ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
ants, any rental income generated is subject to corporate income tax (IRES) at a rate of 24% and to regional tax on productive activities (IRAP) at the ordinary rate of 3.9% (or more, depending on the relevant region). The taxable income of a real estate company for IRES purposes is the net revenue after the deduction of costs, as shown in the annual profit and loss account. Roughly all costs relating to the activities of a company can be deducted, including depreciation (excluding land) and inter - est (as long as this exceeds interest receivable), up to an amount equal to 30% of tax EBITDA in each fiscal year. Interest due on loans aimed at purchasing real estate properties for “letting” that are secured by mortgages over the same properties is fully deductible. The taxable income of a real estate company in relation to the leasing of residential real proper - ties for IRES purposes is represented by the rent minus maintenance expenses and interest up to the above limits. No other costs are deductible. Interest is not deductible from an IRAP stand - point. The taxation of dividends distributed to share - holders depends on the nature of the share - holder. Dividends in favour of a foreign individual are generally subject to a withholding tax of 26%. Withholding tax rates can be reduced by any double tax treaty signed by Italy with the country of residence of the foreign investor. Dividends distributed to a company that is resi - dent in the EU or EEA and subject to corporate income tax therein are liable to a 1.2% withhold - ing tax (to avoid discrimination with dividends
received by Italian resident companies). Exemp - tion from Italian withholding tax under the Par - ent-Subsidiary Directive may apply. Dividends paid by an Italian resident company to foreign undertakings for collective investments (UCIs) are exempt from withholding tax if the fol - lowing conditions are met (EU UCIs): • UCIs are established in the EU or EEA; and • UCIs are compliant with Directive 2009/65/EC (UCITS) or are alternative investment funds managed by managers subject to regulatory supervision in the country where they are established, pursuant to Directive 2011/61/ EU (AIFMD). In the case of direct investment performed by a foreign company (without a permanent estab - lishment in Italy, noting that ownership of Italian real estate does not automatically give rise to a permanent establishment in Italy), the income derived from letting property is subject to IRES, payable at a rate of 24%. 95% of the gross income derived from letting is taxable and no depreciation or other costs can be deducted. Italian REIFs are not subject to IRES or IRAP and foreign investors may benefit from a withholding tax exemption if certain requirements are met. Tax on capital gains deriving from the sale of real estate properties may vary according to the structure of the investments. Profits on the sale of a property realised by an Italian corporate vehicle are subject to IRES and IRAP at the aggregate rate of 27.9%, regard - less of how much time has lapsed since acquisi - tion. The profit is represented by the difference between the agreed purchase price and the net tax value of the property at the time of the sale.
466 CHAMBERS.COM
Powered by FlippingBook