The COVID-19 pandemic has created a health emergency in Italy and deeply affected its economy, impacting various industries, including tourism.
In recent months the Italian government has adopted several extraordinary measures as it seeks to support the industries most affected by the pandemic and ensuing economic crisis, Law Decree no. 34 issued on May 19 2020, also referred to as ‘Relaunch Decree’.
Our Italian real estate and tax team summarises below the key measures being taken by the government, with a focus on those aimed at boosting Italy’s ailing tourism sector. Whether these measures will be enough to restore the tourism sector remain to be seen however, as restrictions and limits on movement remain.
1. Vacation Tax Credit (art. 176)
The Relaunch Decree provides for the grant of a vacation tax credit to a consumer with a maximum value of €500 for the expenses incurred on holidays, in accommodation facilities, hotels, bed & breakfasts and farmhouses based in Italy which opt for the participation to the programme. This tax credit is granted to a single member of a family with an income of less than €40,000 and is differentiated by the number of members of the family (€ 150 credit for a single member, € 300 for two members, € 500 for 3 or more family members). The tax credit can be also used by a member of the family different from the requesting member.
This measure comes into effect on July 1, 2020 and is valid until December, 2020. It will be granted to consumers as an 80% direct discount on the bills issued by the supplier, e.g. hotels, bed & breakfast. The remaining portion of the bill amount is granted as tax credit in the tax return for FY2020.
The supplier of the accommodation service, in turn, may offset the discount granted in the invoice as tax credit in its tax return or, alternatively, may transfer the tax credit to bank and other financial intermediaries.
The tax credit cannot be used when the vacation is booked through the intervention of online portals, other than travel agencies and tour operators. With a specific regulation issued 17 June 2020 the Revenue Agency clarified the procedure to benefit of such a tax credit.
2. Property tax exemption (art. 177)
The Relaunch Decree provides for the exemption from the payment of the first instalment of the property tax , so called IMU (ordinarily due by 16 June) which applies to properties like hotels, pensions, tourist villages, holiday apartments, guesthouses for short stays, bed & breakfast, bathing establishments and spas.
The exemption is granted on condition that the owners of the aforementioned properties are the same subject who/which actually manages the business activity (i.e. not in case of mere real estate owner).
3. Tourism Fund (art. 178)
With the aim at stimulating transactions in the tourism industry, the Relaunch Decree provides for setting up an endowment fund of €50m for 2020.
This fund will be dedicated to purchase of shares/quota units in collective investment and investment funds managed by asset management companies for the purpose of purchasing, restructuring and enhancing properties intended for tourist and hospitality activities.
4. Tourism Promotion in Italy (art. 179)
The Decree provides for setting up a fund aimed at carrying out initiatives supporting tourism in Italy. Further legislation will specify the criteria and methods for allocating the relevant resources, predicted to be in the region of €20m for 2020. The Ministry for Cultural Heritage and Activities will oversee the allocation of the resources among the applicants.
5. Measures on stay tax (art. 180)
The Relaunch Decree provides for setting up a fund intended to restore the municipalities impacted by lower than usual income arising from stay tax brought about by the restrictions imposed on movement and travels. A specific Decree will outline criteria to allocate resources between the various municipalities.
The Relaunch Decree includes also a specific provision for the collection of tourist tax. In particular, managers of accommodation, as well as property owners who collect rental fees are responsible for the actual payment of the tourist tax to the competent municipality, while the actual cost of the tax will be borne by travellers to which the tax will be transferred. The providers of accommodation are also obliged to take care of additional formalities associated with respective regulations (e.g. filing of the tourist tax communications). This applies to the providers of accommodation in Rome and the main cities of each region where the number of tourists is 20 times greater than the number of resident citizens.
The Decree also provides for the application of penalties in case of omission, delayed or insufficient payment of the tourist tax (Art. 13 of Legislative Decree 471/1997).
In practice, the legislation provides clarity on the role of the providers of accommodation, stating that they should be qualified from a legal perspective as "responsible" for the collection, payment and compliance formalities for the tourist tax. In the past, they were considered "agents", and as a result the range of activities relating to the collection of the tourist tax was unclear.
6. Additional Measures
The Decree provides for setting up an endowment fund of €25m for 2020 intended to support travel agencies and tour operators. A special decree will outline the criteria of assignment of the available resources to the eligible operators.
7. Tax Credit on lease agreements (art. 28)
The hotel operators who run their business on the basis of a lease agreement are entitled to a tax credit equal to 60% of the rent actually paid for the months of March, April and May, if they have suffered from a reduction of their turnover of at least 50% with respect to the same month of last year. The tax credit is equal to 60% in case of traditional lease agreement, and financial lease agreement; it is reduced to 30% in case of going concern leases, management agreements and services agreement provided that they include the use of a real estate.
In case of seasonal tourist activities the tax credit is referred to the rent paid for the months of April, May and June.
Last reviewed: 22 June 2020