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The Ultimate Guide to Italian Superbonus!

Want to know how Italy bounced back from the pandemic to become The Economist‘s Country of the Year in 2021, and how this can help you realise huge investment gains in 2022? All whilst fighting against climate change AND the black market economy? We explain it all…

Do you know your Ecobonus from your Superbonus? Building and renovation work overseas can seem a daunting prospect, but the great news for prospective purchasers in Sicily is that the Italian Government has been pursuing an aggressive relaunch strategy in the wake of the Covid-19 pandemic. Prominent amongst the ways in which they are trying to stimulate the economy are a wide portfolio of tax breaks for ex-pats, and astonishing subsidies for domestic renovation work. In this article we’ll cut through the jargon and help you understand the full extent of the opportunities available to you from the Superbonus 110 in 2022.

Before making any real estate purchase you should make sure you have fully understood the tax implications, whether you intend the property to be a holiday home, a permanent residence or a buy-to-let investment.

An Internationally-celebrated Success Story

When the economic assistance packages were initially proposed by Brussels in the wake of the pandemic, many Governments around Europe funnelled the money directly into the hands of the private sector, bailing out companies who had lost revenue during the crisis. The Italian model differed, only offering a baseline furlough scheme to its corporations but seeking to stimulate the economy through a vast network of subsidies for home improvement works.

tax breaks in sicily

We should note that this money is not available for the construction of new housing, only for the upgrading and modernisation of existing property. So renovating a house in Italy – for so long a rather fanciful Hollywood dream – has for a short time become a very rational business proposition.

But subsidising the property market was not simply a helping hand for investors. The Multiplier Effect is as fruitful as a Sicilian lemon grove in spring, with the reverberations felt through the sectors of architecture, engineering, interior design, landscaping, electrical engineering, hydraulics and all manner of trades and crafts. Whether you’re Ikea (other Swedish retail giants are available) or a local carpenter, this decision is cause for celebration.

Other huge advantages of this smart scheme, which saw Italy awarded The Economist‘s prestigious title of Country of the Year in 2021, are the role it plays in the ongoing fights against ‘black market’ work and climate change. The requirement for properly-audited invoices to be produced in order to receive subsidy has given reputable tradespeople a leg up against their frequently shoddy but temptingly cheap cash-in-hand rivals. With this move Italy is taking a firm step away from some of the less reputable elements of its twentieth century history and embracing a more modern, transparent business culture.

By diverting cash to homeowners who choose to increase the energy efficiency of their property, meanwhile, the government has also put a huge sum of its money where its mouth is, regarding commitments made by the international community to the planet in Paris and Glasgow. Investors in Sicilian property can do so with a clean conscience, as well as at a competitive financial advantage.

With slices of the central investment also being recycled through the system in the form of VAT and other taxes, this is a virtuous circle earning the widespread respect of the business world. But how can you get involved? First, let’s break down the main categories of subsidy on offer. The legislation is complex, and we do urge our clients to seek specialist financial advice (we know several tax consultants who are already helping developers take advantage of this unique opportunity, and would be delighted to introduce you to them) but here is an overview:

Bonuses on Offer for 2022

Superbonus 110

In Italy, the term ‘bonus’ has come to be widely applied to tax credits offered to incentivise particular purchases. In the property industry the ‘Superbonus 110’ package allows for tax deduction at an astonishing 110% rate for expenses related to energy efficiency (the so-called ‘Ecobonus’) and earthquake-proofing (the ‘Sismabonus’).

To be crystal clear, you can now receive more than the cost of the work you’re doing on your property in subsidies! Too good to be true? Not if you can meet a few simple criteria, chief amongst which is the deadline…

What’s Included?

Two broad categories of work are supported by the Superbonus 110 in 2022 –  principal (‘trainanti’) and secondary (‘trainati’) work. The former includes:

✔︎ Installation of thermal cladding
✔︎ Energy efficient air conditioning systems (for heating and cooling), both new and replacement
✔︎ Seismic safety compliance

Secondary work is taken to include work which happens as a consequence of principal activity. For instance, if you install an eco-friendly under-floor heating system, but in doing so you have to tear up the floor, your new or restored flooring work will be covered by Ecobonus 110. It will also cover:

✔︎ Solar panels, heaters and photovoltaic systems (up to a value of €48,000 per property)
✔︎ Energy efficiency upgrades, for instance replacement windows and doors
✔︎ Stations and installations for charging electric cars

This is not an exhaustive list – please talk to us if you would like to know more!

Deadlines

It was confirmed by the Italian parliament this winter that single-family properties have been given an extra year to take advantage of this scheme, which now runs until December 31st, 2022. You may have read some alarming news about this in the recent past, as it had previously been proposed that this extension should only be on offer to a buyer’s main house and on offer to those with a limited household income – the good news (for the vast majority of our clients) is that Parliament removed that stipulation and now the extra year of these savings will be open to all!

However, in this case, at least 30% of the work must have been completed by June 30, 2022.

Bigger Properties

Condominiums, and individuals who own buildings with 2-4 units will have access to this scheme right through the year 2025, but with the rate of subsidy declining over time, as follows:

110% for work completed through the year 2023,

70% for the year 2024, and

65% for the year 2025.

Sismabonus

This category of bonus will be on offer until the end of 2024.

Earthquake Exemption

Real estate located in municipalities which have been affected by earthquakes since 2009 will be given a longer deadline to take advantage of these savings. In such areas the Superbonus will remain at 110% until the end of 2025.

Bonus Facciata

This bonus, reduced slightly from 90% to 60% for 2022, is for repair work to the exterior fascia of any building, including balconies, decoration and friezes. The only thing to be careful of is that this must be visible from the street or other public land – restoration of a private internal courtyard, for example, would not be eligible.

Accessibility Bonus

A new development for 2022 comes in the form of a 75% bonus for the removal of architectural barriers to accessibility for people with disabilities (‘abbattimento delle barriere architettoniche’). This will run until the end of 2023, giving you an extra year in which to offer a more welcoming service to guests in your vacation properties, or increase the value of your family home.

Furniture Bonus

Even some furniture purchases can qualify for subsidies! Although the ceiling for the ‘Bonus Mobili’ has dropped from €16,000 to €10,000 in 2022 (and will fall to €5,000 in 2023 and 2024), there is still an opportunity to claim tax back on furniture and appliances in the A+ energy class, or A for ovens.

To qualify for this bonus, furniture or appliances must be being purchased for an area of your home (or a common space in shared homes or condominiums) which has been renovated. You should bear in mind that the deduction can only be claimed on payments by bank transfer or credit card. Purchases must also be in full and up-front, rather than using any kind of credit arrangement or installment financing.

You should also be aware that this bonus is not eligible for the ‘sconto in fattura’ or the ‘cessione del credito’ (see below) but only for reclamation via tax offset.

Sounds Incredible! How Do I Claim?

Bonus payments take the form of tax credits and, for work carried out in 2022, will come in four equal, annual instalments. In 2020 and 2021 this had been being spread over five years.

An Example:

Steven and Mary spend €100,000 on a villa in Sicily, and invest €100,000 in sustainable and legally-invoiced renovations and home improvements.

As new residents, they become Italian taxpayers, but thanks to the Superbonus 110 in 2022-2025 they receive €110,000 of tax credits, worth €27,500 p.a.
If Steven and Mary’s tax bill was under €27,500 for each of those years, they will pay no tax whatsoever for their first four years in Italy. If it is greater than that amount then the credits they receive will mean that the effective price of what is now a €200,000 property was only €90,000. Incredible, either way.

Discounts for Non-residents and Overseas Taxpayers

At this point you may be wondering how you, as someone not currently paying tax in Italy, can claim these subsidies. This is indeed an excellent question… one early issue with the bonus system was that non-residents seemed set to fall through the cracks!,

Of course, one easy route into the Superbonus 110 in 2022 (and a potentially well-rewarded one, thanks to the advantageous tax regimes for new residents) would be to move here for more than six months of the year and become a permanent resident of Sicily.

If that isn’t a move that works for you right now, don’t worry, the Italian Government has provided two alternative pathways.

‘Sconto in Fattura’

A ‘Discount on the Invoice’ requires the company carrying out the work to give you an agreed discount, up to but not exceeding the full cost of the work itself. In practice you can expect up to 50-65%, depending on your working relationship and the size of your order. In return, this company can claim all of the tax credits originally due to you. They can also choose to assign them to a third party at a later date.

‘Cessione del Credito’

Making a ‘Credit Assignment’ means transferring your tax credits to a tax-paying third party. This could be a supplier, a self-employed tradesperson, a bank, building society or any kind of company. This third party will effectively buy the tax credit from you for an amount up to the value of the credit. In reality, this will be around 50-65%. To take this route, you would pay the company or companies carrying out the work at their full rate, then manage the assignment and receive your partial refund at a later date.

In either of these events, it is your responsibility to advise the Italian Inland Revenue (‘Agenzia delle Entrate’) of your actions by March of the year following the completion of the work.

The Small Print

The bonuses only apply to improvements to existing buildings (not new construction). In order to qualify for the Ecobonus subsidy you will need to demonstrate that the proposed works will upgrade the energy class of the building by at least two levels. There are some spending limits but rest assured, they’re more than adequate for the vast majority of cases. Incredibly, it is actually realistic to plan on undertaking all of the renovations outlined above, if you take the tax rebates, at ZERO cost.

IVA (the Italian equivalent of VAT) will still be levied on subsidised purchases. However, the rate will continue to be a reduced 10%, rather than the standard 22%. Another route to savings!

Renovate Your Property in Sicily

If you’re thinking of renovating your property, we really do recommend that you put your trust in the value of a good reputation. Trustworthy builders, electricians, plumbers and painters are worth their weight in gold. Even more important is an architect capable of guiding this team and transforming your ideas into reality. This figure has tremendous importance in Italy, as they have the ultimate responsibility for making sure that all paperwork is complete and accurate – and this is what determines whether you receive all these subsidies!

We have acted as project managers and consultants on major renovation and restoration work for scores of delighted clients, and are always happy to share our network of professionals and tradespeople. Many of these also speak multiple languages, including English. Chloé Pierron, for instance, is a young architect from Paris, who moved to Sicily in 2014 and has worked on domestic and corporate projects throughout the island. Not only a welcoming personality and a trustworthy professional, Chloé’s story is also a vivid illustration of just how much potential is open to foreigners who relocate to Sicily.

The Next Step

Now that you understand all the financial incentives in play, it’s time to discover

how to buy a house in Sicily!

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