Land, Buildings and Farms
Which is the best way to purchase real estate in Italy?
Should your plan be to acquire a property for your family or with the goal of simply renting it out (i.e.: with no intent of carrying out an actual business such as that of a guest house or a hotel) you may consider employing a foreign entity. Provided that such entity has no permanent establishment in Italy (i.e.: a fixed place of business, and office etc.), the subsequent sale of the asset shall attract no capital gain tax insofar as a 5 years holding period is satisfied.
The downside of such a route is that renovation costs (if any) are not tax deductible as they do not qualify as business expenses (indeed, as a matter of fact no business is being carried out in Italy).
To secure the recognisance of renovation costs, you may consider purchasing the property as a private individual in which case an array of very generous tax credits shall become available to you. Of course, to enjoy the benefit of a tax credit you need to have an income liable to tax in Italy.
By purchasing as a private individual, you are also eligible for a substantial reduction of applicable transfer taxes which shall be charged on the cadastral value of the target property rather than on its market value (note: on average, cadastral value is 2/3 lower than the relevant market value).
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