ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
7.4 Management of Schedule-Related Risk Construction agreements usually provide for penalties to be paid in case of delay. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Contractors are required to deliver a perfor - mance bond and, upon completion of the works, to give a warranty bond and a ten-year insurance policy ( decennale postuma ) covering material defects of the building. 7.6 Liens or Encumbrances in the Event of Non-Payment In the case of default by a landlord, contractors/ designers may be able to encumber the prop - erty and enforce the sale in order to recover their outstanding debts. This would imply a judicial proceeding. 7.7 Requirements Before Use or Inhabitation The law requires buildings to be fit for use before they can be inhabited. According to the regula - tions currently in force, fitness for use is self- declared by the developer through a certified technical assessment using a specific form, which confirms that the works comply with the submitted project and the regulations on hygiene, health and safety, plants and systems and fire prevention. 8. Tax 8.1 VAT and Sales Tax See 2.10 Taxes Applicable to a Transaction . 8.2 Mitigation of Tax Liability Where non-residential real assets are purchased by a REIF or a SIIQ, the applicable cadastral tax
and mortgage tax are halved to 0.5% and 1.5%, respectively. The contribution of multiple real assets, mainly leased, performed by a VAT-registered entity to a REIF or SIIQ is not subject to VAT and is subject to negligible transfer taxes of EUR200 each. 8.3 Municipal Taxes An owner of real property is generally liable for the payment of the IMU. The taxable basis is equal to the cadastral income (including a 5% increase), multiplied by a figure depending on the type of property. The local municipality approves the rates which range from 0% to 1.14% annually. The user of a property is also subject to the waste removal tax ( tassa sui rifiuti or TARI). 8.4 Income Tax Withholding for Foreign Investors An investor may derive lease income from owned real properties, either directly or by means of dividends or distributions made by a corporate vehicle or fund. Tax on rental income may vary substantially, depending on the structure of the investment. Where the property is held by an Italian corpo - rate vehicle, if the real estate is leased to ten - ants, any rental income generated is subject to IRES at a rate of 24% and to 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,
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