We are often asked questions about how best to invest in real estate in Italy, is it necessary to open a company or is it better to purchase for an individual?
First of all, you need to figure out the purpose of the investment – for resale or rental, residential housing or commercial premises (shop, supermarket, hotel). When buying commercial premises, it is almost always more profitable to register for a company.
Purchase and sale and rent are subjects to payment of various taxes, both at the stage of concluding a contract of sale and on payment of taxes on income.
For example, a simple purchase of an apartment for renovation at an auction, its repair and resale can be carried out by an individual. But if an investor purchases a large premise or a whole building, repairs it, divides it into several apartments and resells it separately, this activity is considered as entrepreneurial, and a legal entity must be created.
Leasing is of two types:
1) short-term, or “tourist”, no more than 30 days under the contract. The owner himself can rent out his own accommodation through the Airbnb or Booking portals, or enter into an agreement with a management company or real estate agency.
2) long-term lease can be for a period of 8 years (4+4 years).
3) temporary “transitorio” lease is up to 18 months. If you are a beginner investor and are planning to purchase one or two properties, then it is definitely better to act as an individual.
Advantages of buying an object for an individual:
– the opportunity to take advantage of tax incentives when buying the first object and pay taxes on the cadastral value, and not on the actual price (the cadastral value can be 30/40% lower than the market value);
– the opportunity to use the construction bonus for the repair of an object, is valid only for individuals;
– tax on rental income for individuals is 21% (cedolare secca) or 10% (canone concerdato);
– in case of resale of an object after 5 years, the tax on profits received from the difference between the purchase and sale prices is not payable, and in the period up to 5 years it is 26%;
– if an apartment with energy efficiency class A or B is bought for investment, then for the whole of 2023 there is a tax refund benefit paid upon purchase.
But if you have purchased more than 4 objects and rent them out, then for the tax office you are an entrepreneur and the probability of receiving a notice of payment of corporate income taxes and a fine is very high. Then the question of creating a company arises (IP, limited liability company or other types) or acquiring an object through the purchase of quotas of an existing seller’s company.
Advantages of buying an object for a legal entity:
– the ability to write off the costs of maintaining real estate
– condominium, utility bills, repairs, VAT offset on purchases and other components affect the end result of the investment
– attracting credit funds allows you to keep some of the money with you for use in other investments, write off bank interests as expenses. At the same time, the return on investment ROI of equity will be much higher!
At our office by appointment we provide advice with real estate lawyers, accountants, notaries.