Italy's 110% "Ecobonus"

17 June 2020, Redaction

How does the "ecobonus 110" or "bonus 110" work? Let's have a look at all the latest news on Italy's latest tax deduction for renovation works, included in the country's relaunch decree after the coronavirus pandemic; including whether the ecobonus applies to work for the replacement of windows, boilers, air conditioing or awnings and if this ecobonus tax deduction can also be applied in second homes.

How does the ecobonus work?

A very important measure for the whole building sector, the 110% ecobonus is present in the recent relaunch decree approved by the Government led by Conte and published in the Official State Gazette. This 110% ecobonus or 110% renovation bonus is a tax deduction of 110% of the expenses incurred for energy efficiency and seismic risk reduction in Italy

The ecobonus will be valid for expenses incurred from 1st July 2020 until 31st December 2021. The 110% deduction can be recovered in 5 equal annual instalments. However, there are two other options: credit transfer or invoice discount.

Who can benefit from the ecobonus 110?

The bonus for renovation can be used by residential housing developments, social housing institutions and, in the case of work carried out on individual apartments, by natural persons outside the company. 

But what type of work is eligible for this ecobonus?  The costs incurred between 1st July 2020 and 31st December 2021 for three major renovations are deductible:

  • Thermal insulation of vertical and horizontal surfaces affecting the exterior of the building for at least a quarter of the same surface (the so-called thermal coat) with a limit of 60 thousand euros multiplied by the housing units present.
  • The ecobonus 110 is valid for the replacement of boilers with centralised condensing systems for a limit of 30 thousand euros multiplied by each single housing unit.
  • For single-family units for the replacement of a boiler with centralised systems, the cost of the replacement will not exceed 30 thousand euros, including the cost of disposal and reclamation of the replaced system.

In both cases the ecobonus 110 is also valid if this work is associated with the installation of a solar powered system.

What happens in the case of works such as the replacement of frames, shutters, awnings, air conditioning or windows? The current ecobonus does not apply to this type of work, but the old ecobonus deduction of 50 to 65% tax deductions for this work remains. The deduction, however, increases to 110% if these interventions "are carried out in conjunction with at least one of the major interventions".

All work to qualify for the 110% ecobonus must ensure the improvement of at least two energy classes in the building. If this is not possible, the achievement of the highest class possible must be demonstrated by means of the EPA (energy performance certificate). Only in this case can the 110 % deduction for renovation be applied for.

Can the ecobonus tax deduction be applied to second homes?

The initial wording of the relaunch decree only allowed this 110% tax deduction in main homes and in the second homes found only in residential housing developments. However, an amendment to that is about to change everything. 

The amendment states that the ecobonus 110 will also apply to second homes, even if they are single-family houses. This is not the only change, as the 110% bonus deduction is also to be extended to sports facilities and hotels.

How long will this ecobonus be around?

The current wording of the relaunch decree considers a time window for the ecobonus 110% from 1st July 2020 to 31st December 2021. However, the amendment mentioned above wants to extend the period of application for the bonus until 31st December 2022.

How does the credit transfer work?

The transfer of credit for the ecobonus 110 consists of the transfer of the credit accumulated (i.e. the amount that will be returned to the citizen within five years) to financial intermediaries (banks or insurance companies) or to the same company that carried out the work, which will collect it from the tax authorities. This is a measure that allows households to have renovation work covered by the ecobonus carried out free of charge at 110%. 

In the latest version of this 110% ecobonus included in the 2020 relaunch decree published in the Official Gazette, there is also the possibility of taking advantage of the transfer of tax credit or invoice discount not only for the 110% ecobonus, but also for renovation work with a 50% deduction, for ecobonuses at 65%, for the facade bonus at 90% and not only for new work, but also for work that has already been carried out.

In addition, severe penalties have been introduced from a minimum of 2 thousand euros to a maximum of 15 thousand for each unfaithful declaration on ecobonus works.

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