Italy introduces new ‘land rich’ rules

Italy has introduced two new measures that will affect non-Italian resident investors, which will be effective from 1st January 2023. The first measure states that capital gains obtained from the sale of unlisted shares in non-Italian resident corporations or entities, where over 50% of their value is derived from real estate properties situated in Italy, will be considered as Italian-sourced income and will be subject to tax in Italy. The second measure relates to the non-resident capital gain tax exemption that is currently available for the disposal of a non-qualified interest in Italian entities. This exemption will no longer be applicable for unlisted corporations or entities where more than 50% of their value is derived from real estate properties situated in Italy.

It is worth noting that these measures will only apply to non-Italian resident investors who cannot benefit from treaty protection, and exclude EU/EEA regulated investment funds. However, it is unclear whether units held in Italian Real Estate Investment Funds (REIFs) will be in scope of the new rules as the language used appears to include capital gains from the disposal of interest in any type of Italian-based entities.

Non-Italian resident investors are advised to await further guidance on this matter and consider the impact prior to disposing of any units held in REIFs. These new measures are expected to impact investors in real estate assets and could potentially discourage foreign investment in Italy’s real estate market. However, they are also expected to increase tax revenue for Italy.

Overall, these measures aim to address tax avoidance and increase transparency in real estate transactions in Italy. It is yet to be seen how these measures will impact the real estate market in Italy and whether further changes will be introduced in the future.