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FINANCE

UPDATE: Under 36? Here’s how Italy plans to help you buy a house

Italy's government has announced that young people hoping to get on the property ladder can apply for the 'first home bonus' from June, a scheme offering tax cuts and help with mortgages.

UPDATE: Under 36? Here's how Italy plans to help you buy a house
The Italian government wants to help more young people in Italy to buy their own home. Photo by Katy Cao on Unsplash

The text of the new decree law was published on Tuesday clarifying the details of the ‘first home bonus’ (Bonus prima casa), following an announcement last week by Prime Minister Mario Draghi.

People under 36 years old who want to buy their first home can submit an application to get financial help from 24th June, with the scheme lasting a year.

The scheme aims to eliminate VAT on taxes relating to deeds transfers and the mortgage on the purchase of a home, and help young homebuyers secure a mortgage – the high upfront cost of which is often cited as one of the factors behind the high number of people in Italy still living with their parents well into their 30s (and beyond).

Purchasing a property in Italy involves no small amount of added fees and taxes – in fact, many property experts advise buyers that they’ll need to budget as much as ten percent of the property price for additional charges.

Photo: Maria Ziegler/Unsplash

What help is available?

People under 36 – the classification for ‘young people’ in Italy – will benefit from two main types of help:

Firstly, there will be a raft of reductions on the taxes paid when buying a first home.

And secondly, taking out a mortgage is set to be made more straightforward, as the state will put down the deposit for young homebuyers.

EXPLAINED: How you could benefit from Italy’s Covid-19 financial support

That’s been made possible thanks to new funding from the ‘First Home Loan Guarantee Fund’ (Fondo di Garanzia Mutuo Prima Casa).

Firming up plans to help young people buy a home is the latest step following Draghi’s pledge to boost the country’s economy following the coronavirus crisis.

In a press conference earlier in May, he promised financial help would go to  businesses, young people and healthcare services.

Photo by Tiziana FABI / AFP

Who can access the first home bonus and how?

For those hoping to buy their first property in Italy with state help, the bonus will run until 30th June 2022 and people under 36 years old are eligible to apply.

It’s available to those who have an ‘ISEE’ – a social-economic indicator of household income – of up to €40,000.

Young people falling into this category can benefit from certain exemptions on registration, mortgage and land registry tax, saving up to €9,000 on the costs of buying a first home.

If you buy property from a private individual, the bonus cancels out registration, mortgage and cadastral taxes, meaning that only stamp duty, mortgage taxes and special cadastral taxes remain to be paid, amounting to a total of €320.

On the other hand, if you buy a house from a company, you won’t pay registration, mortgage and cadastral taxes and again, you’ll need to pay stamp duty, mortgage and cadastral taxes.

The difference in the second case is that VAT must be paid to the seller, but the buyer accrues a tax credit to spend equal to this VAT for house-buying costs.

In effect, it means if the purchase of the property is subject to VAT, it will be reduced to zero with the first home bonus.

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Further to that, eligible candidates will also be exempt from the VAT on stamp duty, which comes in at around 2% of the cadastral value of the house. That’s if you live in Italy full time – it’s 9% if you don’t.

Claiming tax credits

The tax credit can be used to deduct directly from these house-buying costs, or alternatively, it can be used as tax relief to deduct from the taxes on your personal income (IRPEF).

Notary fees, which are generally fixed for each part of the sale, will be halved. The notary checks that the property is legally registered and their fees can vary from town to town.

If buying a house through an agent, a notary does all the required checks and may be able to take care of the preliminary agreement as part of their service.

How about loans?

Included in the first home bonus is state help with the deposit, after a government decision to extend the First Home Loan Guarantee Fund.

It exists already and covers up to 50% of the total value of the property, but is set to be extended to 80% of the total value, of up to €250,000, without a deposit – and the banks get a state guarantee.

Watch out for the conditions

To access the bonus, it must be your first home and you’ll need to keep in mind that not all properties can benefit from the government help, including stately homes, villas, castles and places of historical or artistic value.

The decree text appears to state that you’ll also need to not reach the age of 36 in the year in which the deed is drawn up. So that means if you’re buying a house this year, you’ll need to be no older than 35 for the whole year. In other words, if you sign the deed for a house this year, you’ll need to turn 36 from next year onwards.

The home must also be located in the municipality in which you work, study or currently live.

And once the benefits have been used, you can’t sell the property for five years – unless you buy another house.

You also can’t access the bonus if you’ve already used it for a first home anywhere in Italy.

As some aspects of the process for claiming the bonus remain unclear, anyone hoping to benefit from the scheme is advised to contact a mortgage expert for further information.

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ENERGY

What are the rules on using wood-burning stoves in Italy?

Sales of wood burners have increased since the start of the energy crisis, but some Italian regions have rules regulating their use.

What are the rules on using wood-burning stoves in Italy?

As the European energy crisis shows no sign of abating and Italian gas bills are once again expected to climb in the coming weeks, many families across the boot are considering switching to alternative (and more affordable) heating systems to keep their houses warm over the winter.

For some, the best option might be using a wood-burning stove, a heating system which seems to have undergone somewhat of a resurgence since the start of the energy crisis. 

READ ALSO: Electricity bills in Italy to rise by 59 percent, says energy regulator

According to energy group AIEL (Italian Association for Forestry Energy, or Associazione Italiana Energie Agroforestali), sales of wood- or pellet-burning stoves in the first five months of 2022 registered an impressive +28 percent against the same period of time last year. 

But those who are looking to turn to wood burners to keep warm over winter should be mindful of regional rules regulating the use of stoves and fireplaces. 

In fact, as many as five Italian regions – Lombardy, Veneto, Piedmont, Emilia-Romagna and Tuscany – currently have laws banning residents from using low-efficiency wood burners, with fines up to €5000 for those flouting the rules. 

What’s the point of these rules?

Regional laws banning the use of low-performance wood burners were introduced well before the current energy crisis to reduce CO2 (carbon dioxide) and PM (particulate matter) emissions across the country.

Fireplace with burning fire.

Bans on low-efficiency wood burners were introduced long before the European energy crisis to reduce CO2 and PM (particulate matter) emissions across the country. Photo by Stephane DE SAKUTIN / AFP

All relevant rulings on the subject use the national ‘five-star’ energy rating as their system of reference.

Briefly, in 2017, the Italian government established five different energy classes for wood-burning heating systems and allocated a set number of ‘stars’ to each category. The lower the number of stars, the greater the ecological impact (i.e. the amount of pollutants released into the atmosphere) of the wood burner in question, with ratings going from a minimum of one star to a maximum of five stars.

For a full breakdown of the five energy classes recognised by the Italian government and to know what types of stoves and fireplaces belong in each category, please consult this extract from the 2017 Gazzetta Ufficiale (the official government gazette).

What rules are in place and where?

Laws on wood burners vary from region to region, so here’s a brief overview of the rules enforced by each of the five above-mentioned regions.

Lombardy – As of January 1st, 2020, all Lombardy residents are banned from using wood stoves or fireplaces with an energy rating lower than four stars. 

Fines for those breaking the rules range from €500 to €5000.

Furthermore, only pellets of the A1 type (i.e. with residual ash lower than 0.7 percent) can be used for pellet-burning stoves with a maximum heat output (potenza termica nominale) lower than 35 kW (kilowatt). 

Wood pellets at a plant belonging to Graanul Invest, Europe’s biggest wood pellet producer.

In Lombardy, only pellets of the A1 type can be used for pellet-burning stoves with a maximum heat output lower than 35 kW. Photo by Ivo PANASYUK / AFP

Veneto – Veneto forbids the use of wood stoves or fireplaces with an energy rating lower than three stars. 

Also, people looking to install a new wood burner must ensure that the stove or fireplace in question has an energy rating of at least four stars. 

Piedmont – As of October 1st, 2019, Piedmont residents are banned from using wood-burning heating systems with a maximum heat output (potenza termica nominale) lower than 35 kW and an energy rating lower than three stars. 

Also, residents can only install new wood burners with a maximum heat output of 35 kW or more and an energy rating of at least four stars.

For additional details on the rules currently enforced in Piedmont, refer to the following website.

Emilia-Romagna – Things get slightly more complicated in Emilia-Romagna, where residents are banned from using wood stoves or fireplaces with an energy rating lower than three stars if their homes have an alternative heating system and they live in municipalities (comuni) whose elevation is less than 300 metres above sea level.

Emilia-Romagna also currently offers financial incentives for those who reside in one of the following comuni and choose to replace their old stoves or fireplaces with latest-generation heating systems with a five-star energy rating.

A retired farmer lights his wood stove.

Emilia-Romagna currently offers financial incentives for those who choose to replace their old stoves or fireplaces with new wood burners with a five-star energy rating. Photo by Jean-Francois MONIER / AFP

For further information about the rules currently in place in Emilia-Romagna, please consult energy regulator ARPAE’s website.

Tuscany – In Tuscany, rules on the use of wood burners are tethered to the individual PM10 (particulate matter less than 10 micrometres in diameter) emissions of each comune

That means that, in municipalities that have exceeded the permitted amount of daily PM10 emissions, residents are banned from using stoves or fireplaces with an energy rating lower than three stars, unless wood burners are their only available source of heating or they live in comuni with an elevation of 200 metres above sea level or more.

At the present time, the above ban only applies to the municipalities located in the so-called ‘Piana Lucchese’.

For further details, please see the following regional decree.

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