Tax deductions and allowances

The costs of wall and floor tiles are tax deductible when the material is used for building renovation and refurbishment works.

These deductions are covered by Article 16-bis of the Presidential Decree 917/86 (Consolidated Law on Income Tax) which became law on 1st January 2012 in the Decree Law no. 201/2011 and which made building renovation costs deductible from personal income tax returns. 

In recent years the legislation regulating these deductions has undergone the following modifications:

• An increase in tax deductible percentage of building renovation costs sustained between 26th June 2012 and 30th June 2013 from 36% to 50% with the maximum expenditure eligible for deduction raised from € 48.000 to € 96.000 per housing unit (from Decree Law 83/2012).
• The extension of these increased benefits to expenditure made up until 31st December 2013 (from Decree Law 63/2013).
• An extension up until 31st December 2014 of the application of the 50% income tax allowance for a maximum expenditure limit of € 96.000 per housing unit and the introduction of a 40% deduction for expenditure undertaken in 2015 (Law no. 147/2013 - Stability Law 2014). 

From 1st January 2016 the tax deductible percentage will return to 36% with the eligible amount also returning to its previous figure of € 48.000 per housing unit.

The Stability Law of 2014 also extended the following measures:
1. The deduction of the costs of adopting anti-seismic measures on buildings in high-risk seismic areas where these buildings are used as first homes or production facilities.
The amount of the deduction was fixed as follows:

• 65% for expenditure undertaken between 4th August 2013 and 31st December 2014.
• 50% for expenditure undertaken between 1st January 2015 and 31st December 2015.

The maximum amount eligible for deduction cannot exceed € 96.000.
2. A tax deduction of 50% on the purchase of furniture and large domestic appliances of class A+ (class A for ovens) or higher, where these are used to furnish buildings undergoing renovation.
The documented expenditure for these purchases made between 6th June 2013 and 31st December 2014 are tax deductible. The deduction is calculated on a total amount not exceeding € 10.000 and divided into 10 annual amounts of the same amount.

BUILDING RENOVATION AND REFURBISHMENT TAX BENEFITS
The main rules and regulations subject to modification in recent legislation include:

• Abolition of the obligation to send a Start of Works Declaration (DIA) to the Pescara Operations Centre.
• A reduction (from 10% to 4%) in the percentage of withholding tax which banks and post offices are obliged to levy on bank and postal transfers.
• Cancellation of the obligation to itemise labour costs on invoices issued by construction companies performing works.
• The right of a seller selling a housing unit on which tax deductible works have been performed and where the entire deduction period has not yet expired, to choose to continue to use the deductions not yet used or to transfer the right to the purchaser (natural person) of the housing unit.
• The obligation of all tax payers to divide the total deductible amount into 10 annual instalments. From 2012 tax payers aged 75 and 80 can no longer divide the total amount into 5 and 3 annual instalments respectively.
• Tax benefits were extended to include works on the reconstruction and restoration of buildings damaged as a result of natural calamities in places where a state of emergency had been declared.

PERSONAL INCOME TAX DEDUCTIONS FOR BUILDING RENOVATION

It is possible to deduct from personal income tax part of the costs for renovating housing and the shared parts of residential buildings sited in Italy.
Following the measures introduced by the Decree Law no. 83/2012, Decree law no. 63/2013 and Law no.
147/2013, tax payers have the right to the following tax deductions:

• 50% of the costs sustained (as proven completed bank transfers) between 26th June 2012 and 31st December 2014, with a maximum limit of € 96.000 for each housing unit.
• 40% of the expenditure which will be sustained in 2015, again with a maximum limit of € 96.000 for each housing unit.
• 36% of the sums to be spent from 1st January 2016 onwards with a limit of € 48.000 for each housing unit.

These tax benefits can be requested for the expenditure undertaken in a year, on a cash basis, and is divided between all the persons participating in the expenditure and having a right to the deduction.
If the works performed in each year consist of the continuation of works started in previous years, the calculation of the maximum deductible expenditure limit must take into account the costs incurred in all the years concerned. Tax payers only have the right to this benefit if the expenditure to which the deduction has been applied does not exceed the total limit calculated.
If renovation works involve residential buildings also used for commercial, artistic or professional activities, the deduction is reduced by 50%.
For works performed on the shared parts of a building, the tax benefit applies to the year in which the bank transfer was made by the condominium management.
In this case the individual condominium member has the right to the deduction depending on his/her due share and depending whether or not he/she has paid his/her due share within the period defined for the annual personal income tax return.
Each tax payer has the right to deduct annually the share up to the limit defined for the personal income tax year in question. Sums over and above the tax cannot be reimbursed.

WHO HAS THE RIGHT TO DEDUCTIONS?
All natural persons resident inside or outside Italy and making annual personal income tax returns may make use of tax deductions for building renovation work.
The tax benefits are not only for building owners but may also be enjoyed by the holders or real or personal rights to use a building and who have participated in the related building expenditure. These include:

• Owners and bare owners.
• Holders of real rights to use (usufruct, use, tenancy of housing and areas).
• Tenants or commodatories.
• Divided and undivided cooperative shareholders.
• Individual business persons, for buildings which are not included in capital goods or goods.
• Persons indicated in Article 5 of the Tuir (Consolidated Law on Income Tax) who earn income in association with others (partnerships, collective partnerships, limited partnerships or equivalent businesses, family businesses) are subject to the same conditions as individual business persons. 

Owner’s co-habiting family members or the holders of buildings subject to works also have the right to these benefits provided that they have sustained the expenditure and that their names appears on bank transfers and invoices.