Investing in Italy via SCI: Benefits and Pitfalls

Published on October 3, 2025 and written by Cyril Jarnias

Investing in Italy

Investing in Italy through a real estate investment company (SCI) can be an attractive strategy for diversifying your assets, but it requires a precise understanding of tax and legal advantages as well as potential pitfalls.

This type of investment offers the opportunity to benefit from a dynamic real estate market and take advantage of favorable tax provisions often associated with SCIs, such as the ability to reduce certain taxes through specific deduction mechanisms.

Optimizing the Legal Structure for an SCI in Italy

A “French-style” SCI doesn’t exist in Italy; the Italian structures used to hold real estate are mainly the Società Semplice (S.s.), commercial partnerships (S.n.c., S.a.s.) and corporations (S.r.l., S.r.l.s., S.p.A.), each having distinct effects in terms of taxation, liability, and administration.

• Società Semplice (S.s.) — structure closest to a French SCI
  • Purpose: non-commercial activities; suitable for asset holding/management of properties, similar to the “civil” use of an SCI.
  • Liability: unlimited for partners regarding company debts, unlike an S.r.l.; no liability shield.
  • Taxation: tax transparency (taxation at partner level, similar to an SCI under income tax).
  • Administration: lighter formalities than corporations; civil partnership regime.
• Società in Nome Collettivo (S.n.c.) — commercial partnership
  • Purpose: commercial activity; not well-suited for simple real estate holding.
  • Liability: unlimited and joint for partners.
  • Taxation: transparent (income taxed at partner level).
  • Administration: heavier commercial and accounting obligations than an S.s..
• Società in Accomandita Semplice (S.a.s.) — general/limited partners
  • Purpose: commercial activities; sometimes used to separate management (general partners) and capital (limited partners).
  • Liability: unlimited for general partners; limited to contribution for limited partners.
  • Taxation: transparent at partner level.
  • Administration: dual governance (general partners as managers).
• Società a Responsabilità Limitata (S.r.l.) and S.r.l. semplificata (S.r.l.s.)
  • Purpose: very flexible, suitable for real estate investments, including rentals; separation of ownership/management.
  • Liability: limited to contributions; liability shield for partners.
  • Taxation: subject to corporate tax at company level (no default transparency), with taxable distribution to partners.
  • Administration: heavier formalities (notarized articles, accounts, governance); S.r.l.s. simplifies formation and minimum capital.
• Società per Azioni (S.p.A.)
  • Purpose: large operations, capital raising; rare for simple real estate holding.
  • Liability: limited.
  • Taxation/Administration: corporation with increased obligations and high costs.

Comparison with France (SCI and Similar Structures)

• Legal Nature and Purpose
  • France: SCI dedicated to civil real estate activities; tax transparency (income tax) is the rule, with possible option for corporate tax; commercial activity (furnished rentals/buy-resell) can switch to corporate tax.
  • Italy: S.s. is the functional equivalent for non-commercial real estate; for more “commercial” rental activity or need for limited liability, S.r.l. is preferred.
• Partner Liability
  • France: SCI — unlimited but non-joint liability (proportional to shares); possibility to limit through interposed company.
  • Italy: S.s. — unlimited liability (risk close to SCI), S.r.l. — limited liability, key advantage for leveraged projects.
• Taxation
  • France: SCI under income tax by default; corporate tax option to depreciate property and smooth results, at the cost of “professional” capital gains taxation.
  • Italy: S.s. — transparency (close to SCI income tax); S.r.l. — corporate tax at company level, dividends taxed at partner level; choice influenced by yield, debt, and holding period.
• Administration and Costs
  • France: SCI moderate formalities; simplified accounting under income tax.
  • Italy: S.s. light; S.r.l./S.r.l.s. more formalistic (notary, accounts, governance), but offer bank credibility and liability limitation.
• Specific Cross-Border Points
  • Transferring a French SCI to Italy has been noted as sensitive, and the closest locally recognized structure remains the S.s.; attention to specific rights/taxes and activity reclassification.

Synthetic Comparison Table

Jurisdiction	Structure	Main Purpose	Liability	Default Taxation	Administration
Italy	S.s.	Civil holding	Unlimited	Transparent (partners)	Light
Italy	S.n.c.	Commercial	Unlimited and joint	Transparent	Medium
Italy	S.a.s.	Commercial	Unlimited (general)/Limited (limited)	Transparent	Medium
Italy	S.r.l./S.r.l.s.	Flexible/real estate	Limited	Corporate tax + dividends	Heavier
Italy	S.p.A.	Large scale	Limited	Corporate tax + dividends	Very heavy
France	SCI	Civil real estate	Unlimited (proportional)	Transparent (corporate tax option)	Moderate

Structuring Advice Based on Investment Objectives

• Long-term family asset holding (personal use, moderate bare rental)
  • Choose an S.s. to preserve tax transparency, facilitate transfer, and avoid corporation costs.
  • Strictly frame the “non-commercial” purpose to avoid any reclassification.
• Rental investment with yield, bank financing, and asset protection
  • Prefer an S.r.l. for limited liability and bank credibility; useful for heavy renovations, debts, and multiple investors.
  • Consider an S.r.l.s. to start with reduced capital, then transform later if needed.
• Club deal or separation of management/capital roles
  • Use S.a.s. to house passive limited partners and managing general partners; attention to unlimited liability of general partners.
• Tax Strategy
  • Seek transparency (S.s.) if partners are low-taxed and prefer simplicity.
  • Seek corporate tax (S.r.l.) if wanting to capitalize income, depreciate, smooth cash flow, and protect assets; arbitrate based on effective rate and dividend taxation.

Common Pitfalls to Avoid

• Using an S.s. for activities akin to commercial (intensive furnished rentals, property dealer) — risk of reclassification and tax/accounting consequences.
• Underestimating unlimited liability in S.s./S.n.c./S.a.s. (general partners) — exposure of personal assets.
• Ignoring local rules when transferring a French SCI to Italy; tax risks and specific rights; prefer local adapted formation (S.s. or S.r.l.).
• Omitting obtaining Italian tax codes for partners/ managers and required notarial formalities (especially in S.r.l.).
• Poor drafting of corporate purpose and partner agreements (preemption, exit, governance), source of conflicts and reclassifications.

Concrete Examples of Profitability Gains Through Structuring

• Example 1 — Long-term residential rental, couple taxed at moderate marginal rate
  • Choice: S.s. with transparency.
  • Effect: taxation at partner scale, low structuring costs; no double taxation level; better net cash flow than S.r.l. for stable rents.
• Example 2 — Rental building with heavy renovation financed by debt
  • Choice: S.r.l. for limited liability and borrowing capacity.
  • Effect: deduction of expenses at company level, accounting depreciation, profit retention for self-financing; reduction of personal asset risk; improved IRR after considering leverage and corporate tax compared to S.s. exposing partners directly.
• Example 3 — Club deal with passive investors
  • Choice: S.a.s. with minority general partners as managers and majority limited partners in capital.
  • Effect: alignment of roles and risk; easier fundraising from investors seeking limited liability, while maintaining entrepreneurial governance.

Best Practices

• Draft a precise corporate purpose and approval/transfer clauses; provide a partner agreement consistent with chosen taxation.
• Model ex-ante post-tax flows for S.s. (transparency) vs S.r.l. (corporate tax + dividends) to choose optimal structure regarding target yield and horizon.
• In presence of renovations/leverage, often prefer S.r.l.; for pure asset holding, S.s. is often more efficient.
• Anticipate cross-border issues (partner tax residence, treaties, dividend withholding) and local governance (administrator, accounting maintenance).

Tax Advantages of Investing in Italy Through an SCI

Real estate tax advantages in Italy for investment via an SCI-type structure (in the French sense) exist, but they don’t apply as in France: in Italy, a foreign SCI is treated as an “opaque” company and taxation mainly applies to distributed dividends and capital gains on share sales, at the flat rate of 26% for resident individuals, rather than tax transparency of rental income at partner level.

• In Italy, the French SCI is not transparent: only dividends distributed by the SCI and capital gains on share sales are taxed in Italy, generally at the 26% rate (tax on capital income), with no tax credit for property tax paid in France on property income.
• An SCI under income tax is considered opaque in Italy (assimilated to corporate tax in the Italian sense): the individual partner is taxed as if receiving dividends; if the SCI doesn’t distribute, there’s no immediate taxation in Italy on rents, and Italian charge occurs at distribution or share sale.
• Italy applies a flat rate of 26% on dividends and share capital gains for individuals, framing overall taxation on the Italian side and can be favorable compared to high progressivity, depending on investor profile.
• Independent Italian real estate advantages (outside French SCI) include attractive regimes on rental income and capital gains, often cited as competitive: “cedolare secca” provides a fixed 21% rate on residential rents, and capital gains exemption after 5 years of holding, making the overall environment favorable for adapted Italian structures.
• Comparatively, these parameters make Italian real estate taxation competitive against other European countries, with moderate rates and increased visibility for international investors.

List of Main Provisions and Effects for an Investor Using an SCI (French) with Real Estate Located in Italy or in France but with Italian Resident Partner:

• Italian treatment of SCI: non-transparency, taxation at distribution and share sale level, 26% rate.
• Absence of Italian tax credit for property tax paid in France on income from property held by SCI.
• If SCI doesn’t distribute or sell, no immediate taxation in Italy for rents collected by SCI; taxation occurs at distribution/sale.
• In case of share sale, capital gain taxed at 26% in Italy for resident individual, under capital income regime.
• For direct investment in Italy, possible recourse to cedolare secca regime (21%) on residential rents and capital gains exemption after 5 years, often highlighted as competitive advantages of Italian framework.

Synthetic Comparison Table

Element	French SCI from Italy’s View	Direct Investment/Italian Logic
Tax Transparency	Non-transparent (taxation on dividends/capital gains on shares)	Rental income taxed according to regime (e.g., cedolare secca 21% for residential)
Key Tax Rate	26% on dividends and capital gains	21% on residential rents (cedolare secca), capital gains exemption >5 years
Timing of Taxation	At distribution or share sale	Annual on rents; capital gain at property sale
Foreign Tax Credit	No tax credit for property income tax paid in France	N/A (depending on setup and treaties)

Simplified Numerical Examples

• Dividend distribution by SCI to Italian resident:
  – Distributed dividends: €50,000 → Italian tax 26% = €13,000 if no other mitigating rule applies, absent credit for property tax paid in France.
• SCI share sale:
  – Capital gain on shares: €80,000 → Italian tax 26% = €20,800 as capital income.
• Direct residential investment in Italy (outside French SCI) under cedolare secca:
  – Gross rents: €40,000 → tax 21% = €8,400, and, if resale after 6 years, capital gain exempt according to usual rule mentioned.

Impact on Long-Term Profitability

• Possible deferral via non-distributing SCI can improve cash flow and capitalization effect, Italian tax only intervening at distribution/sale.
• Fixed 26% rate on dividends/capital gains on shares brings predictability; depending on alternative marginal rate, this can be lower than high progressive taxation, improving net yield for some profiles.
• In direct Italian setup, cedolare secca at 21% and capital gains exemption after 5 years support higher net profitability long-term, especially in buy-and-hold strategy.
• Absence of Italian tax credit on property income tax paid in France can reduce net yield when property is in France but held via SCI by Italian resident, hence importance of arbitrating location and structure.

Relevant Bilateral Tax Treaties

Franco-Italian conventions and other treaties can attribute right to tax real estate income to state where property is located, while residence state treats distributions/capital gains according to its internal law; in practice, for French SCI held by Italian resident, Italy doesn’t grant tax credit for property income tax paid in France on rents, and taxes distributions/capital gains at internal 26% rate.

For cross-border investments involving other countries, appeal of Italian framework (flat rates, capital gains exemption >5 years in Italian system) can combine with treaties to limit double taxation at origin property level, but Italy will retain its right on capital income received by its residents according to its rules.

Lists of Operational Attention Points

• Check residential quality of property for cedolare secca eligibility (if direct investment in Italy).
• Map distribution flows: no distribution = no immediate Italian tax, but taxation at exit.
• Evaluate cost of absence of tax credit on Italian side for foreign property income tax.
• Simulate scenarios of SCI corporate tax/income tax and Italian “opaque” perception to avoid double tax layers.
• Integrate holding period to capture capital gains exemption >5 years in adapted Italian structure.

These rules vary according to nature of properties, exact SCI regime, partner tax residence, and concrete application of treaties. Personalized calculation is essential before any cross-border arbitration.

Pitfalls to Avoid When Buying Real Estate in Italy Via an SCI

Main pitfalls to avoid when buying real estate in Italy via an SCI concern bureaucracy, non-resident taxation, regulatory disparities between Italy and country of origin, and local market volatility.

Creation and Management of an SCI and Administrative Complexity

• Heaviness of Italian formalities (multiple authorities, delays to obtain Catasto and Certificato di Destinazione Urbanistica) can delay signing and possession, with additional costs if banking or tax schedule slips.
• Urban planning compliance checks are strict and often slow (permits, extensions, pools), and slightest irregularity can lead to fines or restoration.
• Ancient servitudes, right of way, and liabilities attached to property (mortgages, tax debts) can remain “hidden” without complete notarial audit.

Tax Implications for Non-Residents

• Local practices like under-declaring sale price are illegal and expose to heavy fines; non-resident via SCI is particularly vulnerable in case of cross cadastre/tax audit.
• Inheritance rights and Italian wealth taxation can differ significantly from country of origin; inadequate structuring of holding via SCI can worsen inheritance taxation and double taxation if not anticipated.

Differences Between Local Regulations and Country of Origin

• In Italy, preemption rights (municipality, neighbors) can delay or block acquisition, a reality less present in other jurisdictions; omission of formal notifications leads to nullity or contestation of sale.
• Existence of illegal constructions or undeclared extensions is relatively frequent; their regularization may be impossible for listed properties or in protected zones, unlike more flexible practices elsewhere.

Risks Related to Fluctuations and Specificities of Local Market

• Island or tourist markets (e.g., Sicily, Sardinia) present opportunities at attractive prices but with high maintenance costs, variable liquidity, and specific logistical and administrative constraints.
• “Good deals” (e.g., €1 houses) often involve heavy works and strict conditions, potentially neutralizing price advantage and immobilizing SCI cash flow.

Practical Advice to Avoid Legal Disputes

• Require and verify, before any significant payment:
  • Catasto extract, compliant planimetry, mutation history, urban planning and compliance certificates, attestations of absence of mortgages and local debts.
  • Compliance file of past works (permits, CILA/SCIA), structural stability, and situation of any common parts.
• Include firm suspensive clauses in preliminary contract (urban planning compliance, absence of mortgages, financing obtention, purge of preemption rights) and provide penalties in case of failure.
• Refuse any under-declaration, use sworn translations, and document each payment through traceable channel.
• Verify actual ownership and property chain in case of co-ownership or complex inheritance; identify all entitled signatories.

Importance of Surrounding Yourself with Qualified Professionals

• Italian lawyer specialized in cross-border real estate: legal audit, purge of preemptions, alignment SCI/tax regimes, management of double taxation risks.
• Experienced local notary: mortgage and cadastral checks, fund security, compliance of deeds and legal notifications.
• Local technician (geometra/engineer/architect): urban planning and structural verification, measurements, energy compliance.
• International tax advisor: mapping impacts for non-residents, inheritance/donation, SCI rent and expense flows, interaction with tax treaties.

Specific Precautions for an SCI Holding Property in Italy

• Map “Italy vs country of origin” taxation: rent flows, interest, capital gains, withholding taxes, and treatment of non-resident partners.
• Anticipate succession: partner agreements, usufruct, compatibility with Italian mandatory rules (hereditary reserve), and effects of listed properties.
• Provide governance allowing quick decision-making facing Italian administrative delays and market windows; avoid partner deadlocks.
• Budget cash cushion for renovations and compliance, plus recurring costs increased in coastal areas.

Minimum Control Table Before Signing

Domain	Key Checks	Responsible Professional
Ownership and Charges	Mortgage extract, local debts, servitudes, co-ownerships	Notary, lawyer
Urban Planning/Compliance	Permits, regularization, restrictions on listed properties, preemptions	Lawyer, geometra
Cadastre/Planimetry	Planimetry-reality concordance, surfaces, destination	Geometra, notary
Taxation	Non-resident regime, succession, double taxation, SCI flows	Tax advisor
Market and Costs	Local liquidity, renovation/maintenance costs, schedule	Agent, engineer, accountant

List of Immediate Actions

• Mandate Italian lawyer and notary independent from seller.
• Insert suspensive clauses covering compliance, preemptions, mortgages, and financing.
• Refuse any under-declaration; require certified translations.
• Commission complete technical and urban planning audit before any deposit.
• Establish cross-border tax memo specific to SCI and partners.
• Set aside reserve of 10–20% of price for compliance and works in Italy.

To Remember: the “SCI + Italy” combination requires enhanced due diligence (urban planning, preemptions, liabilities) and international tax structuring; coordinated support from local lawyer, notary, and technician is not optional, it’s your best anti-dispute insurance.