Business and tax planning for real estate in Italy
The economic crisis caused by the Covid-19 outbreak and ensuing lockdowns is the most prevalent global financial downturn of this century. Italy, like all other economies, has struggled immensely. And, given the significance of tourist flow to the Italian economy, the negative effect is likely to last longer.
Nonetheless, reports indicate that, while specific economic sectors have been hit hard, the Italian property market exhibits excellent signs.
Examining recent statistics on real estate investing, both residential and industrial, reveals interesting and hopeful results. Indeed, the numbers indicate a slow but evident increased tendency for all housing and commercial real estate investments, especially those meant for rental purposes.
The overall profit rate of purchasing a property to rent it out was about 6.7 per cent in the first three months of 2020 but climbed to 7.4 per cent in the next quarter. We carried out the informal assessment by splitting the selling price offer, i.e., the renting rate asked by landowners in numerous marketplaces and factoring in quarterly indexes for residences, business facilities, parking lots, and workplaces in the next quarter in 2020. The net percentage of profit that a landowner obtains on his rental property is calculated as an outcome.
The ultimate findings of this detailed and informative analysis reveal that currently, the most rewarding business in the Italian Republic is, beyond question, investing in commercial real estate.
Indeed, as the report demonstrates, these forms of investments generated a net return of 9.9 per cent last quarter and 11.4 per cent this quarter, with real-estate exhibiting a strongly rising trend.
Also, the growing tourism industry in Italy attracts many international firms willing to invest in the hotel industry by buying a single or more than one of the region's numerous valuable and lucrative commercial assets. These business organizations must adhere to Italian and European Union regulations, and the primary concerns to address are how to create a business model to, eventually, be responsible for managing the estate, carry out market surveys, and carefully evaluate the launching of the venture in question.
Relying on reputable consulting services is key. The potential corporate buyer will mainly have to gather the necessary paperwork, comply with administrative regulations, and be aware of tax implications.
In terms of taxes, international business enterprises must consider the European Union Mother-Daughter Regulation (passed in 1990), which was intended to abolish tax barriers relating to revenue allocations within corporate entities (EU's parent and subsidiary companies).
Allowing profits paid to parent businesses by subsidiary companies to be tax-exempt, the Regulation seeks to eliminate the danger of double tax implications. As for the Italian Republic, firms may seek tax remission on profits and other financial tools paid by Italy-based subsidiaries to parent firms domiciled in other European Union countries, or alternatively demand a reimbursement if tax is deducted.
Enterprises that buy commercial real estate units, like restaurants, hotels, farmland, or vacation homes, must form an enterprise or corporation governed as ruled by current Italian regulations and standards. The SRL, Ditta Individuale, and the SAS are the most often used Italian organizational forms for managing and administering a hotel business.
Starting an SRL, or Societa a Responsabilita Limitata — in other words, an LLC (limited liability company) - implies that there will be no restrictions on how many stakeholders are members and that participants' liability is bound to the donated funds.
SAS, or Societa Semplice in Accomandita, is an abbreviation for "simple convenience corporation." This organizational model permits an infinite number of share-owners, no minimum capital investment requirement to initiate it, and no limitation on the liability of members.
The Ditta Individuale is a sole proprietorship venture. The individual businessman can start this sort of business without any starting cash or property; however, the proprietor's private properties or belongings will be kept as collateral in the event of indebtedness.
A sole businessman wishing to establish a B&B (guest house) in Italy provides for an excellent and detailed illustration of how corporate and financial laws related to the hotel sector work in the Italian Republic.
Phase 1: Form a Ditta Individuale (Personal Corporation)
The business owner must open the enterprise within a month (30 days) of the activity's start date (before guests actually arrive in case of rental properties). The regulation applied in this situation is the Classification of Economic Activities (Ateco 55.23.5) standard.
Phase 2) Make an application for the SCIA
The municipal authority requires owners to submit the SCIA (Certified Notification of Initiation of Activities) before starting the business.
Phase 3) Informing the officials about the guests.
The landowner that provides lodging is expected to supervise and transmit information on guests to public security authorities. This correspondence is required for all stays with a duration of less than thirty days.
Longer stays are subject to additional scrutiny and registration with the Italian Revenue Agency (Agenzia Delle Entrate). The landowner must submit the RLI form, and, after that, the Revenue Agency is responsible for transferring financial information to the Italian Ministry of the Interior.
About our services
Our experienced group includes lawyers, accountants, and property developers able to exhaustively counsel foreign corporations interested in investing in the property market in Italy, by:
- Assembling the requisite business strategy and financial planning to minimize the expenses of establishing branches in Italy.
- Assisting with all appropriate documents for establishing a subsidiary in Italy and completing the required regulations and transcriptions of the papers.
- Providing backing and advice as regards purchase of commercial real estate, including negotiation and thorough technical research of the property.
- Offering complete support in the initial set-up, such as instruction on utilizing the required software for digital invoicing, branding, creating a marketing blog or a website.
- Supplying consultancies to international corporations intending to build a subsidiary to conduct hotel business operations, and covering all employee and economic related services including relocating workers from the mother company, handling residence permits etc.