Owners of Italian property or those thinking about purchasing should be aware of the government backed scheme to kickstart the economy.
A solid and unprecedented bonus scheme to intentivize restoration and home improvement. Here below the details on how to recoup a siginificant amount of restoration costs as well as creating an eco-friendly and energy efficient home.
One of our clients who rents his farmhouse to holidaymakers, recently installed solar panels and a heat pump to reduce his annual utility bill, his property jumped 2 classes so he's now claiming 50k of the costs.
In May 2020 the Italian Government issued urgent legislation to assist with the recovery of the Italian economy, following the unprecedented shock of the covid-19 pandemic.
You may have heard about the Super-bonus of 110% that has recently been established in Italy via the “Relaunch Decree” (Decreto Rilancio). The decree has been formally converted into law on July 18, 2020, with the aim of helping to “relaunch” the Italian economy in response to the COVID-19 crisis.
What exactly is the “super-bonus”, and when is it possible to obtain it?
The super-bonus is a tax advantage available for those who are willing to make property upgrades that qualify as energy renovation. It also includes seismic retrofitting.
Prior to the establishment of the super-bonus, two other fiscal incentives existed, the eco bonus and the sisma bonus.
The common characteristic of these incentives is ability to deduct the amount needed for the improvement projects from your taxation, in particular form your IRPEF. Therefore, the bonus is especially of interest to those who do business in Italy or rent out their homes, as well as those who’ve transferred their fiscal residency to Italy. Possibly to take advantage of the other attractive non-domicile FLAT TAX regime capped at 100k per year despite earnings.
The reason why this tax break is up to 110% of qualifying expenses is that a further 10% is added to the total qualifying expenses (100%) actually incurred, to cover technical costs during planning and the rate of discount if the tax credit is sold on to a bank or other financial institution. The “Superbonus” can be traded (Cessione del credito) by entitled property owners , effectively by selling it to third parties, or setting it against their own suppliers` invoices (Sconto in fattura) thus effectively getting the costs of the property improvements paid by the Italian Revenue.
Of course, some limitations to the deduction apply, since you cannot always deduct more than a certain amount.
But let’s see first what the super-bonus involves and what it includes.
First of all, we need to distinguish between those improvements which are necessary for obtaining the super bonus (leading works), and those for which you can get the bonus only if carried out in conjunction with the leading works (secondary works).
Here is a short list of the leading works for which you can qualify for the super-bonus:
External insulation coating for a surface of at least 25% of the building. In this case, you need to follow the related rules and regulation regarding the material, ways to insulate the surface, etc., so our suggestion is to make sure that the works are made as per the regulations.
Upgrade of the heating system with a heat pump: it is important to specify that the Decree mentions the upgrade in place of the existing heating system, not the “addition” of a new heat pump system.
Seismic retrofitting of the building (sisma bonus): it involves the adoption of seismic measures, per which a specific and mandatory documentation is required for certifying that the safety is guaranteed. The works have to be carried out on the structural parts of the buildings and on an entire block of buildings. Work cannot be limited to a single unit – the reason being to ensure safety of an entire complex or building rather than obtaining a bonus for works that do not provide any guarantees of security.
In summary, any kind of bonus is strictly connected with to improving the safety and enabling energy savings.
What are the other building works that are included in the bonus if made together with the leading works (secondary works)?
Solar panels: the 110% tax deduction is subject to the sale of the remaining and unused energy to GSE (GSE is the state-owned company which promotes and supports renewable energy sources in Italy).
Electric column installation for recharging electric vehicles.
Replacement of fixtures.
If it is not possible to start the leading works because of legal or regulatory restrictions, it is still possible to obtain the bonus for the secondary works. This is in terms of not denying the same opportunity to those property owners who still wish to renovate and improve their buildings despite the presence of restrictions (i.e. landscape limits, etc.)
Do I need to be the owner of the property for obtaining the super-bonus?
The answer is pretty straightforward – NO, you do not need to be the owner. If you have a rental contract you can still be entitled to the bonus, however you always need permission from the owner.
For what kind of properties is the bonus obtainable?
Both first and second home qualify. (so applicable to overseas owners)
Property functionally independent and with one or more independent accesses (such as townhouses).
Individual residential units.
Common parts of residential buildings, for example – condominiums.
Which properties are excluded from the super-bonus?
Some categories are excluded, but pay attention....... the qualification is based on your cadastral class ie. The tax category of your property which doesn’t always what you may think your property actually is. The majority of properties (luxurious or otherwise) fall into the A2 civil habitation class.
Excluded classes ;
- A1 luxury houses)
- A8 (luxury villas)
- A9 (Castles).
Is the bonus limited to a certain amount of money?
Yes, you cannot obtain more than what is established by law. The limits are as follows:
- For thermal insulation works, the limit varies based on the type of building:
A maximum of €50,000.00 for detached houses and individual houses within a residential area.
A maximum of €40,000.00 for condominiums with 2 to 8 units.
A maximum of €30,000.00 for condominiums with more than 8 units.
- For winter heating works €30,000/€20,000/€15,000 dependently on the type of house as above (detached, within 8 units in a condominium, or with more than 8 units).
- For solar panels: €48,000 or €2,400 per each KW per each single unit.
What are the conditions to obtain the super-bonus deductions ?
There must be an improvement of the energy class, this improvement must be of at least two classes. If it is no possible to improve the energy of two classes, then it is enough to reach the highest class. A qualified technician (usually a Geometra) has to formally declare that thanks to the works carried out on the property, the building has a higher energy response and consumes less energy. The formal declaration is called APE
, also known as Energy Certificate
; this certificate provides the assessment of the energy consumption of a building.
For the Sisma Bonus the improvement has to be of at least one class.
Leading and secondary works.
The secondary works need to be done in addiction to one of the three leading works as described above.
If the leading works cannot be made because subject to cultural or landscape constraints or to zoning limits etc., you can obtain the bonus only for the secondary works. This is the sole case in which you can obtain the bonus despite the leading works not having been made.
How do you qualify for the Super-bonus ?
The super bonus of 110% can be obtained if works are carried out from the 1st of July 2020 through the 31st of December 2021.
Discount on Invoice and Tax Credit
Tax payers can offset 110% of renovation works against their tax liabilities. This happens in five equal installments.
The tax payers can also convert their tax credit into a discount of costs. In this case the service provider acquires the tax credit.
The service provider can consequently transfer the credit to the bank, meaning that the tax credit can be transferred more than once.
This generally happens if when the building company does not have the cash in the bank to offer a discount of costs by acquiring the credit from the taxpayer.
All major banks are currently working on offering options and custom packages following the Relaunch Decree.
This tax legislation is complex and still evolving. It has been amended by subsequent legislation and its interpretation is progressing with Italian Revenue circulars and regulations. There are still some gaps to be filled and no doubt new issues / gaps will arise in future, but is a real opportunity for Italian property owners who pay taxes in Italy.
“Superbonus” is an attractive tax break for all Italian property owners, resident or non-resident, even in the current difficult economic circumstances. Unfortunately, this legislation is very technical and complex.
This new legislation could result in an Italian “tax credits” market, where “Superbonus” tax credits are negotiated and can be bought and sold by parties unrelated to the actual originating property owners. It is not yet clear what the risks involved are likely to be, in future.
However it is very clear that if you make a mistake in implementing the detailed “Superbonus” regulations you risk losing the tax credit, even if you duly carried out qualifying works and incurred all the relevant costs. In addition, tax penalties and interest charges are also likely to be levied.
“Superbonus” must be handled with professional care, as the legislation is complex and still evolving, to ensure you will get the full benefits of the “transferable” Italian tax rebate.
After all, there is still plenty of time to organise and implement the relevant qualifying works. You will also get a tax credit for most of the professional costs incurred.
If you have a house in Italy and wish to know more about your right to obtain a super-bonus, feel free to contact us for a first free consultation!