Building Renovation: Tax Advantages in Italy

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Building Renovation: Tax Advantages in Italy

Information and documents IRPEF 36% LAW 449/97 and subsequent amendments.

The 2008 Finance Act provides a tax benefit for home renovation in Italy. It allows for the deduction of 36 percent of home renovation expenses (up to €48,000) from taxable income. This benefit has been extended until 31 December 2010.

The benefit is extended to the VAT amount, fixed at 10 percent for the provision of services and supplies of goods related to building works in private housing for ordinary and extraordinary maintenance, restoration, conservative rehabilitation and restructuring.

The Home Renovation Tax Benefit

The Finance Act 2008 (Legge Finanziaria) allows home owners to deduct 36 percent of expenses incurred in restructuring a home and common areas of a residential building in Italy, up to €48,000. This benefit is available for each property renovated and is paid out over a period of up to ten years.

Example: If a property owner has incurred a renovation cost of €48,000, they may deduct €19,680 from Irpef (personal income tax) over ten years with a tax savings of €1,968 every year (or €3,936.00 if over five years). The deduction period is determined based on the age of the recipient:

• 10 years if the taxpayer is younger than 75 years of age
• 5 years if the taxpayer is between 75 and 80 years 
• 3 years if the taxpayer is over than 80 years of age

The benefit may be divided if there is more than one owner of the property entitled to the deduction.

The beneficiaries

This deduction is available to all people who are subject to individual income tax whether or not they are resident in the territory of Italy. It should be noted that this is a tax deduction and not a refund, so each taxpayer has the right to deduct the benefit up to the amount of tax due for that year.

The Type of Work Eligible

• Ordinary maintenance work done in common areas of residential buildings
• Extraordinary maintenance works- usually includes replacement or restoration of structural elements or sanitary systems in the building
• Preservation, restoration and recovery work, and work done to ensure the proper functioning of the building or to prevent its degradation
• Building restructuring for single apartments/condominiums and changes made to change or convert a property, essentially creating a new one

Energy efficient heating

If installed as part of the work described above, the costs incurred for the purchase and installation of an energy-efficient fireplace and/or a stove, and the implementation (or adaptation) of a chimney are entitled to the tax benefit. The work eligible for this deduction is outlined in art. 31 of law 5/8/1978 No 457. 

Stoves aimed at energy-efficiency are referred to in Law No 9/1/1991 10 and D.P.R. No 26/8/1993 412. The deduction is recognised for the purchase and installation of fireplaces and wood/pellet stoves with performance measured (by Direct method) being no less than 70%. The "Direct method" is the only form of measurement of thermal performance allowed by the law (Rendimento termico maggiore del 70%). The measurement considers a series of parameters.

Obtaining the Deduction

1) Before beginning work, it is necessary to send the Italian Revenue Service (Agenzia delle Entrate) notification via registered letter that work is to be initiated. This is called a "comunicazione di inizio lavori". Contact the local revenue service office for the specific form (Comunicazione di inizio lavori di ristrutturazione edilizia per fruire della detrazione d'imposta ai fini Irpef) or download a PDF version from the revenue service website.

• For the form "Comunicazione di inizio lavori di ristrutturazione edilizia per fruire della detrazione d'imposta ai fini Irpef": Click here

The following must be included with the form:

• copy of the building permit (D.I.A., concessione, autorizzazione edilizia) for the work of extraordinary maintenance, restoration and conservative rehabilitation, housing restructuring, or a copy of communication of beginning of works (for the work that is done for energy savings)
• the Land registries data (visure)
• photocopies of Municipal tax ICI payment receipts paid from 1997
• only for construction done for energy saving- the producer's statement certifying the product's conformity to the requirements of the Law 10/91 and DPR No 26/8/1993 No 412

The notification must be sent to:

• Agenzia delle Entrate 
  Centro Operativo di Pescara
  Via Rio Sparto 21
  65100 Pescara

2) After notifying the Italian Revenue Service, notice must be given to the local Health Agency (Azienda Sanitaria Locale, ASL) with the following information:

• the property owner's name, address and phone number
• the location of the work to be done
• the kind of work to be undertaken
• identification of the contractors
• beginning of works date

To qualify for the deduction, all deductible expenses must be paid by wire transfer (bonifici bancari). The transfers must identify the purpose of the payment, the tax identification number (codice fiscale or IVA) of the payee(s) and recipient. If more than one person is to benefit from the deduction, all pertinent tax identification numbers must be included with each wire transfer.

3) When the work is finished, taxpayers must also do the following:

• for work totalling more than €50,000, a declaration of the completion of works must be signed by a registered professional engineer, architect, surveyor or other authorised to carry out technical work;
• keep tax invoices or receipts for expenses relating to the renovation work as well as all receipts of bank transfer payments.

Information by Archit. Paolo Bulletti, Paolo Bulletti Design Bureau, Architecture Landscape Interiors
Via Cinque Giornate 15, 50129 Firenze, Italy
Tel. +39 055 474 981 / Fax +39 055 474 981 / www.designbureau.it / click to e-mail / Skype: bullettip
On request, copies can be provided of statements and form to be completed and submited to authorities.
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