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Evolution of the rent during the initial lease
• Rent is usually yearly adjusted in accordance with an
indexation clause providing for an evolution of the rent on the
basis of ISTAT (National Institute of Statistic) index:
–– 75% (maximum) for the commercial contracts with 6+6
years duration;
–– up 100% for residential contracts or longer commercial
contacts (7+6 minimum).
Term of the renewed lease
• No increase of rent is possible after the first 6 years period. At
the end of the 12 years period free negotiation is foreseen by
the law.
Major commercial leases
• Landlords and tenants are free to negotiate commercial leases
without any limitations, otherwise automatically imposed by
the law, if the value of the yearly rent is equal or grater than
250.000 euros.
• While in other leases of minor value duration, increase of rent,
pre-emption right and payment of goodwill at the termination
of the contract are automatically due, greater contracts
make the parties free to negotiate and to eliminate any of
the tenant’s advantages above mentioned, as long as the
agreement is executed in writing form (art. 79 law 392/78, as
emended by law 164/2014).
Rent to buy
• Rent to buy is a new contract introduced in 2014 by an
emergency law (Sblocca Italia), finalized to boost the
economy.
• It could be defined as a combination between of two different
contracts: lease and preliminary purchase contract.
• The lessee can use the asset for a certain period of time and
he has the right to purchase it.
• The purchase price of the asset is reduced of an amount equal
to an agreed portion of the paid rent.
• The agreement must be recorded in the public records
(Conservatoria dei registri immobiliari).
• The contract is terminated and voided if lessee doesn’t timely
pay the rent.
TAX
Tax regime applicable to an asset deal
• The building transfer is subject to a different VAT and transfer
tax treatment depending on the cadastral enrolment.
• Mainly, the applicable indirect taxation depends if the
building, or units in which it is divided, are registered for
residential purposes or for commercial purposes.
• The tax regime is the following, assuming that the purchaser
is an Italian incorporated and VAT registered company.
Commercial
• Commercial buildings are subject to two different VAT
regimes:
–– exemption regime (ordinary regime);
–– no VAT has to be added to the transaction; the total
amount of the cadastral and mortgage taxes will be equal
to the 4% of the purchase price, plus registration tax
amounting to a fixed amount of 200 Euros;
–– 22% VAT regime (optional regime). The vendor may
opt for the common VAT regime (VAT is applied at a
22% rate to the transaction price). Should this be the
case, the reverse charge mechanism has to be applied
by the purchaser: it means that the vendor will issue
an invoice with no VAT and the purchaser must issue
a further document (so called self-invoice) quoting
the 22% VAT rate. The vendor’s invoice will have to be
registered in VAT registers both as input and output VAT.
Accordingly, neither economic nor financial will affect the
purchaser; it is worth mentioning that this regime is fully
available provided that the purchaser is not subject to a
VAT exemption regime on the future sales, which could
otherwise imply a partial recapture of input VAT related
to the asset deal, quantified in proportion to the ratio
between VAT exempt and non-exempt sales. The total
amount of the cadastral and mortgage taxes will be equal
to 4% of the purchase price; a further transfer tax of 200
Euros will be added.
Residential
• Residential units are only subject to the VAT exemption
regime. In such a circumstance a transfer tax of 9% of the
purchase price will be due. In addition, further cadastral
and mortgage taxes amounting to 100 Euros in total will be
applied.
Special Instruments
Real estate closed-end funds
• A wide tax exemption is provided by the law to real estate
closed-end funds managed by SGR (under the supervision of
the Bank of Italy) if said funds are participated by supervised
investment vehicles and/or are owned by banks or individual
shareholders witch own less than 5% each.
SIIQ
• The recent emergency law (Sblocca Italia) has granted
important tax advantages to SIIQ (public trade companies).
• SIIQ are obliged to operate mainly in the lease of real estate
(80% of there income must come from that source).
• SIIQ were introduced in the italian legal system in 2006 but
the limitation imposed by the law impeded, in most cases, the
use of said instrument.
• At present many limits have been removed: one single
shareholder may own 60% of the shares, the floating shares
must be at least 25%, capital gain on assets contributed to a
SIIQ is taxed with a withholding tax of 20%.
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Investors Guide to Europe 2015