ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
6.5 Rent Variation Parties are free to determine the rent but once it is fixed it is subject only to an annual review based on 75% of the Italian National Institute of Statistics or ISTAT consumer price index or 100% depending on the duration of the lease. Since November 2014, parties in longer-term leases can freely negotiate and determine a mechanism to review and update the rent. How - ever, current market practice still provides for the rent to be updated on the basis of the ISTAT consumer price index. Turnover rents, stepped rents and free rent peri - ods are also permitted, with certain limitations provided by case law. 6.6 Determination of New Rent The general rule is that residential leases are VAT exempt. Landlords can opt for the VAT regime to be applied at a 10% rate exclusively in the following cases: • leases executed by companies that built the leased building and companies that have performed, including through contractors, the renovation works referred to in Article 3(1)(c), (d) and (f) of Presidential Decree No 380/2001; and • leases of social housing, as defined by law, carried out by other companies. The tax reform currently in progress should extend the VAT option to any landlord who quali - fies as a VAT entity, irrespective of these require - ments. See 6.5 Rent Variation . 6.7 Payment of VAT Residential Leases
Non-Residential Leases The general rule is that these leases are VAT exempt. However, any landlord can opt for VAT to be applied (at a 22% rate). The VAT option must be clearly stated in the agreement. 6.8 Costs Payable by a Tenant at the Start of a Lease No costs should be paid by the tenant other than rent and any ancillary charges unless there are fit-out works to be carried out within the prop - erty. If this is the case, the parties will define which works are for the benefit of the tenant and which are for the benefit of the landlord. 6.9 Payment of Maintenance and Repair Maintenance costs for common parts of the property are borne by the landlord and reim - bursed by tenants on a pro rata basis. 6.10 Payment of Utilities and Telecommunications Tenants pay utilities and telecommunication costs. 6.11 Payment of Property Taxes A local property tax (IMU) is imposed on com - mercial leases in Italy. It is imposed on the own - ership of the property and calculated on the value of the property in line with the Italian tax regulations. Registration tax is imposed on the lease agreement and calculated on the rent. The IMU will be borne by the landlord according to the tax law. However, landlords and tenants may enter into a triple-net lease agreement according to which the rent due by the tenant is calculated consider - ing the amount of the IMU payable by the land - lord. This provision is valid among the parties
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