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PROPERTY

Italy’s building bonus: Can you really claim back the cost of renovating property?

If you’re looking to make improvements to your Italian property, there are generous sums of state aid available for renovations. Here’s what you need to know.

Under the Italian government’s Superbonus scheme, homeowners could benefit from a tax deduction of up to 110% on the expenses related to making energy upgrades and reducing seismic risk.

The scheme is part of the government’s Decreto Rilancio (Relaunch Decree), introduced as an emergency response to the economic impact of Covid-19.

READ ALSO: How and where to find your dream renovation property in Italy

A form of this bonus existed before the pandemic, but as the nation fell into a coronavirus-induced economic slump, the government increased the allowance.

The financial injection is hoped to boost the construction and real estate industries and provide an opportunity to reinvigorate the nation’s many old, damaged and inefficient buildings.

A staggering 70% of houses in Italy are more than 50 years old, according to the Agenzia delle Entrate (Italian Revenue Agency). With only 9% of homes in Italy built this century, restoring older properties looks more likely than buying a new-build for some time to come.

What funding is available?

There are two notable bonuses available for restorations: the ‘Ecobonus’ and the ‘Sismabonus’ and you can use both in conjunction.

According to the decree, it’s even possible to buy a wreck and use the bonus to create a new home.

Since the Superbonus scheme has now been extended from December 2021 to the end of 2022, there’s even more chance to cash in.

Is this all too good to be true? Who’s eligible to apply and how do you access the funds? 

Here’s a breakdown of the government regulations and the pitfalls to watch out for.

Note: The schemes are complex and subject to change, so it’s important to get professional advice before buying and renovating.

Think carefully before you decide to buy a quirky old Italian property to renovate. Photo: Christophe Simon/AFP

The Ecobonus

To benefit from this bonus, you need to improve the property’s energy efficiency by two ratings, for example from D to B.

The services you can claim for include installing thermal insulation and the replacement of winter air conditioning systems.

You can further upgrade your energy infrastructure with funds assigned for fixtures and windows, solar panels, boilers and even electric charging points for cars.

There’s a spending limit for each category, though. For example, an upper limit of €48,000 is granted for solar panels.

Professionals must be hired to carry out the work and provide an energy performance certificate as proof (l’attestato di prestazione energetica – A.P.E.).

The scheme also covers shared areas of buildings, detached houses, social housing and single-family homes, even within multi-family buildings.

Interestingly enough, upgrading two homes is also allowed, which may be an alluring prospect for those looking to buy a second home in Italy.

However, if you’re planning on splashing out on a luxury property, you’ll have to renovate it without government help. Prestigious villas and castles are excluded from the financial aid.

So how do you access the Ecobonus? 

There has been a recent change to the fine print, which means there are more options available.

Firstly, you could use the tax deduction method over five years, which works well if you want to offset high taxes from your income. To go down this route, you must be an Italian resident paying income tax, known as ‘IRPEF’.

So, in theory, if you spend €50,000 on renovating your home, you could be eligible for up to €55,000 in tax credit over five years. That means you’d get a tax rebate of €11,000 per year.

But this only works if you’re paying more tax (IRPEF) than that per year, as any unused tax credit is lost.

What if you own a property in Italy but don’t have Italian residency?

You can still access the Superbonus.

There are two other possibilities, which are both available to non-residents.

In return for a commission, you can transfer the tax credit to another party, such as tax credit institutes or banks.

The latest way to access the scheme seems relatively smooth and requires no advance payment.

You can apply for a discount on the invoice, effectively trading your tax credit to the contractors. This means the supplier recovers the bonus on your behalf, taking a slice of it as a fee.

In this scenario, the homeowner effectively has no dealings with the government payment.

File photo: AFP

House buyer Enrico Fabbri took this last option, as it seemed the simpler route for him and his young family.

“We have bought an old house because of the government bonus. Since you can also now let the supplier handle all the finance and bureaucracy, it seemed too good an opportunity to miss,” he said.

They had been looking for a house for 18 months, hoping to take advantage of the bonus in its previous and smaller form.

Since the post-Covid offer increased for a limited time, they sped up their search and snapped up a property that “far exceeded what they could have afforded prior to the bonus”.

They’re not sure how much they’ll save yet, but they estimate that from a final figure of around €350,000 to buy and renovate the property, the cost to them will be €150,000, meaning a hefty potential saving of €200,000.

READ ALSO: How to stay out of trouble when renovating your Italian property

Not everyone has found the process this straightforward, though.

A British expat who lives in Piemonte told us that they were initially excited to use this bonus to renovate their older property but had to “give up”.

On starting the process, they discovered that their home wasn’t compliant with regulations and so would have to be changed before they could access the Superbonus.

If a room is designated as a space that can’t be lived in, such as a ‘cantina’, and it’s being used as a bedroom, you’re not eligible to apply.

The only way to go ahead with the government-backed energy upgrades is to pay for the alterations to be made. Our source told us this would run into thousands of euros and so it was no longer worth it.

If you do meet the criteria, though, the Ecobonus potentially offers huge savings and should leave you with cheaper energy bills in the long run.

The Sismabonus

This bonus is for properties at risk of earthquakes. To access this pot, the property must be in an area of seismic risk 1, 2 or 3.

READ ALSO: Which areas of Italy have the highest risk of earthquakes?

The properties covered are the same as the Ecobonus, but unlike it, there is no limit to how many houses you can renovate with this source of funding.

You’ll need an expert to assess the seismic risk and provide a certificate to prove the work has been effective in guarding against earthquakes.

The final result must demonstrate a reduction in seismic risk by one or two classes.

Here’s where the Sismabonus gets interesting: buildings that are demolished and reconstructed are also covered. That means you can buy a wreck and build a new home with government money.

There are clauses to watch out for, such as if the wreck is in a historic centre, for example. It’s essential in this case to maintain the previous characteristics of the old building and rebuild the property the same size.

However, for the amount of derelict buildings in Italy, this could breathe life into long abandoned properties and lost land.

You can access this bonus using the same routes as the Ecobonus.

Which one you ultimately choose depends on your personal circumstances, such as whether you hold residency in Italy, or how much income tax you pay.

Has the Superbonus affected the Italian property market?

Property expert Erika Gottardi, from estate agency Tecnocasa in Bologna, says she has noticed a marked surge in people looking for homes in need of renovation.

“Older homes are preferred at the moment, as people want to use the bonus to upgrade them. There’s also a greater interest in detached houses with a garden, but that could be attributed to Covid,” she said.

READ ALSO: How will Italy’s property market change in 2021?

She added that she has also witnessed an increase in people who are sticking with their current property and renovating it using the government help, instead of buying a new house.

Next steps

For further details, please see the Italian government website’s Superbonus 110% section. It provides in-depth guidance on who is eligible, the application process and a host of FAQs.

Even though this is a limited-time deal, remember to check with professionals before you rush in and buy a home in need of renovation or decide to upgrade your existing property.

If you’re keen to buy, you may also want to read our guide to the additional costs you might not be expecting, and take a look at some of the common mistakes to avoid when buying a house in Italy.

See more in The Local’s Italian property section.

Member comments

  1. You say above that the Italian Government website Superbonus section can be accessed in English – how do I do that?!

  2. I am renovating an apartment in an old building at my own cost but in cooperation with the other owners have chosen to renovate and insulate the roof with the superbonus possibility. Leaving the administration and bureaucracy to the builder who has hired a lawyer to stay on top of the process.

  3. Interesting article but can anyone tell me what percentage does the supplier give you? The person who said he was getting 150,000 out of the 350,000 didn’t say how much of the total was house purchase and how much for renovations.

  4. The supplier or just a bank will give you at least 100% back – you can negotiate what happens with the 10%. If you have the capital take the lot. This is such a great deal – anyone with any kind of capital should try to find something to renovate, with such a large scope of incentive and low mortgage rates its not hard to find a winner. So many houses lying around in great locations. Put in sustainable heating/ cooling and high quality insulation and you never have any fuel bills either.

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For members

MONEY

What you need to know about opening a bank account in Italy

There are a few things to know before choosing the right place to put your cash in Italy. Here’s our guide to finding the best bank for you.

What you need to know about opening a bank account in Italy

Money makes the world go round, they say, and even in notoriously cash-friendly Italy, your life will be a lot easier if you have somewhere to put it.

But with daunting paperwork, confusing opening hours and array of diverse offerings, interacting with Italian banks can be challenging.

Here’s our guide to opening a bank account in Italy to get you started.

Step one: Know what’s out there

I come from Canada, where you can count the number of big banks on one hand. That means Italy’s banking sector can be a little dizzying in comparison. At the time of writing, Italy has more than 20 banks with assets of more than €10 billion. 

Among the biggest names in Italy are Dutch-based ING, Germany-based Deutsche Bank, Italy’s own Unicredit, and the Banca Nazionale di Lavoro (now owned by France’s BNP Paribas).

READ ALSO: Which are the best Italian banks for foreigners?

Alongside these big national banks, there are regional providers like the Banca Popolare di Puglia e Basilicata or the Banco di Sardegna, which confusingly operate branches far from their respective homelands. As a result, it’s not uncommon to find a Pugliese bank next to a Venetian one in Lombardy, or encounter a local bank that has just a handful of branches throughout the country.

Consider the fees applied to transactions and cash withdrawals when choosing your Italian bank account. (Photo by ANDREAS SOLARO / AFP)

Disrupting the banking world in recent years has also been the emergence of a whole new crop of online banks, like N26 and HYPE, which offer very low fees by operating no physical branches.

And lastly, there’s the post office: Poste Italiane, in an unholy alliance of paper-based bureaucracy, also operates a consumer bank notorious for slowing down postal lines everywhere.

Knowing the lay of the land will help you pick out the best offering for your life and location. Consider your choice carefully. When we arrived, we chose N26 for its low fees and easy sign-up. But soon, we needed a bigger bank that could offer services like a fideiussione (renter’s guarantee).

Choosing the right bank is about more than knowing if it has a branch in your area — as you settle, a bank’s mortgage offerings, insurance, or high-interest savings accounts may become more important to you.

Step two: Decide what account you need

Technically, if you’re over the age of 18, you’re eligible to open an account in Italy — but most account types are only available to residents, which includes foreign nationals who are here because of a valid job offer or degree program.

The most common account type is a conto corrente or current account (a checking account for American readers). These accounts are designed with daily transactions in mind, meaning there are often opportunities to save on fees by maintaining a minimum deposit or balance.

Ask an expert: Which are the best UK banks for Brits living in Italy?

To earn higher interest, you can place your savings in a conto di risparmio or savings account, which offer fewer transfers and transactions in exchange for higher interest. There is also the conto di deposito, a more restrictive but even higher-interest savings account designed for parking your money just to earn.

Lastly, there are conti correnti esteri, foreign accounts, which can offer deals on wire transfers or allow you to use your home currency and save on exchange fees. These accounts don’t require you to be an Italian resident, making them a good choice for people staying for an indeterminate time.

Step three: Review costs

There’s a reason some of Italy’s nicest buildings belong to banks — this country’s banking fees are among the highest in Europe.

Though comparisons are hard to come by, in 2009 the European Commission found that fees in Italy could be four or five times the amount for the same accounts in the Netherlands, Ireland, or Germany.

But choose the right offer, and they don’t have to be — one analysis found these fees could vary by as much as 10 times between banks.

On average, a typical current account cost nearly €95 per year in 2022, with high-interest savings accounts costing even more. But that average dropped to just €25 for online-only accounts like those offered by N26.

A branch of Unicredit bank in Milan. (Photo by FILIPPO MONTEFORTE / AFP)

In exchange for these fees, banks offer a range of different services — everything from higher interest to lower transaction fees.

Most banks won’t charge a setup fee, but may charge to issue you with your first debit or credit card. Other services, like cheques, wire transfers, or even ATM withdrawals above a monthly limit are likely to be met with other fees.

Il Sole 24 Ore, one of Italy’s leading financial newspapers, has an online tool that will help you compare bank offers, automatically deducting your expenses from your anticipated interest to show you exactly how much your account is likely to cost.

Make sure to read the fine print — some “fee-free” accounts are promotional offers and expire after a year or so, leaving you paying hefty fees. Others look expensive, but are free if you maintain a low minimum balance or make monthly deposits of just a few hundred euro.

Step four: Visit a branch or sign up online

Now that you know the account type and bank you’re looking for, you can dive into the paperwork.

For a variety of reasons, it’s generally best to wait until you are in Italy to open your account — even in the case of online accounts or conti esteri. Banks will want to mail you your card and know a fixed address in Italy, and you will need an Italian tax code (codice fiscale) to get started in any case.

For online accounts like N26 and HYPE, paperwork is often minimal and requires filing out a few online forms and uploading your ID. 

In physical banks, by contrast, it can be quite extensive, involving a lot of fine print in Italian. If your language skills are poor, consider bringing a friend who can help you review your contracts, or select a bank that you know offers counter service in English.

To open an account, you’ll need the following documents:

  • ID or a passport;
  • Codice fiscale;
  • Residency permit (or, if you’re a non-resident, proof of address like a bill or piece of certified mail); and
  • Proof of your employment income (i.e., a contract or tax return).

Businesses will also need to provide the company’s registration certificate, a certificate of good standing, and statements of the financial status of all shareholders with more than a 20 percent stake in the company.

Take these to your local branch to get the process started. Make sure to check your local bank’s opening hours first — Italian banks are notorious for taking long lunches and closing early in the afternoon.

Closing an account

If you’ve decided it’s time to say goodbye to your bank, it’s unfortunately not quite as simple as visiting a branch.

In most cases, you will need to send a registered letter or raccomandata to your local branch before you show up in person, including signatures from everyone on the account.

And as usual, make sure to read your contract carefully — some banks will even charge a fee to close your account.

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