Leasing commercial real estate in Italy: tax and legislative aspects

The leasing of commercial real estate is an important activity in the Italian economy. Entrepreneurs and investors often choose rental real estate to start new business ventures or expand existing ones. However, when it comes to commercial leases, there are several fiscal and regulatory aspects to consider. In this article we will look at some important aspects that those who want to rent commercial real estate in Italy need to know.

The important aspects of leasing commercial real estate in Italy

Firstly, the first important distinction concerns leases for industrial, commercial and craft activities and leases of real estate intended for hotels and theaters. In the former case, the lease term should be 6 years, with an option to renew for another 6 years after the first term, while the minimum lease term for hotels and theaters should be 9 years, with renewals for another 9 years each time. It is worth noting that beach summer cafe and restaurant rentals, as amended by Decree n. 79/2011, is comparable to a hotel lease, so a minimum lease term of 9 years also applies for such activities. Different deadlines also apply to notifying the other party of the intention to terminate the contract. In the case of industrial, commercial and craft leases, there is a strict deadline for sending a termination notice of 12 months before the expiration of the contract, while the deadline for termination notices for hotels and theaters is 18 months.

Another important difference between residential and commercial or hotel leases concerns compensation for loss of goodwill. This compensation is provided only if the activity involves direct contact with the public and consumers. In these cases, a lease termination not caused by the tenant's default, rescission or abandonment or one of the bankruptcy proceedings means that the tenant is entitled to compensation equal to 18 months' rent in the case of a commercial lease and 21 months' rent in the case of a hotel lease.

From the point of view of tax considerations, landlords of commercial enterprises must declare the income derived from the rental of the real estate on which the commercial activity is carried out. These incomes are categorized as miscellaneous income and are subject to individual income tax (IRPEF). Taxation of commercial landlords is governed primarily by Article 67 of the Text Uniform Income Tax (TUIR). The amount of IRPEF depends on the landlord's total income, which is determined by adding up all income received during the year. IRPEF is calculated by applying a progressive IRPEF scale for commercial landlords in Italy, with rates varying according to the amount of income. In addition, landlords must calculate and charge VAT on rent in the case of commercial or hotel leases. Buildings rented out for residential or business use are excluded from VAT treatment (although it is possible to elect VAT treatment for residential rentals if they are rented out by a developer or a company that has carried out renovation work on the properties, or in the case of buildings rented out for social housing). Regarding the registration of real estate leases for industrial, commercial and craft activities, a number of documents are also required, which vary depending on the type of activity of the lessee. An example would be a building suitability certificate, which is essential if the activity is industrial. The registration of hotel leases also requires additional documents, which may vary from municipality to municipality; therefore, it is advisable to request a list of required certificates and documents from the relevant authority or office depending on the activity carried out. In light of the many opportunities offered by leasing real estate for commercial or hotel purposes, the special nature of such contracts requires the advice of a specialist in this field, such as an accountant, to ensure the correct management of taxes and the choice of tax regime.

Ambra Iacobucci - Centro Studi CGN