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The Benefits of Investing in Italian Real Estate

The Benefits of Investing in Italian Real Estate

Many are the qualities for which Italy is known around the world. Good food, art, fashion and, most of all, the so-called “dolce vita,” an expression that has already entered the world’s vocabulary and refers to a carefree lifestyle devoted to the small but essential pleasures of life.

Another reason Italy should be known around the world is the great presence (and especially convenience) of real estate investment opportunities.

If you are a foreign national, whether you are thinking about buying a house in Italy or not, then this article is for you, because you will find 4 good reasons why you will ask yourself, “Why haven’t I invested in Italy yet?“.

Italian Houses For Sale at 1€

Strange as it may seem, it is possible in Italy to buy a house for the symbolic price of €1. You may be wondering why. Very simple. A number of small Italian municipalities have started a project named “Case a 1€” (“Houses for 1 €“) with the intention of combating phenomena such as the abandonment and decommissioning of properties and the depopulation of those areas that are becoming progressively uncrowded due to the lack of generational change.

Joining the project requires complying with certain conditions. Specifically:

– a willingness to redevelop the property through a short-term (max. 1 year) project to renovate it;

bear the notary fees for registration, title deeds and stacking;

initiate work within the timeline decided by the municipality, once all necessary permits have been obtained.

So the interested buyer will have to get in touch with the municipality, fill out the necessary forms to express their willingness to purchase and redevelop the property. The municipality will evaluate the proposal and, if approved, a property can be purchased for €1, which, once redeveloped, can be used for residential use or can be sold with a huge profit margin.

Buying a house at the cost of €1 is not the only way to make a good investment in Italy. If your dream has always been to own a historical property with aristocratic charm and you have a budget of more than 1 €, in Italy it is possible to purchase state-owned or privately owned properties of historical character. As a result of increases in maintenance costs and taxes, the state has in fact launched a program to sell such properties in order to redevelop them. Through the websites of the regions or judicial auction portals, it is possible to buy or even just rent, historic properties (such as villas or palaces, even castles) at prices significantly lower than the market value and their real value.

“Elective Residence” And Tax Benefits

Buying houses in Italy if you are a foreigner is very simple. Most importantly, it is very convenient. Being the owner of a property does NOT imply the obtaining of a residence permit, nevertheless, it is possible for the foreign buyer to obtain a kind of “retirement permit” through the so-called “elective residence“, which will allow him to move permanently to Italy with the sole condition of proving a passive income of at least about € 31 k/ year.

This means that the foreigner will not be allowed to work and thus generate active income in Italy, but will be able to invest and move to our country, enjoying all the tax benefits our system has to offer to new residents.

For example, high net worth individuals who transfer their tax residence to Italy can apply a substitute tax of 100,000 euros per tax year to their foreign income in substitution of Italian income tax. This taxation represents an alternative to the application of ordinary taxation, therefore, and the option is valid for a period of 15 years. This regime can also be extended to family members through the payment on their foreign income of a substitute tax of 25,000 euros for each family member.

In addition, individuals with pension income paid by foreign entities who transfer their tax residence to Italy, in one of the municipalities belonging to the territory of the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Apulia, with a population of no more than 20,000, can benefit from an optional tax regime, which provides for the application of a substitute Irpef tax at a rate of 7 percent to any category of income produced abroad. The “Sostegni Decree” Ter (Dl 4/2022) expanded the number of beneficiaries of the favorable regime: foreign pensioners who transfer their residence to municipalities affected by the L’Aquila earthquake of April 6, 2009, can also benefit.

Lastly, there are also tax benefits for foreigners who intend to move to and work in Italy; in fact, the tax-advantaged “impatriate workers” scheme is designed for employees and freelancers who transfer their residence to Italy. Under the scheme, for 5 years, income from employment (or assimilated category) and self-employment exercised in Italy is taxed at 30 percent of the amount, or even at 10 percent if the worker becomes resident in some particular regions of Southern Italy.

Safety and Guarantees in Real Estate in Italy

One reason that makes Italy a favorable target for real estate investments is the security that characterizes this kind of transaction, guaranteed by the presence of a figure (not always existing in the European legal landscape) of the Notary.

In Italy, any deed of real estate purchase and sale must pass under the watchful, impartial and competent eye of the Notary, who acts as a public official on behalf of the government and not on behalf of the parties, from whom he remains neutral, and who carries out the work of checking the regularity of the procedure, which is of crucial importance for both buyer and seller.

First of all, the Notary, as an extremely competent and impartial person, has the task of interpreting the wills of the two parties, seller and buyer, and making sure that the content of the deed of sale actually reflects the two wills, and that it does so in accordance with Italian law.

Secondly, and this is probably his most important function, the Notary verifies that the property is free from any legal or economic constraint (lien, mortgage, foreclosure, seizure, etc.), and that the seller is the real owner of the property itself. Only in this way you can be sure that you are buying the property from the person who has the full right to sell the same. In addition, the Notary’s control also extends to the verification of the urban, building and cadastral regularity of the property: the law, in fact, prevents or (in less serious cases) limits the purchase of properties that present abuses or that, simply, are not correctly and/or completely recorded in the Land Registry.

The verification work of the Notary certainly does not stop there, as he or she has to carry out a series of formal verifications however of great importance, from the power of signature and capacity of the parties involved in the contract to the matrimonial property regime of the couple (if the parties are married) or the tax regime to be applied to the contract (there may, for example, be specific facilities related to the verification of compliance with energy regulations).

High ROI: Where to Invest?

Last but not least, a final important piece of evidence of the good health of Italian real estate is the high average of ROI, calculated on the basis of every region in the country.

For those who do not know, ROI, or return on investment, is an index that measures the profitability and economic efficiency of a financial transaction, given by the simple ratio of the revenue obtained from the transaction to the cost incurred to put it in place (revenue/cost of investment).

To date, it has been calculated that the average ROI of the Italian real estate market is about 22 %, with areas that slightly exceed 10 % and areas that, even, go over 40 %. This simple data makes it clear how every area of the country can represent an important investment opportunity despite the fact that, obviously, there are areas that are potentially more profitable than others, such as big cities (Milan, Rome, Florence, etc.), or major tourist areas (Sardinia, Amalfi Coast, Capri Island, Puglia, etc.).

To recap: you can buy houses for €1; you can decide to live in a castle; you can enjoy many tax advantages; you can spend a golden retirement in the most beautiful country in the world; you can buy property everywhere, in any part of Italy, and you can be confident that your purchase is safe and secure. I bet you are wondering, “Why haven’t I invested in Italy yet?”.

If you wish to know more about investing in Italian real estate, you can contact Lexia using the form below for more information and assistance during the process.

    Featured image by Ljubomir Žarković

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