Italian church tax breaks to end next year
Photo credit: Urish
The Italian Catholic Church will pay property tax next year, the government has decreed.
The Church has long enjoyed exemption from tax on the properties it owns, as long they are at least partly used for non-commercial, religious purposes. But as the country's financial belt continues to tighten, many have questioned whether the tax breaks should continue.
Indeed, La Repubblica suggests that the revenue from the Church's real estate, which includes hotels and restaurants, could total as much as €25.5 million a year - and that is just in Rome alone. The EU actually launched an investigation two years into whether the tax breaks were technically an illegal act of state aid.
As a result, the government revealed plans to amend the laws earlier this year. Last month, the Council of State rejected the proposals, but the government has insisted that the decree will go ahead.
"The regulatory framework will be definite by January 1, 2013 - the start of the fiscal year - and will fully respect the European Community law," Prime Minister Mario Monti's government told the Associated Foreign Press.
From February next year, the Church's tax breaks will be scrapped, finally including the Vatican in Italy's nationwide scramble to recoup its crippling financial debts.
But the Church is not the only one facing tax measures: late last year, the government introduced a new IMU tax requiring both Italians and non-resident second home owners to pay tax on all properties.
The levy has not deterred investors, though, according to Knight Frank, partly because the sums are relatively small - 0.4 per cent of the cadastral value on a primary residence and up to 1.06 per cent on a second home - and partly because the weakening euro has made Italian real estate more affordable for international buyers.
Indeed, Kate Everett-Allen's new research shows that prices have dropped by almost 30 per cent from the 2008 market (lower than the 10.5 per cent recorded by official figures), prompting investors to swoop on real estate bargains. And top of the list? The high end of the market.
"The €3 million plus market is in good shape", according to Knight Frank, highlighting the resilient sales volumes of luxury homes across the country. Liguria, Lake Como and Venice are all popular among wealthy investors, followed by Tuscany, Umbria, Rome and Sardinia.
"In some markets such as Tuscany, Umbria and Florence the €450,000 to €1 million price bracket is sluggish as buyers in this market segment tend to be more heavily reliant on finance," says Everett-Allen. "Nonetheless, there remains strong demand for development products below €1 million."
Buyers from the UK, US, Belgium, Denmark, the Netherlands and Russia are the most active, she adds.
"For many international buyers, Italy's established prime locations offer a more secure second home option without the risk that many emerging European markets present. A weaker euro in the first half of 2012 made very little difference to the volumes of sales but interest from non-Eurozone buyers improved once the euro reached 1.20 against the pound."
With demand from property buyers still strong and the Church set to contribute to the country's financial recovery, it appears that Italy's taxes are nothing to be scared of. After all, as overseas investors have shown, sometimes all you need is a little faith.
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