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Income tax free securitisation of real estate in Italy

In a recent ruling (No. 132 of 3 March 2021) the Revenue Agency has confirmed that SPVs used to secure proceeds from the direct ownership of real estate and most of their non-resident investors enjoy full direct tax exemption in Italy.

“ReoCo” in the context of securitisation of mortgage loans

A few years ago, Law 130/1999 (Securitisation Law) was extended to the securitisation of “non-performing” (NPL) or “unlikely to pay” (UTP) loans from banks and other financial intermediaries through a vehicle (SPV). The SPV issues notes to finance the acquisition of the loans. The notes may be privately placed with specific investors.

To increase the chances of recovery, the Securitisation Law allowed the setting up of a dedicated corporate vehicle (ReoCo) having the exclusive purpose of purchasing, managing and increasing the value of real estate that secures the loans purchased by the SPV, in the exclusive interest of the securitisation. The law clarifies that the assets of the Reoco constitutes a “segregated pool of assets” aimed at ensuring the fulfilment of the obligations of the SPV under the securitization program and, consequently, any income or gain realised thereon is exempt from any direct tax. The same exemption applies when the real estate proceeds are transferred to the SPV.

Furthermore, proceeds received by foreign noteholders who are resident in counties with which Italy has an adequate exchange of information are not subject to Italian withholding tax.

The law also provides significant tax breaks with regard to indirect taxes. Registration, mortgage and cadastral taxes are fixed at EUR 200 for the purchase of real estate, registered movable assets and related rights by the ReoCo, and the subsequent transfer from ReoCos to either enterprises (if the purchaser declares in the transfer deed that it intends to transfer the acquired assets within five years from the date of purchase), or individuals who opt for the tax benefit for first home buyers (agevolazioni prima casa).

The new rules for real estate securitisation 

In 2019, Art. 7.2 was added to the Securitization Law to allow the direct securitization of real estate assets, registered movable assets (such as cars) and related in rem or personal rights (7.2 SPV).

The law states that assets and rights acquired as part of the real estate securitization transaction by 7.2 SPVs “constitute segregated assets” of the SPV. Practitioners therefore assumed that the 7.2 SPV would enjoy the same direct tax exemption available for all securitization SPVs.  

What does Ruling 132/2021 say? 

The Italian tax authorities have confirmed that the 7.2 SPV will indeed enjoy the tax exemption and, furthermore, that:

  • the economic results deriving from the management of the securitized assets, during the course of the securitization are not subject to corporate income tax and regional tax
  • profits - if any - remaining in the 7.2 SPV after all its creditors are fully satisfied are subject to ordinary taxation
  • payments on the notes issued by the 7.2 SPV to non-Italian holders, resident in white listed countries, are exempt form Italian taxes
  • the purchase, lease and sale of real estate by a 7.2. SPV is subject to ordinary VAT rules
  • the purchase and sale of the assets by the 7.2. SPV is subject to ordinary registration, mortgage and cadastral taxes (the rates depend on the nature of assets)
The 7.2 SPV regime creates new investment opportunities in the Italian real estate market offering a better tax regime than that applicable to real estate investment funds, with a more flexible non-tax environment


amanzitti, mdimonte, bonellierede, italian tax, real estate investment, securitisation, income tax

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