-letting of the prop-
erty at the same terms and conditions to third party purchas-
ers or tenants.
Deregulation of “Large” Lease Agreements
Effective November 12, 2014, the Italian Parliament has approved
Law Decree no. 133 of September 12, 2014, together with the
relative amendments, through the enactment of the conversion
Law no. 164 of November 11, 2014 (Sblocca Italia). This new legis-
lation allows the parties to a commercial property lease agree-
ment to depart from the mandatory provisions of the Tenancy
Law mentioned above in those agreements where the annual
rent is greater than EUR 250,000, to the extent that the leased
property has not been declared of historical interest. As a result,
such large Italian property lease agreements now have the
same type of flexibility seen in other European markets.
Business Lease Agreements
With a business lease agreement, the lessor grants to the les-
see the right to run a business for a certain period of time,
against the payment of rent.
As a matter of experience, business lease agreements are
mainly employed in the letting of shopping centers, retail
parks, and large retail assets where commonly the activity to
be carried out within the property requires an administrative
authorization that is held by the owner.
Regardless of the amount of annual rent, business lease
agreements are not subject to the mandatory provisions of the
Tenancy Law, and, as a result, they allow the parties a greater
contractual flexibility. This is the main reason why institutional
operators have preferred this type of contract in the letting of
large retail assets.
The main drawback of business lease agreements is in rela-
tion to the employees who may be hired by the lessee during
the term of the lease. Such business lease agreements gener-
ally contain the obligation of the lessee to lawfully terminate
any existing employment contracts within the expiration of the
lease (and related indemnification obligation vis-à-vis the les-
sor). However, should the lessee breach such obligation, the
employment contracts possibly in place at the expiration or
termination of the contract could be automatically enforce
-
able vis-à-vis the lessor pursuant to article 2112 of the Italian
Civil Code.
TAX CONSIDERATIONS
Income Taxation—Real Estate Companies
Real Estate Companies that are tax residents of Italy are gen-
erally subject to corporate income tax (“IRES”) and regional tax
on the value of production (“IRAP”).
Tax Rate. IRES is currently levied at 27.5 percent. It is worth
mentioning that the IRES rate will be decreased to 24 percent
with effect from tax year 2017. IRAP is generally levied at 3.9
percent, but each Italian region may increase (or decrease)
the rate by up to 0.92 percent.
Taxable Base. IRES taxable income consists of a taxpayer’s world-
wide income (including that deriving from the lease of real estate
assets and capital gains upon disposal of real estate assets),
based on the results of the Profit & Loss Statement (“P&L”) pre-
pared for the company’s legal purposes, and then adjusted
downward or upward in accordance with the rules set forth by
the Italian Income Tax Code, and on other tax law provisions.
IRAP taxable base is roughly the difference between the
value of production (item A of the Italian Generally Accepted
Accounting Principles (“GAAP”) P&L) and the costs of produc-
tion (item B of the Italian GAAP P&L with certain exceptions,
e.g., certain staff expenses).
Capital gains (and capital losses) upon disposal of real estate
assets (and more generally upon disposal of assets other than
financial assets and assets transferred in the context of a transfer
of a going concern) are relevant for IRAP purposes.
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Tax Losses. Corporate taxpayers can use their tax losses to
offset taxable income of following years only up to 80 percent
of the taxable income of any given year. In other words, tax-
payers are prevented from completely offsetting the taxable
income of a given year even if they have tax losses carried
forward from the previous fiscal years equal to, or higher than,
their taxable income of that given year. The 80 percent limi-
tation does not apply to tax losses incurred in the first three
years of operation of the business. Tax losses generated in the
three-year initial period of operation can, therefore, be entirely
offset against taxable income of the following years.
Tax losses cannot be carried forward for IRAP purposes.
Depreciation. The tax depreciation rate of real estate assets
(booked as fixed assets) is generally 3 percent (increased to
6 percent in the case of shopping centers). In the first tax year,
the rates are reduced by half.
Generally, land cannot be depreciated. If the land is pur-
chased first and then the building is erected on it, the value
to be allocated to the land and to the building is equal to,
respectively, the acquisition cost of the land and the costs
incurred for constructing the building. If the land and the build-
ing are purchased jointly at the same time, the tax value of the
land is the higher of the book value separately allocated to
the land in the balance sheet relating to the fiscal year when
the purchase has taken place, or 20 percent (30 percent in the
case of industrial buildings) of the whole purchase price (i.e.,
the price paid to buy both the land and the building).
Limitation to Interest Deduction. As a rule, interest payable can
be deducted up to an amount equal to the amount of interest
receivable accrued during the tax year. Any interest payable in
excess of the interest receivable may be deducted only up to
an amount equal to 30 percent of its risultato operativo lordo
(“ROL”) in the same year (“30 Percent Threshold”). ROL roughly
corresponds to the notion of Earnings Before Interest Taxes,
Depreciation and Amortization, (“EBITDA”). Any further excess
of interest payable in a tax year is not deductible in such tax
year but can be carried forward (without time limitations) and
deducted in the following tax years, provided, and to the extent,
that in such tax years the interest payable—net of any interest
receivable—is lower than the 30 Percent Threshold. If the 30
Percent Threshold of a given tax year is not fully used to deduct
interest payable in that tax year, the amount of the unused 30
Percent Threshold in such tax year may be carried forward to
the following tax years (without time limitations).
Such rules limiting the deduction of interest payable do not
apply to interest that must be capitalized according to the appli-
cable GAAP. Interest payable that is duly capitalized according
to the applicable GAAP increases the tax basis of the asset.
Moreover, the 30 percent ROL limitation does not apply to inter-
est payable accruing on loans taken out to purchase a business
real estate asset meant to be leased to third parties, provided
that the loan is secured by mortgage. In particular, the full
deduction of the interest expenses is allowed to companies
which assets value is mainly composed of real estate assets
to be leased and at least two third of the revenues derive from
the lease of the real estate assets or businesses which value is
mainly constituted by the market value of the real estate assets.
Interest payable cannot be deducted from the IRAP taxable
base. However, interest payable that is duly capitalized accord-
ing to the applicable GAAP increases the tax basis of the
assets, and it can therefore be deducted through depreciation.
Allowance on Corporate Equity. Allowance on Corporate
Equity (“ACE”) is an additional deduction—for IRES purposes
only—corresponding to the notional return on capital. This
notional return is equal to the aggregate net equity increase
that has occurred as of the fiscal year 2011 (“ACE Base”), mul-
tiplied by a rate of return, set at 4.5 percent for tax year 2015
and 4.75 percent for tax year 2016.
Briefly, the ACE Base is computed as follows: the sum of
cash equity contributions actually made by the sharehold
-
ers plus waivers of financial receivables that the shareholders
had toward the company, plus undistributed profits set aside
to reserves other than non-disposable reserves, minus the
decreases of the company’s net equity triggered by distribu-
tions or assignments to the shareholders, whether in cash or
in kind and irrespective of the legal title upon which such dis-
tributions or assignments are based.
Companies must compute their ACE Base every year by tak-
ing into account all the aforesaid increases and decreases
that have occurred since January 1, 2011. However, the ACE
Base of a given tax year cannot be higher than the compa
-
ny’s accounting net equity at the end of that same tax year,
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exclusive of both the treasury shares reserve and the operat-
ing yearly profits. Moreover, the ACE Base must be adjusted
downward if certain transactions occur between the company
and its subsidiaries or its “sister companies” (i.e., companies
that are controlled by the same entity).
The notional return is deducted only once the net income
has been calculated. If, in a given year, the notional return is
higher than the company’s net taxable income, the company
will declare no income in that year and will be able to carry
forward the excess of notional return to the following years.
Dividend Distributions for Italian Residents. As a rule, divi-
dends paid by Italian-resident companies to Italian residents
are not subject to any withholding tax. Dividends are generally
95 percent IRES-exempt, or 50.28 percent personal income
tax (“IRPEF”)-exempt if they are paid to, respectively, Italian
resident entities and individuals. As an exception, a 26 percent
final withholding tax (i.e., such withholding tax represents the
only tax liability for the shareholder in relation to the dividend
received) applies to dividend distributions made to Italian-
resident individuals holding the shares/quotas not in the con-
text of a business activity, provided that the equity interest is
not qualified (i.e., it does not exceed 25 percent—reduced to
5 percent for listed companies—of the share capital, or 20
percent—reduced to 2 percent for listed companies—of the
voting rights in the shareholders’ meeting of the subsidiary).
Dividend Distributions for Non-Italian Residents. As a rule, Italy
levies withholding tax on dividend distributions made to non-
Italian resident shareholders (without a permanent establish-
ment to which the shares are effectively connected). The rate
of the withholding tax is generally 26 percent, which may be
reduced under the applicable double tax treaty, if any. The
26 percent withholding tax rate is, however, reduced to 1.375
percent in the case of dividend payments made to non-Italian
resident entities that are subject to tax and are resident in an
EU Member State or EEA Member State that is a White List
Country. As a consequence of the reduction of IRES rate, from
tax year 2017, the withholding tax rate for dividend payments
made to non-Italian resident entities that are subject to tax
and are resident in an EU Member State or EEA Member State
that is a White List Country also will be reduced to 1.2 percent.
If the non-Italian resident shareholder is an EU-resident com-
pany without a permanent establishment in Italy to which the
shares are effectively connected, it may also benefit from a with-
holding tax exemption under the Parent–Subsidiary Directive.
Capital Gains for Italian Residents. The Italian participation
exemption, generally applicable to capital gains from the dis-
posal of shares and other equity interests realized by Italian
businesses does not, as a rule, apply (and therefore such
gains are fully taxed), unless evidence is given that the Real
Estate Company carries out an “active” business prevailing
over the mere leasing activity. In this latter case (and subject to
the fulfillment of other requirements), the gains, if any, are then
95 percent IRES-exempt and 50.28 percent IRPEF-exempt if
realized by, respectively, business entities and sole proprietors
or partnerships.
Capital gains realized by individuals are 50.28 percent IRPEF-
exempt or subject to 26 percent capital gains tax, depending
on whether the equity interest is qualified or not.
Capital Gains for Non-Italian Residents. Capital gains real-
ized by non-Italian residents, without a permanent establish-
ment in Italy to which shares are effectively connected, from
the disposal of a nonqualified equity interest in a Real Estate
Company is not subject to tax in Italy if (i) the shares are listed
on a regulated market; (ii) the non-resident is resident in a
White List Country; or (iii) an exemption is provided for by the
applicable double tax treaty, if any. Otherwise, the gain is sub-
ject to a 26 percent capital gains tax.
Capital gains realized from the disposal of qualified equity
interests are instead subject to IRES or IRPEF on 49.72 percent
of the amount of the gain, unless an exemption is provided for
by the applicable double tax treaty, if any.
Income Taxation—Real Estate Investment Funds (REIFs)
Taxation of the Fund. Italian REIFs are treated as persons lia-
ble to tax for IRES purposes. However, REIFs entirely owned
by one or more institutional investors (“Institutional REIFs”) are
not subject to IRES or to IRAP. As a consequence, subject to
certain limited exceptions, any income, including capital gains
on the sale of real estate assets or of equity interests in real
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estate companies, dividends from real estate companies, and
lease payments is generally not taxed when held by the fund.
To this end, institutional investors include:
• The Italian government or other Italian public bodies;
• Italian undertakings for collective investments (for instance,
investment funds);
• Italian social security entities and pension schemes;
• Italian insurance companies with regard to investments
made to cover technical reserves;
• Italian banks and financial intermediaries subject to pru-
dential supervision;
• Non-Italian persons and entities listed above that are resi-
dent in White List Countries;
• Italian-resident banking foundations, private “no profit”
entities and cooperative companies; and
• Special Purpose Vehicles (“SPVs”) that are mainly partici-
pated (50 percent + 1) by one or more of the entities listed
above, irrespective of such participation being direct or
indirect. Such SPVs may be corporate or contractual and
may be resident in Italy or in White List Countries.
REIFs, other than Institutional REIFs, are not subject to IRES
and IRAP provided that they fully comply with the notion of
“investment fund” provided for by the Unified Financial Act. In
particular, this requires that the management company acts as
an independent asset manager and carries out discretionary
management of the fund’s assets in accordance with appli-
cable regulatory provisions and the fund’s regulation, and that
there is a “plurality of investors.”
Taxation of the Investors: Italian Residents. Proceeds paid by
Italian REIFs to Italian-resident institutional investors—as well
as the spread between the amount paid to the investors upon
redemption/liquidation of the units and the price paid by the
same investors to subscribe for the units—are subject to a 26
percent withholding tax, which is levied on account of the ordi-
nary income taxes or as a final withholding tax depending on the
status of the recipient. No withholding tax is levied on proceeds
paid to Italian pension funds and to undertakings for collective
investments, including other REIFs. In case the withholding tax is
levied on account of the ordinary income taxes (this would be the
case of Italian corporate and, more in general, entrepreneur tax-
payers), the proceeds are then included in the recipient’s overall
IRES or IRPEF (Italy’s income tax on individuals) taxable base,
and the withholding already paid is credited against the IRES or
IRPEF due. When the final withholding is applied (this would be
the case of Italian individuals and non-business entities), the pro-
ceeds are not included in the recipient’s overall income.
The same treatment applies to Italian-resident non-institutional
investors holding a stake not higher than 5 percent. On the
contrary, in case of Italian-resident non-institutional investors
with a stake higher than 5 percent, a flow-through (transpar-
ency) approach applies. In other words, the positive results
accrued at the level of the funds are proportionally allocated
to such investors and taxable to them, regardless of any actual
distribution by the funds.
Capital gains realized upon the disposal of units in Italian
REIFs are generally subject to tax in the hands of the inves
-
tors. The applicable tax regime, however, depends on the sta-
tus of the investors.
Taxation of the Investors: Non-Italian Residents. The tax
regime of Italian permanent establishments of non-Italian resi-
dents for the income attributable to such permanent establish-
ment is similar to the one applicable to Italian residents.
Proceeds paid to non-Italian resident investors (without a per-
manent establishment in Italy to which the units of REIFs are
effectively connected)—as well as the spread between the
amount paid to the investors upon redemption/liquidation of
the units and the price paid by the same investors to sub-
scribe for the units—are taxed as follows:
• No withholding tax applies if the proceeds are paid to (i)
pensions funds and undertakings for collective invest-
ments (such as mutual funds and investment funds) that
have been set up in White List Countries; (ii) central banks
and sovereign funds; and (iii) organizations established
under international agreements concluded by Italy;
• A 26 percent withholding tax applies on the proceeds paid
to other foreign investors, irrespective of whether they are
institutional investors. If the investor is resident in a coun-
try that has a double tax treaty in force with Italy, a lower
treaty rate may apply. To this end, the Italian Tax Authorities
deem that the provision of the treaty applicable in this
case is the one provided for interest payments (Article 11
of the OECD Model).
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Capital gains realized by institutional investors and by inves-
tors (other than institutional investors) holding a stake lower
than 5 percent upon disposal of the units in Italian REIFs are
not subject to taxation in Italy if (i) the units relate to listed
REIFs, or (ii) the investor is (a) one of the persons or entities
listed previously in this section (mutual fund, central bank,
etc.), or (b) resident for tax purposes in a White List Country.
In all other cases, capital gains are taxed in Italy, unless the
exemption is provided for by the applicable double tax treaty.
Income Taxation—Listed Real Estate Investment
Trusts (“SIIQs”)
Taxation of SIIQs. SIIQs are exempt from both IRES and IRAP
on profits arising from:
• The leasing of real estate assets;
• Capital gains (and capital losses) on the disposal of real
estate assets intended to be leased;
• Dividends paid out of profits relating to leasing activity by
other SIIQs and SIINQs (see below);
• Capital gains (and capital losses) on the disposal of
shares/equity interests in other SIIQs and SIINQs;
• Proceeds arising from investments into Italian real estate
funds (“Italian Qualified REIFs”) that invest at least 80 per-
cent of their gross asset value into real estate assets,
rights in rem on real estate assets, including those aris
-
ing from lease contracts with a transferral nature as well
as from license relationships (rapporti concessori) and
interest in real estate companies; and other real estate
investment funds leasing their real estate assets, including
social housing real estate investment funds;
• Capital gains (and capital losses) on the disposal of units
in Italian Qualified REIFs.
All of the above are defined as the “Exempt Business.”
Income arising from other sources is subject to standard IRES
and IRAP.
SIIQs must distribute to their shareholders at least 70 percent
of the net profits of the Exempt Business to the extent that
such profits relate to the holding of real estate assets, shares/
equity interests in other SIIQs and SIINQs, and units in Italian
Qualified REIFs.
Capital gains arising from the disposal of real estate assets,
investments in SIIQs and SIINQs and units in Italian Qualified
REIFs must be distributed: for an amount equal to 50 per-
cent, in lieu of the 70 percent threshold; and within the two tax
years following the tax year during which the capital gain has
been realized.
Taxation of Investors: Italian Residents. A 26 percent withhold-
ing tax is levied on the dividends paid to the SIIQ’s sharehold-
ers out of profits of the Exempt Business.
No withholding tax is levied on dividends paid to (i) other
SIIQs; (ii) Italian undertakings of collective investments; (iii)
Italian pension funds; and (iv) assets under management
under Article 7 of Legislative Decree no. 461 of November 21,
1997 (risparmio gestito).
The withholding tax is final if the SIIQ’s shares are held by non-
business individuals. In the other cases, dividends are subject
to a withholding tax on account and then are fully included in
the taxable base of the taxpayer.
The Italian participation exemption does not apply to the cap-
ital gains realized upon disposal of shares in SIIQs. Capital
gains realized by sole proprietors, Italian business partner
-
ships, Italian resident companies, and by permanent estab-
lishments of non-Italian residents are fully included in the IRES
taxable base of such persons.
In respect of shares held by resident non-business individu-
als, the regime changes depending on whether the shares
represent a qualified equity interest or not. If the shares in the
SIIQs are qualified, capital gains upon their disposal are fully
taxed in the hands of Italian resident individuals and subject
to IRPEF. If the shares are nonqualified any gain is subject to a
26 percent capital gain tax.
Taxation of Investors: Non-Italian Residents. As a rule, 26 per-
cent withholding tax is levied on the dividends paid to the
SIIQ’s shareholders out of profits of the Exempt Business. The
Italian Tax Authorities have taken the view that the Parent/
Subsidiary Directive does not apply to SIIQs. However, non-
residents can benefit of reduced rates provided for by the
applicable double tax treaties, if any.
In respect of shares held by non-residents without permanent
establishment in Italy, the regime applicable to capital gains
changes depending on whether the shares are qualified or
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Jones Day White Paper
not. If the SIIQ’s shares are qualified, capital gains upon their
disposal are fully taxed in the hands of non Italian residents.
An exemption may be available under double tax treaties.
Conversely, Italy does not tax the capital gains relating to non-
qualified shares, if they are realized by nonresidents without a
permanent establishment in Italy.
Income Taxation—SIINQs
• The SIIQ tax regime also applies to nonlisted real estate
companies (società di investimento immobiliare non quo-
tate, “SIINQs”), if the following conditions are met:
• They are resident in Italy for income tax purposes;
• Their main business is the leasing of real estate assets;
• They are 95 percent owned by a SIIQ (or, jointly, by more
than one SIIQ); and
• They opt for the SIIQ regime and for the domestic tax con-
solidation regime together with the controlling SIIQ.
Income Taxation—RE SICAFs
The same tax regime applicable to REIFs applies also to RE
SICAFs investing in real estate assets (see Taxation—Real
Estate Investment Funds (REIFs)).
Income Taxation—Direct Investment
The considerations made under the prior section, “Taxation—
Real Estate Companies,” basically apply also to direct invest-
ments in a real estate assets performed by Italian resident
companies. However, under Italian tax law, the full deduction
of interest payable accruing on mortgage loans taken out to
purchase a business real estate asset meant to be leased
to third parties is available only to companies whose asset
value is mainly composed of real estate assets to be leased
and at least two third of the revenues derive from the lease
of the real estate assets or businesses whose value is mainly
constituted by the market value of the real estate assets
(immobiliare di gestione).
The income tax consequences of an asset deal directly per-
formed in Italy by a non-Italian resident depends on whether
the non-Italian resident is deemed to have a permanent
establishment in Italy. Although the ownership of real estate
assets by a non-Italian resident company does not amount
per se to a permanent establishment in Italy, it is likely that the
management of the real estate assets amounts to a perma-
nent establishment in Italy.
Should a permanent establishment exist, the latter is subject to a
similar tax regime applicable to Italian taxpayers. If a permanent
establishment does not exist in Italy, a non-Italian resident com-
pany, which owns real estate assets located in Italy, is subject to
IRES (but not to IRAP) on the cadastral income of such asset. If
the real estate assets are let out, 95 percent of the rent would be
subject IRES (but not to IRAP). The gain, if any, realized upon the
sale of the assets is, generally, subject to IRES, unless the asset
has been held for at least five years, in which the gain is exempt.
Local Taxes on Real Estate Assets Explained
The ownership of real estate assets implies generally the
application of a municipal tax (imposta unica comunale, “IUC”).
IUC is composed of (i) a tax on the holding of the real estate
asset (imposta municipale propria, “IMU”); (ii) the tax on indi-
visible municipal services (tassa per i servizi indivisibili, “TASI”);
and (iii) the tax on solid waste (tassa sui rifiuti, “TARI”).
IMU. The taxable base of IMU is the cadastral income, as
resulting from the land registrar on January 1 of the relevant
year, plus a 5 percent addition to the cadastral income, mul-
tiplied by a coefficient ranging from 55 to 160, depending on
the cadastral classification of the property. The general tax
rate is 0.76 percent, but the municipality in which the immov-
able property is located may increase or decrease the rate by
a coefficient of up to 0.3 percent.
Exemptions to IMU are provided in certain cases (e.g., real estate
assets to be sold by the constructor or restoration company).
TASI. The taxable base of TASI is the same as for IMU. The stan-
dard tax rate is 0.1 percent, but the municipality can increase
or decrease it.
TARI. The taxable base for TARI is calculated with reference to
the area occupied by immovable property and open spaces.
The municipality may assume that the taxable base is 80 per-
cent of the area occupied by immovable property and open
spaces according to the cadastral classification (immovable
property registry).
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Jones Day White Paper
Indirect Taxes Relating to Real Estate Assets
ASSET DEAL—SALE OF REAL ESTATE ASSETS (OTHER THAN LAND)
Seller of the
Asset
Residential Asset Business Asset
Ordinary
Social Housing (No
Main Dwelling*)
Main Dwelling
(No Social Housing)
Strumentali per natura
Non-VAT
Taxpayer
Registration Tax: 9%**
(minimum amount:
EUR 1,000)
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration Tax: 9%**
(minimum amount:
EUR 1,000)
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration Tax: 2%
(minimum amount EUR
1,000)***
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration: 9%**
Mortgage: EUR 50
Cadastral: EUR 50
VAT Taxpayer
Who Did
Not Build or
Substantially
Restore the Real
Estate
VAT-exempt
Registration Tax: 9%**
(minimum amount:
EUR 1,000)
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
VAT-exempt or 10%
VAT upon election /
VAT applied through
reverse charge mech-
anism****
Registration Tax: EUR
200
Mortgage: EUR 200
Cadastral: EUR 200
VAT-exempt
Registration Tax: 2%
(minimum amount:
EUR 1,000)***
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
VAT exempt or 22% VAT
upon election / VAT applied
through reverse charge
mechanism****
Registration: EUR 200
Mortgage: 3%**
Cadastral: 1%**
(mortgage and cadastral
taxes are 1.5% and 0.5%
respectively if a REIF or a
RE SICAF is either the seller
or the buyer)
VAT Taxpayer
Who Built or
Substantially
Restored the
Real Estate in
the Last 5 Years
10% VAT*****
Registration Tax: EUR
200
Mortgage Tax: EUR
200
Cadastral Tax: EUR
200
10% VAT
Registration: EUR 200
Mortgage: EUR 200
Cadastral: EUR 200
4% VAT
Registration Tax: EUR
200
Mortgage Tax: EUR
200
Cadastral Tax: EUR
200
22% VAT******
Registration: EUR 200
Mortgage: 3%**
Cadastral: 1%**
(mortgage and cadastral
taxes are 1.5% and 0.5%
respectively if a REIF or a
RE SICAF is either the seller
or the buyer)
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Jones Day White Paper
Seller of the
Asset
Residential Asset Business Asset
Ordinary
Social Housing (No
Main Dwelling*)
Main Dwelling
(No Social Housing)
Strumentali per natura
VAT Taxpayer
Who Built or
Substantially
Restored the
Real Estate (But
Not in the Last 5
Years)
VAT-exempt or 10%
VAT***** upon election
/ VAT applied through
reverse charge mech-
anism****
Registration Tax: EUR
200
Mortgage Tax: EUR
200
Cadastral Tax: EUR
200
VAT-exempt or 10%
VAT upon election /
VAT applied through
reverse charge mech-
anism****
Registration: EUR 200
Mortgage: EUR 200
Cadastral: EUR 200
VAT-exempt or 4% VAT
upon election
Registration Tax: EUR
200
Mortgage tax: EUR
200
Cadastral Tax: EUR
200
VAT-exempt or 22% VAT******
upon election / VAT applied
through reverse charge
mechanism****
Registration: EUR 200
Mortgage: 3%**
Cadastral: 1%**
(mortgage and cadastral
taxes are 1.5% and 0.5%
respectively if a REIF or a
RE SICAF is either the seller
or the buyer)
* Main Dwelling means the dwelling that qualifies as “prima casa” under Law Decree no. 131 of April 26, 1986 (as subsequently amended).
** Until December 31, 2016, the purchase of a real estate asset at a court auction by entrepreneurs or entities carrying out a business activity is sub-
ject to a fixed registration, mortgage and cadastral taxes at EUR 200 each in lieu of the proportional applicable taxes. Such tax benefit applies to the
extent that the real estate asset is re-sold within 24 months from the purchase date. The ordinary tax regime as well as 30% penalties and interest
apply if the purchaser fails to re-sell the real estate asset within the above mentioned term.
*** Until December 31, 2016, the purchase of a real estate asset at a court auction by individuals eligible for the main dwelling tax regime is subject to
a fixed registration, mortgage and cadastral taxes at EUR 200 each in lieu of the proportional applicable taxes. Such tax benefit applies to the extent
that the real estate asset is not re-sold within five years from the purchase. The ordinary tax regime as well as 30% penalties and interest apply if the
purchaser re-sells the real estate asset within the above mentioned term.
**** Reverse charge mechanism is only applicable if the purchaser is a VAT taxpayer.
***** 22% if the real estate is a luxury dwelling.
****** 10% if (i) the real estate is a “immobile Tupini” sold by the builder, or (ii) substantially restored real estate that is sold by the enterprise that
restored it.
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Jones Day White Paper
SALE / CONTRIBUTION OF LAND
Seller of
the Land
Zoning*
Land Other Than Zoning
Agricultural Land
Favorable Regime for
Small Farm Property**
Non-VAT
Taxpayer
Registration Tax: 9%
(minimum amount: EUR
1,000)***/****/*****
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration Tax: 9%
(minimum amount: EUR
1,000)****/*****
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration Tax: 9%
(minimum amount: EUR
1,000); 15% if the pur-
chaser is not a quali-
fied farmer (minimum
amount: EUR 1,000)****/
*****
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Registration Tax: EUR 200
Mortgage Tax: EUR 200
Cadastral Tax: 1%*****
VAT
Taxpayer
VAT 22%
Registration Tax: EUR
200
Mortgage Tax: EUR 200
Cadastral Tax: EUR 200
Outside the scope of
VAT
Registration Tax: 9%
(minimum amount: EUR
1,000)****/*****
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Outside the scope of
VAT
Registration: 9%
(minimum amount:
EUR 1,000); 15% if the
purchaser is not a
qualified farmer (mini-
mum amount: EUR
1,000)****/*****
Mortgage Tax: EUR 50
Cadastral Tax: EUR 50
Outside the scope of VAT
Registration Tax: EUR 200
Mortgage Tax: EUR 200
Cadastral Tax: 1%*****
* Zoning means a tract of land (area edificabile) that, according to certain regulatory instruments, may be developed by a real estate contractor,
which can thus build either residential or business real estate.
** Regime available only if the land is sold to certain qualified farmers or farm enterprises (società di coltivazione diretta).
*** 4% in case of contribution of zoning meant to be developed for building business real estate, provided that the business real estate be completed
within five years of the contribution.
**** EUR 200 registration tax applies if the contribution is made to a company that has either its registered office or place of management in another
EU Member State.
***** Until December 31, 2016, the purchase of a real estate asset at a court auction by entrepreneurs or entities carrying out a business activity is
subject to a fixed registration, mortgage and cadastral taxes at EUR 200 each in lieu of the proportional applicable taxes. Such tax benefit applies to
the extent that the real estate asset is re-sold within 24 months from the purchase date. The ordinary tax regime as well as 30% penalties and interest
apply if the purchaser fails to re-sell the real estate asset within the above mentioned term.
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Jones Day White Paper
Asset Deal—Sale of a Business (Going Concern)
The sale of a business is outside the scope of VAT, regardless
of whether the seller is a VAT taxpayer. The sale of a business
is instead subject to registration tax. If the business is located
in Italy, the registration tax is due even if the deed of transfer
is executed outside the territory of Italy.
If, in the transfer deed, the seller and the buyer clearly state
the price paid for each class of assets transferred, different
tax rates apply to the price indicated for each asset, net of the
liabilities proportionally allocated to it. The following tax rates
may apply:
• Accounts receivable: 0.5 percent (the Italian Tax Authorities
seem to take a different position and may apply a 3 per-
cent rate);
• Real estate assets: generally 9 percent (15 percent in case
of agricultural land sold to a person other than a qualified
farmer); and
• Other tangible assets (excluding cars and boats) and
intangible assets (including goodwill): 3 percent.
If the parties fail to apportion the overall price, there will be
only one rate. This will be the highest rate among those, in
principle, applicable to the different assets included in the
business (e.g., 9 percent if the business includes real estate
assets), and it will be applied to the overall consideration paid
by the buyer.
The Italian Tax Authorities may disregard the consideration
reported by the parties in the contract and assess a higher
value of the assets transferred, including goodwill, if they
deem that the price indicated by the parties understates the
value of the business.
If the business also includes real estate assets, EUR 50 mort-
gage tax and EUR 50 cadastral tax are also due.
Share Deal—Transfer of an Equity Interest in an Italian
Limited Liability Company
The sale of an equity interest (quota) in an Italian limited liabil-
ity company (società a responsabilità limitata) is VAT-exempt.
The sale is generally executed by notary deed, and it is sub-
ject to mandatory registration with the Italian Tax Authorities.
EUR 200 registration tax applies.
Transfer of Shares in an Italian Joint-Stock Corporation
The sale of shares in an Italian joint-stock corporation (soci-
età per azioni) is VAT-exempt. The sale is subject to EUR 200
registration tax if the sale is executed by either notary deed
or private deed with notarized signatures. If the shares are
instead transferred by endorsement (girata), the transfer need
not be registered with the Italian Tax Authorities, and, therefore,
it would not be subject to registration tax.
Moreover, if shares in an Italian joint-stock corporation (having
its registered office in Italy) are transferred (whether by sale or
contribution), the purchaser must pay 0.2 percent (0.1 percent
in case of listed shares) financial transaction tax on the pur-
chase price, save for certain exceptions (e.g., transfers within
the same group or transfers upon mergers).
Leases
Leases of business assets are exempt from VAT, save for the
case where the lessor elects to subject the lease to VAT. In any
case, lease rents are also subject to 1 percent registration tax.
Leases of non-business assets are VAT exempt, unless the les-
sor elects to subject the lease to VAT in the following cases: the
lessor is a VAT taxpayer who built or substantially restored the
leased asset, or in the case of social housing. If VAT is not opted
for, the lease rentals are subject to 2 percent registration tax.
Business leases are subject to VAT. If more than 50 percent of
the value of the assets of the business relates to real estate
assets, a 1 percent registration tax also applies.
© 2018 Jones Day. All rights reserved. Printed in the U.S.A.
Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general
information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the
Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our “Contact Us” form, which
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an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.
LAWYER CONTACTS
For further information, please contact your principal Firm representative or one of the lawyers listed below. General email mes-
sages may be sent using our “Contact Us” form, which can be found at www.jonesday.com/contactus/.
Marco Lombardi
Milan
+39.02.7645.4001
mlombardi@jonesday.com
Patrizia Gioiosa
Milan
+39.02.7645.4001
pgioiosa@jonesday.com
Matteo Troni
Milan
+39.02.7645.4001
mtroni@jonesday.com
Carla Calcagnile
Milan
+39.02.7645.4001
ccalcagnile@jonesday.com
Luca Ferrari
Milan
+39.02.7645.4001
lferrari@jonesday.com
Sara Rizzon
Milan
+39.02.7645.4001
srizzon@jonesday.com
