Italy's REIT legislation gets final approval

Italy's state council has given the green light to legislation favouring the introduction of real estate investment trusts (REITs), known as SIIQs. The decree, introduced as part of the Italian budget law for 2006, was backed by the deputy economics minister Vincenzo Visco last month, but awaits final approval from Italy's state council before coming into force on 1 July 2007.

According to Italian newspaper Il Sole 24 Ore, the state council has requested changes to the rules under which Italian SIIQs will trade, related to the free float and financial leverage. The finance ministry will fine-tune and publish the bill within the next weeks.

According to the current legislation, to be eligible for SIIQ status and corporate and regional tax breaks, companies will have to pay, over a five-year period, an entry tax of 20% on the capital gain on rented property held at the end of the last financial period in which the ordinary corporate fiscal regime applied. At least 80% of real estate assets have to be allocated for rent and rents have to comprise at least 80% of total revenues. Also, they must distribute at least 85% of profit in dividends.

Activities not linked to rents and aimed at development will be treated under and subject to the ordinary tax regime. Under the bill, the maximum held by a shareholder in a SIIQ is 51%, while at least 35% of the capital has to be distributed to shareholders not owning more than 1%.

Italy's main stock market Borsa Italiana recently updated its rules of admission for real estate companies and the new SIIQs. The stock exchange has set the minimum capitalisation required for admission to the regulated stock markets MTA and Expandi at EUR 200 mln. In addition, Borsa Italiana said SIIQs will be listed on the Expandi market under the new category 'Real Estate Investment Companies (REIC)'. The changes still have to be approved by the Italian securities market regulator Consob.