Italy unveils 'REITs' legislation

Italy is moving forward with legislation to introduce real estate investment trusts (REITs). An amendment of the Finanziaria, the State annual financial budget, contains the first official draft of the legislation, Italian media sources have reported. The draft will be presented for discussion in the Senate by Italian deputy Economics minister Vincenzo Visco.

The key elements of the SIIQ legislation includes an obligation to distribute 85% of the profit; a maximum shareholder stake of 51%; a minimum of 80% of the assets to be property; the Italian newspaper IlSole24ore reported. Profits will be subject to a withholding tax increasing from 12% to 20%, whose impact is still unclear on foreign entities.

However, the most interesting details of the proposed Italian SIIQs - roughly equivalent to the impending UK and German REIT and the French SIIC - is the tax-break regime. SIIQ societies will be exempt from IRES and IRAP property taxes, while the stock will be exempt from Pex participation, against a tax of 20% of the capital gain, payable within a maximum of five years. In case of acquisitions, a transfer tax reduction from 4% to 2% is envisaged, in line with the recently introduced decree 223/2006 on tax breaks for property funds.

The law is set to come into force in Italy in July 2007, seven months after the UK and Germany are set to introduce their own real estate investment trust.