Italy

Economic world player

World’s fifth most visited country

Overview House price growth: 7.2%

– Knight Frank

Excellent mortgage availability

Year-round rental returns

 Siena

 Country overview < Italy

Why Italy? LIECHTENSTEIN
G E R M A N Y
A U S T R I A

SWITZERLAND HUNGARY

CROATIA
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Venice
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M A L T A C H A N N E L

MALTA

Italy at a glance
Area: 301,318 km²
Climate: Summer: Hot in across the country (24°C).
Winter: Colder in the north,
milder in the south.
Time Zone: GMT+1
Population: 58,884,000
Language: Italian
Capital City: Rome
Political System: Republic
President: Giorgio Napolitano
Prime Minister: Romano Prodi
Currency: Euro
Joined EU: 1957 (founder member)
Dialling code: 00 39

Country overview < Italy 

Why Italy?
Eighth largest economy in the world
Italy is the eighth largest economy in the world1. As a founder member
of the EU, the G8 and NATO, it is a key world player economically
and politically. Romano Prodi was elected Prime Minister in 2006,
and although the government coalition has governed at times without
a clear majority, the day-to-day running of the government and
economy has not been affected.

Foreign investment has doubled

According to OECD, total inward foreign direct investment has
more than doubled for Italy in 2006, with $41.2 billion compared
with $19.9 billion in 2005 and $16.8 billion in 20042. Italy receives
significant foreign investment from major multinationals. For
example, it is the third largest supplier of products for IKEA, which
has recently announced a €1.5billion investment in Italy alone3. Such
levels in investment have a positive effect on the economy, encouraging
growth and economic success.

Fifth most visited country in the world

With over 40 UNESCO World Heritage sites, Italy is the fifth most
popular country to visit in the world4. In 2004, 36.5 million people The Colosseum, Rome

visited Italy. It attracts a variety of tourists from city culture seekers

to those who just want to relax by the countryside and sea, and is a
perfect holiday or second-home location. The variety of tourism puts
an upward pressure on demand for property, and increases yields.

Strong sustainable growth

Recent years have seen strong growth in the Italian property market,
with a countrywide average, house prices have risen by 7.2% in 2006,
according to the Knight Frank’s Global Property Index5. Some
less developed areas have the potential for significant growth above
this level.

Excellent mortgage availability

A foreign investor can easily buy property in Italy. The country has
a mature, highly developed mortgage market and loans are easily
St. Peter’s Church, Rome
available from both Italian and British banks. Low interest rates, with
up to 80% LTV on mortgages with long leases, term lengths are for 1. World Bank http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
2. www.investinitaly.com/news_detail.jsp?ID_NEWS=472&idarea=12&GTemplate=news_archivio.jsp
3. www.investinitaly.com/news_detail.jsp?ID_NEWS=482&idarea=12&GTemplate=news_archivio.jsp
25 years6 mean you can comfortably finance your investment. The 4. UNWTO World Tourism Barometer, Vol 4, No. 2, June 2006 www.worldtourism.org/newsroom/menu.htm
5. www.knightfrank.com/ResearchReportDirPhase2/10876.pdf
typical rate is 5.5%7. 6. www.connectoverseas.co.uk
7. Ibid

 Country overview < Italy

Year round rental returns
The availability of cheap air travel and a favourable climate (summer
average 24°C) makes Italy a popular year-round destination for visitors.
This means there is a steady demand for accommodation. Investors
can make good, solid returns from holiday makers throughout the
year. Pick a property near to an attraction, such as a historic city,
UNESCO heritage site, or beautiful coastal or country view, and you’ll
find demand for this area is high. This will have a significant effect on
rental yield.

Very easy to get to… and around

Italy is in the heart of Europe and is served by 13 international
airports across the country from Milan in the north to Palermo in the
south. Several low cost carriers including Ryanair, Easyjet, bmibaby,
Thomsonfly, Alitalia and British Airways operate through these
airports which mean that all regions of the country are well served.
Internal transport networks are very well developed through road, rail
and air. This encourages a strong tourism market, from short breaks Tuscan landscape

to two-week holidays.

Realistic second home or retirement option

With its high quality standards of living and good weather, Italy is a
popular place for retirees or those who are looking for a holiday home.
For tax purposes, if you live in Italy than 183 days a year, you are
classed a resident. Live in Italy for 5 years, and you avoid paying capital
gains tax. This makes Italy an excellent choice for a second home or
retirement option. The country has a rich variety of beautiful locations
be it historic towns and cities, picturesque countryside or elegant
coastal and lake locations.

Diverse and beautiful country

Cities rich in culture, such as fashionable Milan, renaissance Florence
and Venice, and la citta eterna, Rome, once the centre of the world,
make Italy exceptional. The country has a variety of rural settings: from
mountainous Alpine Lombardy to green rolling Tuscan hills, elegant
Lakeland settings, and the dramatic Sicilian landscapes. Italians enjoy a
rich food culture, as well as the national obsessions of designer fashion,
opera and football (Italians are the current world champions). This all
adds to make Italy a unique place to invest in.

Il Duomo, Florence
Country overview < Italy 
Economic overview
Italy is the world’s eighth largest economy, generating $1,668bn and as one of the three richest regions in Europe in terms of
in 20058. It also has the fourth largest GDP in Europe, together GDP, it has a per capita GDP of $49,216, making it higher
with a consumer base of 60 million9. As a member of the Eurozone than Saudi Arabia or Switzerland11. The northern economies are
since the beginning in 1999, it adopted the Euro at the earliest also supported by a strong tourism industry with regions such
opportunity. Being in the zone insulates the economy against as Lombardy, Piedmont, The Veneto and Tuscany attracting
external shocks, making Italy a stable country to invest in. significant tourist numbers. Such strong tourist demand leads to
potential for high rental income.
Italy’s economy has remained strong over the last 30 years, and
it’s in inflation is under control. In fact rates of below 2% are In comparison, the further south you go, the lower the GDP,
predicted over the next two years. Although GDP growth is also with some of the southern regions like Sicily, Campania and
predicted to be low, at 1.5% in 2007, the strength and size of Calabria haveing GDP per capita below €16,00012. While these
the economy still makes Italy an ideal place to invest in. areas have not fared so well economically in the past, investment
incentives from regional, national and European government
The world’s eighth largest economy. are encouraging business. The southern regions of Italy are
assigned for EU Objective 1 status13, which means they receive
There is a significant economic divide between the north and significant investment to improve the economic infrastructure,
the south in Italy. Major industry is centred in the north and making them ripe for economic redevelopment. With increased
north-west areas, due to easy access to the rest of Europe10. This government and foreign investment, demand for property is
is reflected in the economic power of the northern regions. Take growing and capital growth rates likely to grow over the next
Lombardy, for example: it is the engine of the Italian economy two years. With property prices also being cheaper in the South,
there is plenty of room to accommodate this growth too.

Naples

8. World Bank Development Indicators Database, 1 July 2006

9. www.investinitaly.com/context_italyinfigures02.jsp?ID_LINK=171&area=16&investment=marketfeatures
10. http://en.wikipedia.org/wiki/Economy_of_italy
11. ISTAT statistics at http://en.wikipedia.org/wiki/Lombardy
12. Figures based on GDP per capita figures on Regional Focus section of Invest in Italy. www.investinitaly. com/context_regfoc02.jsp?ID_LINK=444&area=44&regionalfocus
13. Italy: Campania, Apulia, Basilicata, Calabria, Sicily, Sardinia http://ec.europa.eu/regional_policy/objective1/regions_en.htm
Siena Plaza

 Country overview < Italy

Oldest bank in the world. Inside the oldest bank in the world.

OECD reports that foreign direct investment Tourism is an excellent industry to increase demand and growth
has more than doubled for rates in property. In Italy’s case it has become one of the driving
Italy in 2006. forces of the economy. It is the fifth most popular country
destination in the world, and the third in Europe, with around
A good indicator for a county’s economy is foreign investment. 36.5 million visitors16 a year. It accounts for €70bn of income
Total inward foreign direct investment has more than doubled into the economy and is the source of 400,000 jobs17. In 2005,
for Italy in 2006, according to OECD, with $41.2 billion Italy invested €2.7bn in tourism18 with significant investments in
compared with $19.9 billion in 200514. Italy receives significant the top historic cities of Rome, Venice and Florence, as well as the
foreign investment from major multinationals. For example, southern regions of Sicily, Calabria and Puglia. This will have positive
it is the third largest supplier of products for IKEA, which has effects for the local and regional economies and growth rates.
recently announced a €1.5billion investment in Italy alone15.
Such levels in investment have a positive effect on the economy, The wide range of tourist products, supported by strong
encouraging growth and economic success, increasing wages, and investment, reflects the high year-round demand for holiday
the opportunities for workers to buy and rent property. accommodation and growing rental rates.

The fifth most popular tourism country

14. www.investinitaly.com/news_detail.jsp?ID_NEWS=472&idarea=12&GTemplate=news_archivio.jsp destination in the world.
15. www.investinitaly.com/news_detail.jsp?ID_NEWS=482&idarea=12&GTemplate=news_archivio.jsp
16. UNWTO World Tourism Barometer, Vol 4, No. 2, June 2006 www.worldtourism.org/newsroom/menu.htm
17. www.investinitaly.com/context_sectorprofiles01.jsp?ID_LINK=450&area=18
18. www.investinitaly.com/news_detail.jsp?ID_NEWS=287&GTemplate=press_folder.jsp&from=searchth

Country overview < Italy 

Political overview
Italy has been a parliamentary democratic republic since 1946,
when it abolished the monarchy in favour of the current system. It
has a bicameral (two house) parliament consisting of the Chamber
of Deputies (630 members) and a Senate (315 members)19.

It is an enthusiastic supporter of the European Union (EU). As

a founder member, Italy hosted the first declaration of European
integration, the Treaty of Rome, which has celebrated its 50th
anniversary this year. It was one of the first to sign up for the
Euro, and has been a strong supporters’ of the new European
constitution20, even encouraging that it should be ratified by
200921.

Political ties with the key European Union countries are strong
with Prime Minister Romano Prodi joining with Germany’s
Angela Merkel in a call to re-strengthening the power of
the Union22. As a founder member of NATO and G8, it is a
significant player on the world political stage. Italy’s role in

Prime Minister Romano Prodi, elected 2006.

world brings long-term political and economic stability, which

makes it an excellent place to invest.

Italy is led by the President of the Republic, who as the as the

head of state represents the unity of the nation. Due to this, the
President tends to stay out of political debate and is considered
the guardian of the constitution23. Giorgio Napolitano is the
current President (elected in May 2006). The office of President
of the Council of Ministers is also known as the Prime Minister,
and is usually the leader of the largest party coalition. Romano
Prodi, leader of the centre-left L’Unione group is the current
Prime Minister, who was brought into office in May 2006. He
was previously Prime Minister between 1996 and 1998, and was
President of the European Commission, the executive body of
the European Union (EU).

President Signor Giorgio Napolitano, elected May 2006.

 Country overview < Italy

Chamber of Deputies.

The state is made up of twenty regions, which is governed by Italy has dramatically renewed its political landscape between
elected council and directly elected president. The strong regional 1992 and 1997 when scandal investigations touched thousands
power in Italy is supported by the constitution, to ensure that of politicians, as well as administrators and businessmen24. Since
services at the state level are as decentralized as possible. It is worth then, there has been a trend toward two large coalitions of many
considering the significant differences between these regions, parties (one on the center-left and the other on the center-right),
politically and economically. This has been reflected in their which has run for elections from 1996 to 200625. This trend has
relationship with central government, with wealthier northern brought stronger more stable government, in comparison to
regions more concerned in keeping Rome out of their affairs, previous eras. The previous Berlusconi administration lasted its
while poorer southern regions rely more heavily on Rome for five year term, the longest in the republic’s history.
financial support and investment. Indeed, the south has been the
According the Economist26, Mr Prodi has been challenged by
focus of successive governments for economic redevelopment.
divisions on foreign policy with his coalition, and has had to rely
on opposition votes to get approval on key foreign policy issues.
However, the approval of the 2007 budget, and increased revenue
growth has improved Mr Prodi’s chances of staying in office until
the end of 2008 and possibly the end of his term in 2011.

19. http://en.wikipedia.org/wiki/Politics_of_Italy
20. http://news.bbc.co.uk/1/hi/world/europe/3954327.stm
21. www.eubusiness.com/Institutions/constitution-eu.93/
22. www.eubusiness.com/Institutions/prodi-merkel-eu50.78/
23. http://en.wikipedia.org/wiki/Politics_of_Italy
24. http://en.wikipedia.org/wiki/Politics_of_Italy
25. http://www.eubusiness.com/Italy/italy-country-profile
Il Vittoriano 26. www.economist.com/countries/Italy/profile.cfm?folder=Profile-Forecast

Country overview < Italy 

10 reasons to buy in Tuscany

1. A tourism hotspot 3. Rare opportunity

Tuscany is one of Italy’s most popular tourist destinations, with an To preserve the natural beauty of the historic Tuscan landscape
industry that is booming, seeing an increase by 6.8% in 200527. around San Gimignano, planning laws are very strict to prevent
Its popularity is reflected by around 10 million tourist visits. The overdevelopment. Converting agricultural land into another use
historical centres of the cities of Siena and San Gimignano are two and then building on it incurs 40% tax, which strongly reduces
of the six UNESCO World Heritage sites that also include Florence the incentive for developers to propose schemes. This makes high
and Pisa. This growing tourism market means demand will always be quality property hard to find.
high for accommodation in well-located areas. This makes Tuscany
an ideal place for strong rental yields. 4. Strong regional economy
Tuscany has a strong economy, not just centred on tourism, but
2. High rental returns also has a wide industrial base covering manufacturing, science and
With Tuscany being such tourism centre, demand is so high for technology. Home to a 1.5 million workforce, it has welcomed
accommodation in the summer season that Lonely Planet 28 states that over 350 multinational companies to invest in the region – a 26%
“in high summer, San Gimignano in Tuscany can be as unpromising increase between 2000 and 2005. Three universities add to the well-
for accommodation as that Christmas Eve in Bethlehem”. Indeed educated workforce, reflected with an above average GDP per capita
between 2000 and 2005, demand for tourism rental of private of €25,00030. The success of the economy means that there will
houses has risen by 58%29. High demand combined with limited always be a demand for property, which helps force prices up.
supply of property means there is the potential for high yields.

27. http://eventi.intoscana.it/english/mediacenter.htm
28. Lonely Planet, Italy, 2006 p.523.
29. Toscana & Turismo La conguintura 2005. From the Osservatario |Regionale del Turismo in Toscana;
www.rete.toscana.it/sett/turismo/conferenza_2006/congiuntura2005.pdf/ (in Italian).
30. http://www.investintuscany.com/192-economy.html
31. www.connectoverseas.co.uk

10 Country overview < Italy

5. Easy financing
With a mature mortgage market, financing is easy to come by.
Mortgages are available from the oldest bank in the world, the Monte
dei Paschi di Siena, who are based locally in Siena, as well as British-
based banks. Low interest rates, with 80% LTV on mortgages with
long leases, term lengths are for 25 years31 mean you can comfortably
finance your investment.

6. Beautiful region
Tuscany is renowned as one of Italy’s most beautiful regions. Famous
for its magnificent scenery combined with historic towns and cities,
it is a place that has inspired writers and artists for centuries. Walking
though the relatively untouched centres of San Gimignano is to
almost step back into another world – and yet it is 5 minutes drive
away from La Fontanelle, with equally historic Siena less than half
an hour away. It’s one of the most desired regions, not just in Italy,
but in Europe.

7. Cultural centre
Tuscany has a rich culture to match its beauty. This is the home
of Renaissance art, with palaces, churches, museums and galleries
full of priceless artworks. It is home to some of Italy’s icons from
8. Easy access
the Leaning Tower of Pisa to Michelangelo’s David. Add to this the
With two major international airports in Florence and Pisa, Tuscany
famous Tuscan food and wine culture, with the Chianti wine region,
is well connected with Europe. You can fly to Pisa Airport (under
and you realise why Tuscany is popular throughout the year.
2 hour’s drive from San Gimignano) from London, Liverpool, East
Midlands, Prestwick and Dublin. Airlines flying into Pisa Airport
include Easyjet, British Airways, Ryanair, Alitalia fly with some
flights starting as low as 1p. Airlines also fly into Florence, (about
1½ hour’s drive from San Gimignano). All the major car hire firms
operate from these airports.

9. Mild climate
Set in the middle of Italy, Tuscany is blessed with a mild climate.
It has warm summers by British standards of 29-32ºC ,with 80 to
90% sunny days. Winters are mild (8-15 ºC), with sunny days never
dropping below the 50% mark. This only adds to the popularity of
the area, reflected by the high demand for property and significant
tourism market.

10. British expat community

There is such a significant expatriate community in Tuscany, that
some have described it as ‘Chiantishire’. The combination of easy
access and warm climate make it an ideal location if you are looking
for a second home, or place to retire. The large community makes an
excellent alternative opportunity for onward sales.

Country overview < Italy 11

Tax in Italy
As with all tax systems, the rules in Italy are complex and you are According to the Civil Code, ‘residence’ is the place of habitual
strongly advised to seek professional advice from a tax specialist. abode; ‘domicile’ is the place where an individual has their main
However, here is a guide as to what you can expect as a UK centre of interests8.
investor purchasing a property for investment purposes. Inheritance and Gift Tax
Inheritance and gift tax were abolished in 2001. Subsequently, only
PROPERTY-RELATED TAXATION gifts made to persons not having a certain degree of relationship
Land registry taxes with the donor are subject to other indirect taxes such as transfer tax,
Known as Imposta di Registro, Imposta Ipotecaria and Imposta cadastral, and mortgage taxes9.
Catastale, these charge 7% of the value of the property1.
VAT
Value-added tax known as Imposta sul Valora Aggiunto (IVA)2.
The ordinary VAT rate is set at 20%3.
Property Transfer Tax
Transfer tax, cadastral and mortgage taxes are imposed as a lump sum
of €129.11 on transfers of properties subject to VAT. Alternatively,
transfer tax rates may vary from 3% up to 15% depending on the
type of property4.
Municipal Tax on Immovable Property
Any owner, resident or non-resident, of property located within BUSINESS TAXATION
Italy must pay the municipal tax annually on property, Imposta Corporate Income Tax (IRES)
comunale sugli Immobili (ICI). The taxable base equals the sum of Corporate income tax (IRES) is regulated by the Consolidated
the estimated value for the type and class of property, as determined Tax Code (CTC). Italian resident corporations are subject to IRES
by the Cadastral Office, i.e. the cadastral income, and a given on their worldwide income. Non-Italian resident corporations are
multiplier. The municipality where the property is located sets the subject to IRES only on Italian source income. The flat tax rate on
tax rate at no less than 0.04%, and no more than 0.07%5. taxable income is 33%10.

PERSONAL TAXATION Regional Tax on Business Activities (IRAP)

Regional tax on business activities, Imposta regionale sulle attività
Personal Income Tax (IRE) produttive (IRAP), is a local tax applied on the value of the
Italian resident individuals are subject to IRE on their worldwide production generated in each taxable period by persons carrying
income. Non-Italian resident individuals are subject to IRE only on out business activities in a given Italian region. Non-Italian resident
certain items of income considered of Italian source. For individual corporations are subject to IRAP only on the production generated
taxpayers, the taxable period coincides with the calendar year6. through Italian permanent establishments11.
Progressive tax rates apply, with a maximum rate of 39% and
minimum tax rate of 23%. In addition a 4% solidarity surcharge tax
is due for the portion of income exceeding €100,0007. UK Tax Specialist
If you would like to speak with a UK accountant in regard
Tax residence of your tax position, we use Drew Hazell at Tayler Bradshaw
Individuals are considered Italian residents if, for the greater part of and find him highly knowledgeable. His number is
the calendar year: 01799 525 407.
a) They are registered in the Italian civil registry; or
1. www.barclays.co.uk/buyingabroad/italy/buying/costs.html
b) They have their residence or domicile in Italy, as defined by the 2. Ibid
3. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=300&area=17
4. Ibid
civil law. 5. Ibid
6. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=290&area=17
7. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=349&area=17.
8. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=290&area=17
9. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=300&area=17
10. www.investinitaly.com/context_investmentguide01.jsp?ID_LINK=291&area
11. Ibid

12 Country overview < Italy

Tuscan Villa outside Poggibonsi

Country overview < Italy 13

 Did you know?
4 Siena is home to the world’s oldest
bank, Monte dei Paschi di Siena

4 The Musei Capitolini in Rome is one

of the oldest museums in the world.

4 The average Italian consumes 26

gallons of wine a year and eats
25 kilograms of pasta .

4 Famous Italian explorers include

Christopher Columbus, Marco Polo,
John Cabot, and Amerigo Vespucci.

4 The Italian football team have been

world champions four times, only
Brazil have won it more.

4 In the town of Ivrea, Piedmont, there

is a traditional carnival every February
in which locals throw oranges at each
other (unsurprisingly known as the
Battle of the Oranges).

4 Florence was the first city to mint its

own gold coins in 1252.

4 The city of Naples is home to the

pizza.

4 The Italians invented the viol, violin,

cello and piano

4 The colors of the Italian flag represent

three virtues: hope (green), faith
(white), and charity (red).

The Battle of the Oranges, Ivrea, Piedmont

14 Country overview < Italy

Notes

Country overview < Italy 15

16 Country overview < Italy