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Upgrading property energy efficiency increasingly attractive: new 110% deductions launched


Starting this week (July 13, 2020), on the Italian Senate calendar is the turning of the “Relaunch” Decree-Law (no. 34 dated May 19, 2020) into law. It was approved in recent days by the House of Deputies with a number of interesting modifications on the original text in terms of tax deductions for energy efficiency and seismic prevention initiatives, a topic we dealt with recently (read the article; 110% super eco-bonus) and which we return to below.

The text is set, for which no further change seems possible, at least for the moment.

Therefore, we can now take stock of this important measure to upgrade building energy efficiency, at least in this initial, purely “legislative” phase, while awaiting the upcoming issuing of the various implementing decrees and measures required for the new incentives to actually “take off”, as well as the memo from the Italian Revenue Agency regarding how to apply it.

1.      The framework of the new energy efficiency and seismic prevention deductions: “driver” work at 110 percent

The “Relaunch” Decree-Law in the version currently being converted into law (hereafter, the “Measure”) increases deductions for energy efficiency (a deduction of 110 percent in five years for expenditures made between July 1, 2020 and December 31, 2021) and provides for three categories of “driver” work:

  1. thermal insulation of vertical, horizontal and inclined opaque surfaces of the building envelope that involve more than 25 percent of the gross dispersing surface of the building or “row house” unit;
  2. work involving the common areas of buildings to replace existing HVAC systems with centralized systems for heating, cooling or supply of sanitary hot water;
  3. work on single-family buildings or “row-house” units to replace existing HVAC systems with centralized systems for heating, cooling or supply of sanitary hot water.

The ceilings on the maximum expenditure eligible for a deduction are different for the three categories given above and are broken down by building composition as follows:

  • for thermal insulation, the deduction is calculated on a total expenditure not exceeding: €000 for single-family buildings or “row-house” units; €40,000 multiplied by the number of units comprising the building for structures with two to eight property units; €30,000 multiplied by the number of units for buildings with more than eight units;
  • for centralized HVAC systems, €000 by the number of units in the building. The deduction is also applicable to the disposal and reclamation of the replaced system;
  • for HVAC systems in single-family homes or “row-house” units, €000; again here, the deduction is applicable to the disposal and reclamation of the replaced system.

For work involving HVAC systems, it should be stressed that to be eligible for the deduction, there must be a pre-existing system that heats the building and will be replaced by a new system of the following types: condensing (at least class “A”), heat pump (including hybrid systems, heat pump built into the condensing boiler, or geothermal systems), including in combination with the installation of photovoltaic systems and related accumulation systems (these are also eligible for the deduction) or microgeneration systems or solar collectors.

In only some municipalities, the deduction can also be applied to the hook-up of efficient remote heating services or for the installation of 5-star class biomass boilers.

2.      110 percent “spin-off” work

The Measure also stipulates that the 110 percent rate is also applicable to all other energy efficiency work already covered  by law (art. 14 of Italian Decree-Law no. 63/2013 and subsequent amendments) within the expenditure limits given for each of them, on the condition that they are carried out in conjunction with at least one of the types of “driver” work.


The wording of the Measure only mentions the rate, thus it must be assumed that for these “other” types of “spin-off” work, the requirement remains to take advantage of the deduction in equal instalments over a 10-year period (instead of five, as is the case with “driver” work).


These “other” types of “spin-off” work at a rate of 110 percent—or, depending on the specific case, they may be eligible for rates of 50 or 65 percent—involve, for example, the replacement of windows and their frames, the installation of solar panels for hot water or sun shades, the replacement of traditional water heaters with heat pump water heaters for the production of sanitary hot water, or other types of work provided for by the law.


For buildings subject to at least one of the restrictions provided for in the Cultural Heritage and Landscape Code (Italian Legislative decree no. 42/2004) or in cases in which the “driver” work is prohibited by building, urban development and environmental regulations, the deduction applies to all “spin-off” energy efficiency work, even if not performed in conjunction with at least one of the types of “driver” work, as long as the “minimum requirements” are respected.

3.      Two-level jump in energy class, including with photovoltaic and accumulators

To be eligible for the higher 110 percent deduction rate, all work—”driver” and “spin-off”—in addition to complying with certain “minimum requisites”, must assure, including in conjunction with the installation of photovoltaic panels and their accumulators, an improvement of at least two energy classes of the building or row-house unit, i.e., if it is not possible (for example, if the property is already rated class “B”), the attainment of the highest energy class, to be demonstrated by the pre- and post-work energy performance certificate (APE).


For photovoltaic systems and their accumulators, if created in conjunction with a type of “driver” work, the 110 percent deduction can be amortized over 5 years (instead of 10), within set maximum expenditure limits (euros per kW of rated output).


Within the context of the “minimum requisites”, included in the deductions for “driver” and “spin-off” work is also that for renovation, including demolition and exact reconstruction.


For installation of photovoltaic systems, the law provides for the right to deduct even new buildings and urban redevelopment (in addition to building renovation), even with lower expenditure limits. This is interesting because these types of work (especially “new building”) are normally excluded from deductions given that they must comply “in any case” with the rules and regulations required for new buildings.

4.      110 percent also for the seismic bonus

The Measure also boosts to 110 percent in 5 years (actually, the amortization period was already 5 years) the deductions for seismic prevention work already in effect (art. 16, c. from 1-bis to 1-septies, Italian Decree-Law no. 63/13), which also includes the major incentive for purchasers of units located in buildings in seismic areas 1, 2 and 3 which have been completely demolished and rebuilt with the purpose of reducing the seismic risk, even with a different cubic footprint than the pre-existing structure, if allowed by urban planning regulations.

This work must be performed by property renovation and construction companies which must provide for the transfer of the individual units within 18 months from the conclusion of work.


The 110 percent deduction for seismic prevention work is now also recognized for the realization of continuous anti-seismic structural monitoring systems, as long as this is done in conjunction with one of the types of prevention work (cited in sections 1-bis to 1-septies mentioned above), in compliance with the expenditure limits provided for by the laws in effect for this work.

5.      110 percent “driven” for electric vehicle charging

110 percent in 5 years also for the installation of electric vehicle charging systems in buildings, as long as installation is carried out in conjunction with one of the “driver” types of work.

6.      Entities eligible and non-eligible for the “super bonus”

Among the entities eligible for the “super bonus” are apartment buildings and condominiums, private individuals (i.e., for the property they own neither as individual businessmen nor freelance workers) for their property units (including single-family homes, as long as the zoning category is not A/1, A/8—and this is clearly contradictory—and A/9) to a maximum of two, public housing authorities and the like (for properties owned by them or managed for local municipalities and used as public housing: for these entities alone, the work period is extended by six months to June 30, 2022), joint property building cooperatives for residences assigned to members, ONLUS non-profit organizations, organizations of volunteers and associations for social development and support, and amateur sports associations and clubs, but only for the locker rooms.

Excluded buildings

Therefore, excluded from these super-measures are all buildings owned entirely by a single owner that is not an individual or public housing authority or other entity named above, even if comprised of multiple subordinates—which is the case of all types of companies.

In these important instances, the energy efficiency and seismic prevention deductions already in existence or the “façade bonus” that took effect on January 1, 2020 for the current year only (but it is expected that it will be extended) are applicable.

Conclusions and other reflections regarding the relaunching of the sector

Many important new things involving the real estate and building sector.

In addition to the various measures implementing the deductions (asseverations, technical specifications for work) and the agency memo, it is expected that in the next few days the “Simplification” Decree will be published in the Official Journal which should include an important new aspect in the Consolidated Law on Construction. It is expected to state that in building demolition and reconstruction, if the size of the plot does not allow the surface area to be modified to respect minimum distances, reconstruction is allowed, however, if the legitimately pre-existing distances are maintained and the potentially-recognized footprint incentives can be realized, including with extensions outside the building outline and by extending the maximum height of the demolished building, while always maintaining the legitimately pre-existing distances.


Also of note, the favorable interpretation surprisingly provided by the Italian Revenue Agency in Response to Question no. 204 dated July 7, 2020, in which it recognized the applicability of the incentives for the purchase of buildings to be demolished and rebuilt (fixed registration and title search taxes), even if not the entire building, but almost its entirety, is purchased.


An unusual flexibility in interpretation that bodes well for a wise and equally-flexible application of the new super-bonus deductions for the relaunching of the sector which is of fundamental importance for the entire economy, in synergy with the pursuit of the basic goals of energy efficiency and environmental protection, as well as the functional modernization of Italy’s real estate infrastructure.

Stefano Baruzzi
Chartered accountant and legal auditor, real estate tax expert,
Head of Real Estate Contracts, Tax & Fiscal for Morning Capital Srl

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