ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
A purchaser may ascertain the permitted use under the town planning rules in force by requesting a zoning certificate ( certificato di des - tinazione urbanistica ), from which it is also pos - sible to discover any urban planning restrictions that apply to the asset. 2.9 Condemnation, Expropriation or Compulsory Purchase Private ownership might be subject to an expro - priation procedure if there is a supervening public interest, such as the realisation of public works or works of public interest. In this event, an indemnification will be paid to the owner of the property/land. The indemnification is at the market price of the property/land that is the sub - ject of expropriation. 2.10 Taxes Applicable to a Transaction Non-Residential Property The sale of a non-residential property by a VAT entity to another VAT entity is VAT exempt, other than in the following cases. • VAT liability will automatically arise if the seller was the developer of a newly constructed property or the entity that carried out renova - tion works on an existing property, provided that the sale is performed within five years from the date of completion of the construc - tion or renovations works (this is known as mandatory VAT). • If VAT liability does not automatically arise, VAT may be payable where the seller exer - cises the option to apply VAT to the sale and purchase transaction and the exercise of this option is properly set out in the deed provid - ing for the sale and purchase of the real asset (this is known as the VAT upon option). In either of these cases, one of the following two mechanisms will respectively apply:
• the ordinary regime in the first case, which provides that the seller must issue an invoice in connection with the sale charging the VAT; or • the reverse charge mechanism in the sec - ond case (ie, when the seller opts for VAT to apply), which provides that the seller will not charge VAT in the invoice and the purchaser then adds the rate and amount of applicable VAT in the invoice and registers the invoice and the VAT in its input VAT register and its output VAT register. There is therefore no cash out for VAT between the parties to the transaction and the VAT is offset in the hands of the purchaser, provided that the purchaser is entitled to the full deduction of VAT on the purchase of goods. The applicable VAT rate is generally 22%. A reduced rate of 10% applies if the real property underwent material renovation works. The following transfer taxes will be payable in any sale and purchase of non-residential real assets: • cadastral tax at 1% of the sale price; • mortgage tax at 3% of the sale price; and • registration tax of EUR200. Mortgage and cadastral taxes can be reduced to an aggregate 2% rate if one of the parties to the transaction is an Italian real estate invest - ment fund (REIF) or if the property is acquired by an Italian listed real estate investment company ( Società di Investimento Immobiliare Quotata or SIIQ). The tax authority may verify if the sale price is in line with the fair market value within two years. Generally speaking, VAT can be offset against output VAT and other taxes or recovered through
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