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PROPERTY

Italy’s building bonus: Can you really claim back the cost of renovating property?

If you’re looking to make improvements to your Italian property, there are generous sums of state aid available for renovations. Here’s what you need to know.

Under the Italian government’s Superbonus scheme, homeowners could benefit from a tax deduction of up to 110% on the expenses related to making energy upgrades and reducing seismic risk.

The scheme is part of the government’s Decreto Rilancio (Relaunch Decree), introduced as an emergency response to the economic impact of Covid-19.

READ ALSO: How and where to find your dream renovation property in Italy

A form of this bonus existed before the pandemic, but as the nation fell into a coronavirus-induced economic slump, the government increased the allowance.

The financial injection is hoped to boost the construction and real estate industries and provide an opportunity to reinvigorate the nation’s many old, damaged and inefficient buildings.

A staggering 70% of houses in Italy are more than 50 years old, according to the Agenzia delle Entrate (Italian Revenue Agency). With only 9% of homes in Italy built this century, restoring older properties looks more likely than buying a new-build for some time to come.

What funding is available?

There are two notable bonuses available for restorations: the ‘Ecobonus’ and the ‘Sismabonus’ and you can use both in conjunction.

According to the decree, it’s even possible to buy a wreck and use the bonus to create a new home.

Since the Superbonus scheme has now been extended from December 2021 to the end of 2022, there’s even more chance to cash in.

Is this all too good to be true? Who’s eligible to apply and how do you access the funds? 

Here’s a breakdown of the government regulations and the pitfalls to watch out for.

Note: The schemes are complex and subject to change, so it’s important to get professional advice before buying and renovating.

Think carefully before you decide to buy a quirky old Italian property to renovate. Photo: Christophe Simon/AFP

The Ecobonus

To benefit from this bonus, you need to improve the property’s energy efficiency by two ratings, for example from D to B.

The services you can claim for include installing thermal insulation and the replacement of winter air conditioning systems.

You can further upgrade your energy infrastructure with funds assigned for fixtures and windows, solar panels, boilers and even electric charging points for cars.

There’s a spending limit for each category, though. For example, an upper limit of €48,000 is granted for solar panels.

Professionals must be hired to carry out the work and provide an energy performance certificate as proof (l’attestato di prestazione energetica – A.P.E.).

The scheme also covers shared areas of buildings, detached houses, social housing and single-family homes, even within multi-family buildings.

Interestingly enough, upgrading two homes is also allowed, which may be an alluring prospect for those looking to buy a second home in Italy.

However, if you’re planning on splashing out on a luxury property, you’ll have to renovate it without government help. Prestigious villas and castles are excluded from the financial aid.

So how do you access the Ecobonus? 

There has been a recent change to the fine print, which means there are more options available.

Firstly, you could use the tax deduction method over five years, which works well if you want to offset high taxes from your income. To go down this route, you must be an Italian resident paying income tax, known as ‘IRPEF’.

So, in theory, if you spend €50,000 on renovating your home, you could be eligible for up to €55,000 in tax credit over five years. That means you’d get a tax rebate of €11,000 per year.

But this only works if you’re paying more tax (IRPEF) than that per year, as any unused tax credit is lost.

What if you own a property in Italy but don’t have Italian residency?

You can still access the Superbonus.

There are two other possibilities, which are both available to non-residents.

In return for a commission, you can transfer the tax credit to another party, such as tax credit institutes or banks.

The latest way to access the scheme seems relatively smooth and requires no advance payment.

You can apply for a discount on the invoice, effectively trading your tax credit to the contractors. This means the supplier recovers the bonus on your behalf, taking a slice of it as a fee.

In this scenario, the homeowner effectively has no dealings with the government payment.

File photo: AFP

House buyer Enrico Fabbri took this last option, as it seemed the simpler route for him and his young family.

“We have bought an old house because of the government bonus. Since you can also now let the supplier handle all the finance and bureaucracy, it seemed too good an opportunity to miss,” he said.

They had been looking for a house for 18 months, hoping to take advantage of the bonus in its previous and smaller form.

Since the post-Covid offer increased for a limited time, they sped up their search and snapped up a property that “far exceeded what they could have afforded prior to the bonus”.

They’re not sure how much they’ll save yet, but they estimate that from a final figure of around €350,000 to buy and renovate the property, the cost to them will be €150,000, meaning a hefty potential saving of €200,000.

READ ALSO: How to stay out of trouble when renovating your Italian property

Not everyone has found the process this straightforward, though.

A British expat who lives in Piemonte told us that they were initially excited to use this bonus to renovate their older property but had to “give up”.

On starting the process, they discovered that their home wasn’t compliant with regulations and so would have to be changed before they could access the Superbonus.

If a room is designated as a space that can’t be lived in, such as a ‘cantina’, and it’s being used as a bedroom, you’re not eligible to apply.

The only way to go ahead with the government-backed energy upgrades is to pay for the alterations to be made. Our source told us this would run into thousands of euros and so it was no longer worth it.

If you do meet the criteria, though, the Ecobonus potentially offers huge savings and should leave you with cheaper energy bills in the long run.

The Sismabonus

This bonus is for properties at risk of earthquakes. To access this pot, the property must be in an area of seismic risk 1, 2 or 3.

READ ALSO: Which areas of Italy have the highest risk of earthquakes?

The properties covered are the same as the Ecobonus, but unlike it, there is no limit to how many houses you can renovate with this source of funding.

You’ll need an expert to assess the seismic risk and provide a certificate to prove the work has been effective in guarding against earthquakes.

The final result must demonstrate a reduction in seismic risk by one or two classes.

Here’s where the Sismabonus gets interesting: buildings that are demolished and reconstructed are also covered. That means you can buy a wreck and build a new home with government money.

There are clauses to watch out for, such as if the wreck is in a historic centre, for example. It’s essential in this case to maintain the previous characteristics of the old building and rebuild the property the same size.

However, for the amount of derelict buildings in Italy, this could breathe life into long abandoned properties and lost land.

You can access this bonus using the same routes as the Ecobonus.

Which one you ultimately choose depends on your personal circumstances, such as whether you hold residency in Italy, or how much income tax you pay.

Has the Superbonus affected the Italian property market?

Property expert Erika Gottardi, from estate agency Tecnocasa in Bologna, says she has noticed a marked surge in people looking for homes in need of renovation.

“Older homes are preferred at the moment, as people want to use the bonus to upgrade them. There’s also a greater interest in detached houses with a garden, but that could be attributed to Covid,” she said.

READ ALSO: How will Italy’s property market change in 2021?

She added that she has also witnessed an increase in people who are sticking with their current property and renovating it using the government help, instead of buying a new house.

Next steps

For further details, please see the Italian government website’s Superbonus 110% section. It provides in-depth guidance on who is eligible, the application process and a host of FAQs.

Even though this is a limited-time deal, remember to check with professionals before you rush in and buy a home in need of renovation or decide to upgrade your existing property.

If you’re keen to buy, you may also want to read our guide to the additional costs you might not be expecting, and take a look at some of the common mistakes to avoid when buying a house in Italy.

See more in The Local’s Italian property section.

Member comments

  1. You say above that the Italian Government website Superbonus section can be accessed in English – how do I do that?!

  2. I am renovating an apartment in an old building at my own cost but in cooperation with the other owners have chosen to renovate and insulate the roof with the superbonus possibility. Leaving the administration and bureaucracy to the builder who has hired a lawyer to stay on top of the process.

  3. Interesting article but can anyone tell me what percentage does the supplier give you? The person who said he was getting 150,000 out of the 350,000 didn’t say how much of the total was house purchase and how much for renovations.

  4. The supplier or just a bank will give you at least 100% back – you can negotiate what happens with the 10%. If you have the capital take the lot. This is such a great deal – anyone with any kind of capital should try to find something to renovate, with such a large scope of incentive and low mortgage rates its not hard to find a winner. So many houses lying around in great locations. Put in sustainable heating/ cooling and high quality insulation and you never have any fuel bills either.

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PROPERTY

Nine things we’ve learned about claiming Italy’s building ‘superbonus’

Two years after it was introduced, Italy's popular renovation discount scheme continues to cause headaches for homeowners trying to access it. Here's what we've learned so far about claiming the so-called 'superbonus 110'.

Nine things we've learned about claiming Italy's building 'superbonus'

In May 2020, as the pandemic gripped Italy in its first wave, the government introduced a new building bonus programme to kickstart the country’s sluggish, Covid-hit economy.

This emergency response, known as the ‘superbonus 110′, came as part of the government’s Decreto Rilancio (Relaunch Decree), which offered a tax deduction of up to 110% on the expenses related to making energy upgrades and reducing seismic risk.

Other types of building bonuses existed before – and continue to be available.

However, none had offered quite so high a value to those looking to make home improvements on their property.

In fact, not only did the new measure incentivise people to upgrade their existing properties, it encouraged people to buy old, abandoned properties, making previously unfeasible renovation projects, in financial terms, a genuine possibility.

READ ALSO: How Italy’s building ‘superbonus’ has changed in 2022

We counted among those taking the plunge to buy a crumbling and uninhabitable building, with the intention to carry out extensive works thanks to funds from the superbonus.

Our property search completely changed due to the scheme and we planned on taking advantage of the generous sums of state aid.

After looking around and viewing properties for months, attracted by adverts that claimed a property was eligible for restoration with the superbonus, we found an old farmhouse – which had become a derelict wreck – in the lowlands countryside outside Bologna, near where we are already located.

(Photo by Philippe HUGUEN / AFP)

In our case, we had to demolish the old property and rebuild a home from scratch – it couldn’t be restored due to earthquake damage in the area, rendering it far too unstable and destroyed to ever be habitable again.

READ ALSO: Why we decided to build our new house in Italy out of wood

That wasn’t a disappointment as we had the opportunity to design our own home instead, choosing every angle, material, layout and floorplan we wanted. It would have been beyond our means to take on a project like this without the superbonus, but with it, we thought it was possible.

Incredibly, the small print of the incentive permits this too, as the government intended to reinvigorate the nation’s many old, damaged and inefficient buildings and recover lost land – including using existing plots to build new homes if the property was too damaged, as is the case for us.

So, we ploughed all our savings and the money from the sale from my husband’s apartment into a collapsing set of bricks, filled with junk and debris from years gone by.

Although daunting, the figures stacked up and meant that we could create our own country home with a manageable mortgage for around 15 years.

Since I’m now 37, that seemed to work well and it all looked reasonable.

READ ALSO:

But it was just the beginning, before the superbonus spiralled into delays, bureaucratic quagmires and fraudulent claims, which all contributed to making accessing the funds a stalemate for many homeowners.

18 months into our project, we have got as far as a concrete shape in the ground, the old farmhouse demolished, but no sign of our future home still – and a budget that has blown out of proportion, changing our financial future considerably.

18 months ‘ progress looks like this on our Italian property renovation project. Photo: Karli Drinkwater

The clock is ticking with deadlines too, albeit briefly extended, to access the bonus in time.

Since its inception, here’s what we have learned about (trying to) claim Italy’s superbonus 110.

1. Demand slowed down starting renovation projects

Within its first year, interest in the scheme was so high that building companies were overwhelmed and projects piled up in a queue.

Many firms stopped taking on new clients, as they battled to push through projects that were already delayed by months and some homeowners abandoned their plans altogether as a result.

As the backlog built up, firms increased their construction quotes and material prices rose – driven by a worldwide boom in cost increases and also most certainly not helped by Italy’s superbonus-fuelled building boom.

Photo by Bill Mead on Unsplash

The situation has continued to worsen due to the war in Ukraine, which has impeded the import and subsequently driven the cost of raw materials.

It was this demand that also saw us sit and wait, watching on while absolutely nothing happened and we continued to be stuck, all the while watching the project cost continually rack up.

READ ALSO: How to stay out of trouble when renovating your Italian property

It had taken four months just for the sale of the wreck to go through, so we were on the back foot already as far as the bonus is concerned.

We were ready to get going in May 2021 after putting in our offer on the property in the January, but in the past year, very little has happened.

We’ve since had to move out of our apartment, as the new owners understandably wanted to move in and we’re now effectively camping out in a part of my husband’s parents’ new house.

As they, too, are trying to access the superbonus, our life has been packed into boxes while we our living area and office is all squeezed into a garage.

I write this surrounded by scaffolding and orange construction barrier tape, now heavily pregnant, and trying not to lose hope that we’ll have our own place to go to.

Our building project has got no further than knocking down the old wreck and laying down the concrete foundations. One year on, there’s not even the bones of a structure.

READ ALSO:

So is it still demand for the bonus and materials that’s causing the delay?

Yes, but also a huge part is down to how you can claim the bonus.

2. Credit transfer problems stopped the banks lending

Another recent cause for a further slowdown is the change in how people could access the bonus and the increasing difficulty of obtaining credit.

There are a few routes to obtaining Italy’s superbonus. The option of offsetting tax from income is likely only financially viable for high earners, as any unused tax discount gets lost.

Image: moerschy / Pixabay

Let’s say your renovation costs come to €100,000, which are tax deductible at 110 percent for five years.

So, if you have a tax break of €22,000 every year for five years, therefore, but your tax bill from your income tax, known as ‘IRPEF’, falls short of that, you lose the deduction and will end up footing the rest of the renovation bill.

READ ALSO: Do you have to be Italian to claim Italy’s building bonuses?

Note – the latest changes specify tax deductions for the superbonus will be spread over four years, not five as previously.

Little surprise, then, that the other two options to access the funds – transferring the credit (cessione del credito) or discount on the invoice (sconto in fattura) – have been more popular.

It effectively means you either trade the tax credit for cash to an Italian financial institution, such as a bank, for the credit transfer, or directly to your contractor or supplier for the discount on the invoice.

Using the credit transfer system means you’ll get cash back that you paid, directly in your bank account.

It’s a slightly riskier route than a discount on the invoice, as the latter means the the supplier recovers the bonus on your behalf, taking a slice of it as a fee.

So, you get less of the bonus but you don’t have to deal with the paperwork and the contractor takes the burden of getting the credit.

“The easiest option is the discount on the invoice,” tax expert Nicolò Bolla of Accounting Bolla told us.

“It takes care of the credit transfer. If you deal with the bank yourself, it takes some expertise and requires a little knowledge of technology and the system, such as downloading and uploading invoices.

“Contractors have multiple sales, so they are more trained to do that,” he added.

However, billions of euros of fraudulent claims led the government to introduce stricter laws, blocking being able to access credit for months, putting the bonus – and renovation projects – on hold.

Our builders were using credit from financial services provider Poste Italiane, who reduced the threshold of credit. This pushed all the building jobs back by months with no word on when works would start.

In that time, they had to search for another bank willing to fund the bonus, while home construction sites lay dormant.

3. Banks blocked and refused credit halfway through projects

Some homeowners faced extra setbacks when they encountered not only delays, but an outright cancellation of prior agreed credit.

Peter (not his real name) told us that he had got the green light to access one of the other building bonuses that can be used in conjunction with the superbonus – the Renovation Bonus (Bonus Ristrutturazioni).

READ ALSO: Budget 2022: Which of Italy’s building bonuses have been extended?

It allows homeowners to apply for a 50 percent tax reduction on carrying out renovation work in both individual properties and condominiums.

The maximum limit on expenses of €96,000 and the 50 percent offset to taxes is divided into annual instalments for 10 years. Or you can apply for the invoice discount or credit transfer.

Photo by Cristina Gottardi on Unsplash

He applied and was approved for credit transfer for works on his home in Modigliana, Emilia Romagna. After buying a property with his partner in December 2020, they began renovations in January 2021, based on credit approved by Italian bank UniCredit.

He told us they carried out €60,000 of works for a new floor and underfloor, electrics and plumbing throughout, a new boiler, replastering walls and installing a new bathroom.

That means that €30,000 credit was due from the bank, but Peter told us they are now refusing to pay out.

“The excuse from the bank is that we didn’t sign with them, however they didn’t ask us to sign anything when they opened the portal for us at the beginning,” he told us.

So, while the bank registered the renovation jobs for them on the government’s portal in order to be able to claim the bonus, they now refuse to return the credit as originally agreed.

“The thing that upsets me so much with UniCredit is we made about 10 payments to builders and suppliers costing €7.50 a time (in administration fees) to make it, and taking the time to go into the bank especially, to get it registered correctly. And to be let down by them now, really is pretty bad,” he added.

Taking this route is “harder” according to Bolla, as “banks prefer to deal with larger businesses than to give credit to individuals,” he said.

For Peter, he now has the option of deducting the tax from his annual income tax bill or finding another bank to take on and transfer the credit.

4. Finding other solutions to open up the credit transfer system

As accessing finance slowed down and projects ground to a halt, the government intervened with yet another regulatory change to the superbonus.

Along with extending the deadline of 30 percent completion of works for single family homes by three months – to the end of September 30th 2022 – the authorities also looked at how to make accessing the funds more straightforward.

The reason for so many changes stems from how the superbonus originally started.

“Two years ago, it was the Wild West. Anyone could get credit to use the bonus – a person, company or business. Due to that, the authorities lost track of sales and plenty of fraudulent claims slipped through the net,” according to Bolla.

“Everything stopped. Then they regulated too much, creating more bureaucracy and delays. So now, they’ve deregulated a little to reopen the transfer of credit,” he added.

Understanding why there were delays to accessing the bonus are complex and manifold. Along with the reasons above, banks also faced rising inflation, which in part caused them to stop lending.

“Somebody needs to offset the tax at some point. Many banks wanted to buy the credit and resell it to larger banks, but any credit that couldn’t be offset in their taxes got wasted.

“It made the banks less willing to buy credit, which in turn slowed down companies’ and individuals’ ability to access it,” he added.

Now, to keep better track of works being done, Italy’s Inland Revenue Agency (L’Agenzia delle Entrate) has introduced better tracking systems in its latest ruling. These will follow the trail of where the money is going, with the aim of cutting down on time lost to bureaucracy.

5. You might – legally – be left with a half-finished house

Depending on what you’ve agreed with your construction company, you may be taking a gamble with the superbonus no matter what, even if works have begun and the system has eased the bottleneck on claiming the funds.

Our builders would only go ahead with the project if we signed a document, in short saying that we understand the project won’t be finished if the funds aren’t available in time or if works roll on past the deadline.

Photo by Filiz Elaerts on Unsplash

The firm wasn’t going to be liable for paying for the construction of our home (and others’ projects too) if they continued to get caught in delays.

In this case, we had no choice. Sign it and hope for the best or lose the €200,000 that has already gone into the works and wreck purchase so far.

6. There are added fees to account for when claiming the superbonus

If you’ve ever sold or bought property in Italy, you’ll know there is an abundance of hidden costs associated with it.

From agency and notary fees, taxes to legal costs, buying a property in Italy can incur another ten percent of the purchase price. For a list of the hidden costs to watch out for, see our guide here.

When it comes to restoring properties using the superbonus, you’ll need to fork out for various certificates, including an energy certificate known as ‘Certificato Energetico APE’ to prove that the property would benefit from energy upgrades using government funds.

This will also need to be done afterwards to prove that the property meets the requirements of the superbonus and has jumped up at least two energy classes.

You may also incur charges from your local town hall or comune for making changes to the property. In our case, as it’s a considerable project, the administrative fee just for submitting our house plans to review cost €12,000.

In total, the cost of fees on our project – before any restoration works using the bonus have taken place – have come to €30,000.

7. The amount you claim and pay continues to rise

Since the superbonus began, the scope of house restoration projects has changed significantly.

The noted demand pushed up construction quotes and material prices continue to rise, vastly increasing the scale of a project’s budget.

It will come as a blow to home renovators who thought they were potentially getting considerable sums of money from the government and therefore making huge savings.

In fact, there will still be large pots of funds to come from the government, but the problem is the price you pay will track the increases and rise too.

Our particular home renovation project has almost doubled since we began.

We initially accounted for a final cost of €450,000 for all works, using the superbonus for almost half of that.

Instead, the quote we received in November was over €700,000 (on top of what we’ve paid for the wreck) and we were told this is unlikely to be the final cost, rising in line with continuing material price rises when works do finally get underway.

The impact of this is life-changing. In our case, it means we’ve had to apply for soaring monthly repayments for 25 years instead of 15. And that’s only if the bank agrees to grant us such a huge financial commitment – which it has, as yet, not done.

8. You might have to pay taxes if you sell your house after claiming the superbonus

At least for a while, you may have to stick with the property you’ve renovated using the superbonus.

Once you’ve claimed this building bonus, essentially you can’t sell it on for another five years if you want to avoid paying capital gains tax.

Tax expert Nicolò Bolla said that this depends on when you bought the property, however.

If you already owned the house for more than five years and took advantage of the superbonus, you can sell it on with no capital gains tax.

On the other hand, if you just bought the property to benefit from the bonus, and therefore have only owned it for under five years, you’ll be liable for the tax – that is, if you make a gain on its sale.

If you bought an old wreck and renovated it, for instance, it’s likely that you will.

For more advice on selling your property after using the superbonus, remember to check with professionals beforehand.

9. It continues to be popular and set back by delays

Despite the recently extended deadline, homeowners continue to wait in queues for their projects to begin or be completed.

Tax expert Bolla told us he gets “daily requests” for the superbonus, but issues a word of caution about the incentive.

“It is a long journey and you need to have some money to renovate your property with the bonus. It’s an expanded timeframe and there are still supply chain issues,” he said.

Despite this, though, Bolla believes it’s an “amazing” scheme. “We have a lot of energy dependence, so this is a good way to upgrade. Normally, the way we deal with our reliance on energy is to punish those who pollute more with higher energy bills, but those are always lower income people.

“Higher energy costs just punish the poor – this, instead, is a good way to solve the problem.”

See more in our articles about property in Italy on The Local.

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