italy off plan property investment and opportunities

8/14/2019 Italy Off Plan Property Investment and Opportunities

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Italy

Economic world player

Worlds th most visited country

House price growth: 7.2% Knight Frank

Excellent mortgage availability

Year-round rental returns

Overview


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3/16COuntry Overview < italy

italy at a glanCe Area: 301,318 km

Climate: Summer: Hot in across the country (24C).

Winter: Colder in the north,

milder in the south.

ime Zone: GM+1

Population: 58,884,000

Language: Italian

Capital City: Rome

Political System: Republic

President: Giorgio Napolitano

Prime Minister: Romano Prodi

Currency: Euro

Joined EU: 1957 (ounder member)

Dialling code: 00 39

F R A N C E

S L O V E N I A

BOSNIA-

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eighth largeSt eCOnOMy in the wOrld

Italy is the eighth largest economy in the world1. Asa ounder member

o the EU, the G8 and NAO, it is a key world player economically

and politically. Romano Prodi was elected Prime Minister in 2006,

and although the government coalition has governed at times without

a clear majority, the day-to-day running o the government and

economy has not been aected.

FOreign inveStMent haS dOuBled

According to OECD, total inward oreign direct investment has

more than doubled or Italy in 2006, with $41.2 billion compared

with $19.9 billion in 2005 and $16.8 billion in 20042. Italy receives

signifcant oreign investment rom major multinationals. For

example, it is the third largest supplier o products or IKEA, which

has recently announced a 1.5billion investment in Italy alone3. Such

levels in investment have a positive eect on the economy, encouraging

growth and economic success.

FiFth MOSt viSited COuntry in the wOrld

With over 40 UNESCO World Heritage sites, Italy is the fth most

popular countryto visit in the world4. In 2004, 36.5 million people

visited Italy. It attracts a variety o tourists rom city culture seekers

to those who just want to relax by the countryside and sea, and is a

perect holiday or second-home location. Te variety o tourism puts

an upward pressure on demand or property, and increases yields.

StrOng SuStainaBle grOwthRecent years have seen strong growth in the Italian property market,

with a countrywide average, house prices have risen by 7.2% in 2006,

according to the Knight Franks Global Property Index5. Some

less developed areas have the potential or signicant growth above

this level.

exCellent MOrtgage availaBility

A oreign investor can easily buy property in Italy. Te country has

a mature, highly developed mortgage market and loans are easily

available rom both Italian and British banks. Low interest rates, with

up to 80% LV on mortgages with long leases, term lengths are or

25 years6 mean you can comortably nance your investment. Te

typical rate is 5.5%7.

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5/16COuntry Overview < italy 5

year rOund rental returnS

Te availability o cheap air travel and a avourable climate (summer

average 24C) makes Italy a popular year-round destination or visitors.

Tis means there is a steady demand or accommodation. Investors

can make good, solid returns rom holiday makers throughout the

year. Pick a property near to an attraction, such as a historic city,

UNESCO heritage site, or beautiul coastal or country view, and youll

nd demand or this area is high. Tis will have a signicant eect on

rental yield.

very eaSy tO get tO and arOund

Italy is in the heart o Europe and is served by 13 international

airports across the country rom Milan in the north to Palermo in the

south. Several low cost carriers including Ryanair, Easyjet, bmibaby,

Tomsony, Alitalia and British Airways operate through these

airports which mean that all regions o the country are well served.

Internal transport networks are very well developed through road, rail

and air. Tis encourages a strong tourism market, rom short breaks

to two-week holidays.

realiStiC SeCOnd hOMe Or retireMent OPtiOn

With its high quality standards o living and good weather, Italy is a

popular place or retirees or those who are looking or a holiday home.

For tax purposes, i you live in Italy than 183 days a year, you are

classed a resident. Live in Italy or 5 years, and you avoid paying capital

gains tax. Tis makes Italy an excellent choice or a second home or

retirement option. Te country has a rich variety o beautiul locations

be it historic towns and cities, picturesque countryside or elegantcoastal and lake locations.

diverSe and BeautiFul COuntry

Cities rich in culture, such as ashionable Milan, renaissance Florence

and Venice, and la citta eterna, Rome, once the centre o the world,

make Italy exceptional. Te country has a variety o rural settings: rom

mountainous Alpine Lombardy to green rolling uscan hills, elegant

Lakeland settings, and the dramatic Sicilian landscapes. Italians enjoy a

rich ood culture, as well as the national obsessions o designer ashion,opera and ootball (Italians are the current world champions). Tis all

adds to make Italy a unique place to invest in.

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Economic overviewItaly is the worlds eighth largest economy, generating $1,668bn

in 20058. It also has the ourth largest GDP in Europe, together

with a consumer base o 60 million 9. As a member o the Eurozone

since the beginning in 1999, it adopted the Euro at the earliest

opportunity. Being in the zone insulates the economy against

external shocks, making Italy a stable country to invest in.

Italys economy has remained strong over the last 30 years, and

its in ination is under control. In act rates o below 2% are

predicted over the next two years. Although GDP growth is alsopredicted to be low, at 1.5% in 2007, the strength and size o

the economy still makes Italy an ideal place to invest in.

Te worlds eighth largest economy.

Tere is a signifcant economic divide between the north and

the south in Italy. Major industry is centred in the north and

north-west areas, due to easy access to the rest o Europe10. Tis

is reected in the economic power o the northern regions. ake

Lombardy, or example: it is the engine o the Italian economy

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and as one o the three richest regions in Europe in terms o

GDP, it has a per capita GDP o $49,216, making it higher

than Saudi Arabia or Switzerland11. Te northern economies are

also supported by a strong tourism industry with regions such

as Lombardy, Piedmont, Te Veneto and uscany attracting

signicant tourist numbers. Such strong tourist demand leads to

potential or high rental income.

In comparison, the urther south you go, the lower the GDP,

with some o the southern regions like Sicily, Campania andCalabria haveing GDP per capita below 16,00012. While these

areas have not ared so well economically in the past, investment

incentives rom regional, national and European government

are encouraging business. Te southern regions o Italy are

assigned or EU Objective 1 status13, which means they receive

signicant investment to improve the economic inrastructure,

making them ripe or economic redevelopment.With increased

government and oreign investment, demand or property is

growing and capital growth rates likely to grow over the next

two years. With property prices also being cheaper in the South,there is plenty o room to accommodate this growth too.

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OECD reports that oreign direct investmenthas more than doubled or

Italy in 2006.

A good indicator or a countys economy is oreign investment.

otal inward oreign direct investment has more than doubled

or Italy in 2006, according to OECD, with $41.2 billion

compared with $19.9 billion in 200514. Italy receives signicant

oreign investment rom major multinationals. For example,

it is the third largest supplier o products or IKEA, which has

recently announced a 1.5billion investment in Italy alone15.

Such levels in investment have a positive eect on the economy,

encouraging growth and economic success, increasing wages, and

the opportunities or workers to buy and rent property.

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ourism is an excellent industry to increase demand and growth

rates in property. In Italys case it has become one o the driving

orces o the economy. It is the fth most popular country

destination in the world, and the third in Europe, with around

36.5 million visitors16 a year. It accounts or 70bn o income

into the economy and is the source o 400,000 jobs 17. In 2005,

Italy invested 2.7bn in tourism18 with signicant investments in

the top historic cities o Rome, Venice and Florence, as well as the

southern regions o Sicily, Calabria and Puglia. Tis will have positive

eects or the local and regional economies and growth rates.

Te wide range o tourist products, supported by strong

investment, reects the high year-round demand or holiday

accommodation and growing rental rates.

Te fth most popular tourism countrydestination in the world.

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Poiic overviewItaly has been a parliamentary democratic republic since 1946,

when it abolished the monarchy in avour o the current system. It

has a bicameral (two house) parliament consisting o the Chamber

o Deputies (630 members) and a Senate (315 members)19.

It is an enthusiastic supporter o the European Union (EU). As

a ounder member, Italy hosted the rst declaration o European

integration, the reaty o Rome, which has celebrated its 50 th

anniversary this year. It was one o the rst to sign up or the

Euro, and has been a strong supporters o the new European

constitution20, even encouraging that it should be ratied by

200921.

Political ties with the key European Union countries are strong

with Prime Minister Romano Prodi joining with Germanys

Angela Merkel in a call to re-strengthening the power o

the Union22. As a ounder member o NAO and G8, it is a

signifcant player on the world political stage. Italys role in

world brings long-term political and economic stability, which

makes it an excellent place to invest.

Italy is led by the President o the Republic, who as the as the

head o state represents the unity o the nation. Due to this, the

President tends to stay out o political debate and is considered

the guardian o the constitution23. Giorgio Napolitano is the

current President (elected in May 2006). Te ofce o President

o the Council o Ministers is also known as the Prime Minister,

and is usually the leader o the largest party coalition. Romano

Prodi, leader o the centre-let LUnione group is the current

Prime Minister, who was brought into ofce in May 2006. He

was previously Prime Minister between 1996 and 1998, and was

President o the European Commission, the executive body o

the European Union (EU).

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Te state is made up o twenty regions, which is governed by

elected council and directly elected president. Te strong regional

power in Italy is supported by the constitution, to ensure that

services at the state level are as decentralized as possible. It is worthconsidering the signicant dierences between these regions,

politically and economically. Tis has been reected in their

relationship with central government, with wealthier northern

regions more concerned in keeping Rome out o their aairs,

while poorer southern regions rely more heavily on Rome or

nancial support and investment. Indeed, the south has been the

ocus o successive governments or economic redevelopment.

Italy has dramatically renewed its political landscape between

1992 and 1997 when scandal investigations touched thousands

o politicians, as well as administrators and businessmen24. Since

then, there has been a trend toward two large coalitions o manyparties (one on the center-let and the other on the center-right),

which has run or elections rom 1996 to 200625. Tis trend has

brought stronger more stable government, in comparison to

previous eras. Te previous Berlusconi administration lasted its

ve year term, the longest in the republics history.

According the Economist26, Mr Prodi has been challenged by

divisions on oreign policy with his coalition, and has had to rely

on opposition votes to get approval on key oreign policy issues.

However, the approval o the 2007 budget, and increased revenuegrowth has improved Mr Prodis chances o staying in ofce until

the end o 2008 and possibly the end o his term in 2011.

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10 resons o bu in tuscn

a tOuriSM hOtSPOtuscany is one o Italys most popular tourist destinations, with an

industry that is booming, seeing an increase by 6.8% in 200527.

Its popularity is reected by around 10 million tourist visits. Te

historical centres o the cities o Siena and San Gimignano are two

o the six UNESCO World Heritage sites that also include Florence

and Pisa. Tis growing tourism market means demand will always be

high or accommodation in well-located areas. Tis makes uscany

an ideal place or strong rental yields.

high rental returnSWith uscany being such tourism centre, demand is so high or

accommodation in the summer season that Lonely Planet 28states that

in high summer, San Gimignano in uscany can be as unpromising

or accommodation as that Christmas Eve in Bethlehem. Indeed

between 2000 and 2005, demand or tourism rental o private

houses has risen by 58%29. High demand combined with limited

supply o property means there is the potential or high yields.

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3. rare OPPOrtunityo preserve the natural beauty o the historic uscan landscape

around San Gimignano, planning laws are very strict to prevent

overdevelopment. Converting agricultural land into another use

and then building on it incurs 40% tax, which strongly reduces

the incentive or developers to propose schemes. Tis makes high

quality property hard to fnd.

StrOng regiOnal eCOnOMyuscany has a strong economy, not just centred on tourism, butalso has a wide industrial base covering manuacturing, science and

technology. Home to a 1.5 million workorce, it has welcomed

over 350 multinational companies to invest in the region a 26%

increase between 2000 and 2005. Tree universities add to the well-

educated workorce, reected with an above average GDP per capita

o 25,00030. Te success o the economy means that there will

always be a demand or property, which helps orce prices up.

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eaSy FinanCing With a mature mortgage market, nancing is easy to come by.

Mortgages are available rom the oldest bank in the world, the Monte

dei Paschi di Siena, who are based locally in Siena, as well as British-

based banks. Low interest rates, with 80% LV on mortgages with

long leases, term lengths are or 25 years31 mean you can comortably

nance your investment.

BeautiFul regiOnuscany is renowned as one o Italys most beautiul regions. Famous

or its magnicent scenery combined with historic towns and cities,

it is a place that has inspired writers and artists or centuries. Walking

though the relatively untouched centres o San Gimignano is to

almost step back into another world and yet it is 5 minutes drive

away rom La Fontanelle, with equally historic Siena less than hal

an hour away. Its one o the most desired regions, not just in Italy,

but in Europe.

Cultural Centreuscany has a rich culture to match its beauty. Tis is the home

o Renaissance art, with palaces, churches, museums and galleriesull o priceless artworks. It is home to some o Italys icons rom

the Leaning ower o Pisa to Michelangelos David. Add to this the

amous uscan ood and wine culture, with the Chianti wine region,

and you realise why uscany is popular throughout the year.

5.

eaSy aCCeSSWith two major international airports in Florence and Pisa, uscany

is well connected with Europe. You can y to Pisa Airport (under

2 hours drive rom San Gimignano) rom London, Liverpool, East

Midlands, Prestwick and Dublin. Airlines ying into Pisa Airport

include Easyjet, British Airways, Ryanair, Alitalia y with some

ights starting as low as 1p. Airlines also y into Florence, (about

1 hours drive rom San Gimignano). All the major car hire rms

operate rom these airports.

Mild CliMateSet in the middle o Italy, uscany is blessed with a mild climate.

It has warm summers by British standards o 29-32C ,with 80 to

90% sunny days. Winters are mild (8-15 C), with sunny days never

dropping below the 50% mark. Tis only adds to the popularity o

the area, reected by the high demand or property and signicant

tourism market.

BritiSh exPat COMMunity

Tere is such a signicant expatriate community in uscany, thatsome have described it as Chiantishire. Te combination o easy

access and warm climate make it an ideal location i you are looking

or a second home, or place to retire. Te large community makes an

excellent alternative opportunity or onward sales.



tx in IAs with all tax systems, the rules in Italy are complex and you arestrongly advised to seek proessional advice rom a tax specialist.

However, here is a guide as to what you can expect as a UK

investor purchasing a property or investment purposes.

PrOPerty-related taxatiOn

Land registry taxes

Known as Imposta di Registro, Imposta Ipotecaria and Imposta

Catastale, these charge 7% o the value o the property1.

VATValue-added tax known as Imposta sul Valora Aggiunto (IVA)2.

Te ordinary VA rate is set at 20%3.

Property Transfer Tax

ranser tax, cadastral and mortgage taxes are imposed as a lump sum

o 129.11 on transers o properties subject to VA. Alternatively,

transer tax rates may vary rom 3% up to 15% depending on the

type o property4.

Municipal Tax on Immovable Property

Any owner, resident or non-resident, o property located within

Italy must pay the municipal tax annually on property, Impostacomunale sugli Immobili (ICI). Te taxable base equals the sum o

the estimated value or the type and class o property, as determined

by the Cadastral Ofce, i.e. the cadastral income, and a given

multiplier. Te municipality where the property is located sets the

tax rate at no less than 0.04%, and no more than 0.07%5.

PerSOnal taxatiOn

Personal Income Tax (IRE)

Italian resident individuals are subject to IRE on their worldwide

income. Non-Italian resident individuals are subject to IRE only on

certain items o income considered o Italian source. For individual

taxpayers, the taxable period coincides with the calendar year6.

Progressive tax rates apply, with a maximum rate o 39% and

minimum tax rate o 23%. In addition a 4% solidarity surcharge tax

is due or the portion o income exceeding 100,0007.

Tax residence

Individuals are considered Italian residents i, or the greater part o

the calendar year:

a) Tey are registered in the Italian civil registry; orb) Tey have their residence or domicile in Italy, as dened by the

civil law.

According to the Civil Code, residence is the place o habitualabode; domicile is the place where an individual has their main

centre o interests8.

Inheritance and Gift Tax

Inheritance and git tax were abolished in 2001. Subsequently, only

gits made to persons not having a certain degree o relationship

with the donor are subject to other indirect taxes such as transer tax,

cadastral, and mortgage taxes9.

BuSineSS taxatiOn

Corporate Income Tax (IRES)

Corporate income tax (IRES) is regulated by the Consolidated

ax Code (CC). Italian resident corporations are subject to IRES

on their worldwide income. Non-Italian resident corporations are

subject to IRES only on Italian source income. Te at tax rate on

taxable income is 33%10.

Regional Tax on Business Activities (IRAP)

Regional tax on business activities, Imposta regionale sulle attivit

produttive (IRAP), is a local tax applied on the value o the

production generated in each taxable period by persons carrying

out business activities in a given Italian region. Non-Italian resident

corporations are subject to IRAP only on the production generated

through Italian permanent establishments11.

uK tax SPeCialiStI you would like to speak with a UK accountant in regard

o your tax position, we use Drew Hazell at ayler Bradshaw

and nd him highly knowledgeable. His number is

01799 525 407.

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Did ou know?Siena is home to the worlds oldest

bank, Monte dei Paschi di Siena

Te Musei Capitolini in Rome is one

o the oldest museums in the world.

Te average Italian consumes 26

gallons o wine a year and eats

25 kilograms o pasta .

Famous Italian explorers include

Christopher Columbus, Marco Polo,

John Cabot, and Amerigo Vespucci.

Te Italian ootball team have been

world champions our times, only

Brazil have won it more.

In the town o Ivrea, Piedmont, there

is a traditional carnival every Februaryin which locals throw oranges at each

other (unsurprisingly known as the

Battle o the Oranges).

Florence was the rst city to mint its

own gold coins in 1252.

Te city o Naples is home to the

pizza.

Te Italians invented the viol, violin,

cello and piano

Te colors o the Italian ag represent

three virtues: hope (green), aith

(white), and charity (red).

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italy off plan property investment and opportunities

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