While the U.K. and Germany have been the focus of Europe’s REIT renaissance, Italy is poised to join the party. At the close of 2006, the Italian government announced its plans to introduce “REIT-like tax legislation,” called societa per investimento immobilare quotate (SIIQs). Following the acceptance of the proposal and the implementation of guidelines by the Ministry of Economics, the land of saints, poets and sailors will be yet another European nation to enact REITs this year. The SIIQ is scheduled to become effective July 1, 2007, at the start of the next tax period in Italy.

Pietro Del Bufalo, with Lovell’s law firm in Rome, says discussions of possible REIT legislation began several years ago, but this planned proposal is the first official step. “The first step will be submitting the proposal for an amendment to our annual Budget Law, after which we can implement general provisions through the Ministry of Economics,” he says.

Arianna Immacolato, director of the tax division with the Italian investment fund trade association Assogestioni, says that the proposed Italian SIIQs must be predominantly engaged in income property investment, where 80 percent of the assets are real estate. “A SIIQ must distribute at least 85 percent of net proceeds derived from income property investment, and a 20 percent exit tax on latent capital gains on real estate assets is envisaged for joint stock companies wishing to convert to the new regime.”

Pre-existing Italian property investment funds, called fondi comuni di investimento immobiliari, will not be able to convert, Immacolato says, as the proposed REITs will only be available to joint stock companies residing in Italy that have shares listed on Italian regulated markets. “However, a 95 percent Italian joint stock subsidiary of a parent SIIQ can obtain the SIIQ regime, even if it is not listed on a regulated market, as long as the other obligations have been met,” she says.

Both Del Bufalo and Immacolato agree that it is too early to measure the implications of the new regime, or to predict its specific role in the Italian real estate market.