Italy To Moderate Property Tax Proposals

by Ulrika Lomas, Tax-News.com, Brussels

14 July 2006

Shares in Italy's real estate sector have rallied over the past few days after the Italian government announced that controversial taxation proposals would be moderated.

The new law, proposed as part of an emergency decree designed to cut the budget deficit, would have replaced the current system of value added tax on buildings which aren't used in a company's core business with a 10% flat tax. The government hoped this would increase tax revenues by about EUR1.8 billion ($2.9 billion).

Under the current VAT system, companies have the ability to claim back the tax over a period of ten years, meaning the tax has a minimal impact on balance sheets.

Leasing industry trade association, ASSILEA, estimated that the additional tax burden if the measures were applied retroactively would equal roughly EUR15 billion for the clients of Italian leasing companies.

However, late on Tuesday evening, the office of Deputy Finance Minister Vincenzo Visco issued a statement which revealed that "some aspects" of the proposals will be changed "in the light of new information received", in particular for the real estate sector.

The day after the announcement, shares in Pirelli Real Estate rallied by more than 4%, Banca Italease by 5% and Beni Stabili by 3.7%.

Since the proposals were announced in late June, shares in Pirelli Real Estate had lost 20 percent of their value to the close on July 11.

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