The Problem Starts Before You Buy, Or Long After
In the hills above Porto Cervo, overlooking the Pevero golf course, a cantiere that looked unremarkable from the road was quietly being transformed into six extra-luxury villas with swimming pools. The project had permits. It had a director of works. It had contractors, engineers, and a municipal official who had signed off on the titles. What it apparently did not have, according to the Procura di Tempio Pausania, was the mandatory urban planning variance required for works of that nature in a landscape-protected area.
In early 2026, investigators from the Corpo Forestale sealed the entire site. Four people — including the developer, the site director, and the responsible municipal official — were placed under investigation. The cantiere at Li Liccioli, in the municipality of Arzachena, became the latest in a long series of Costa Smeralda property stories where what seemed like a straightforward construction project turned into something else entirely.
It was not an isolated case. The Procura di Tempio concluded 2025 with a public statement noting that real estate and environmental crimes are “particularly widespread” in the Gallura territory, with properties worth “tens of millions of euros” placed under sequestro across 97 separate proceedings in the previous two years alone.
Three Levels of Exposure, and Why Most Owners Only See One
When a building irregularity is discovered on a luxury villa in Costa Smeralda, the immediate conversation tends to focus on the administrative dimension: the demolition order, the restoration ordinance, the appeal to the TAR. That conversation, while important, is the visible layer of a much deeper problem.
There are, in practice, three distinct levels of legal exposure that a building violation on a high-value property in Sardinia can generate — and they do not move in sync with each other:
The administrative and criminal layer. Unauthorized construction in Italy is a criminal offence under the Testo Unico Edilizia (Presidential Decree No. 380/2001). For works carried out in a zona vincolata — a landscape or environmental protection zone, which covers most of the Costa Smeralda coastline — the severity of the offence increases sharply. Criminal proceedings are handled by the Procura della Repubblica at Tempio Pausania, which has demonstrated consistent and well-funded investigative activity in this area. The risk is not hypothetical: the Vacchi case, the Li Liccioli site, the Villa Armony sequestro — these are real proceedings involving real luxury properties in the Arzachena and Porto Cervo area, running through Italian courts right now.
The civil and administrative remediation layer. A demolition order — ordine di demolizione — is the primary consequence of unauthorized construction in Italy. Its enforcement is overseen by the municipality, with appeal to the TAR and ultimately to the Consiglio di Stato. In some circumstances, where demolition is technically impossible without damaging the lawfully built portions of the property, Italian law allows a substitution of the demolition sanction with a pecuniary one — the so-called fiscalizzazione dell’abuso. But the conditions for fiscalizzazione are strict, interpreted narrowly by courts, and not available where the abuse involves landscape-protected land — which is to say, not available in most of the high-value zones of Costa Smeralda.
The fiscal and tax layer. This is the dimension that tends to arrive last but hits hardest — and the one most owners, and even some advisors, do not see coming. It manifests in several distinct forms, each with its own logic and its own timeline.
How a Building Irregularity Becomes a Tax Problem
The connection between unauthorized construction and fiscal exposure is not automatic, but it is well-documented in the Costa Smeralda context.
The most direct mechanism involves catastale misregistration — the formal mismatch between how a property is recorded in Italy’s land registry (the Catasto) and its actual physical state. A villa that has been extended, converted, reconfigured, or equipped with structures not reflected in its cadastral registration pays taxes — IMU, TASI, registration tax, capital gains tax — on a declared value that does not correspond to reality. The gap between the declared and actual value is, in fiscal terms, the measure of a potential revenue loss to the state — and therefore the basis for a tax assessment.
In Porto Cervo, this pattern was documented in striking detail by the Guardia di Finanza in August 2025. Investigators discovered a condominium complex facing Pevero beach where rooms officially registered in the Catasto as vuoti sanitari and warehouses — legally, empty spaces with no residential or commercial use — had been converted into tourist accommodation and operated as an undisclosed hotel for years. Between 2018 and 2024, the operation generated over €12.5 million in undeclared income, with tax evasion estimated at approximately €4 million. The Procura di Tempio is now investigating criminal liability for both unauthorized construction and tax offences.
The second mechanism is less obvious but equally significant: value reconstruction by the tax authority following a criminal proceeding or administrative sanction. When a luxury villa becomes the subject of a building investigation, the Guardia di Finanza and the Agenzia delle Entrate are formally notified. Once in possession of a verified description of the property’s actual physical state — including the unauthorized works — the tax authority may reassess the property’s historic values for the purposes of all transactions in which it was involved: purchases, sales, donations, company contributions. If the property changed hands at a price calibrated to its declared (non-abusive) state, the reassessment can generate a substantial gap — and a substantial fiscal claim.
The Vacchi Case: What It Shows About the System
The ongoing trial of Gianluca Vacchi — entrepreneur, DJ, and influencer, whose villa on the Pantogia hill at Porto Cervo became the subject of criminal proceedings in 2023 — is instructive not because of who is involved, but because of what it reveals about how the system works.[5][4]
The project involved a property estimated at €15 million, to be expanded with fifteen bedrooms, a discotheque, two lodge suites, a padel court, and terraces overlooking the Pevero bay and the island of Tavolara. The dispute centres on whether specific portions of the construction exceed the authorised volumes — a question that the defence maintains is limited to “a very modest portion” of the overall surface area, while the Procura has characterised the construction as significantly non-conforming.
The proceedings illustrate three features of the Costa Smeralda regulatory environment that any owner or prospective purchaser should understand:
- Building permits issued by the Comune di Arzachena are subject to subsequent review by the Corpo Forestale, the Procura, and potentially the Soprintendenza — so a permit in hand is not, in itself, a guarantee of conformity.
- Works in landscape-protected zones are judged against standards that can differ materially from those in non-protected areas, and the line between an authorised variation and an abuso edilizio is drawn by investigators and prosecutors, not only by the municipality.
- Once a property is under sequestro, it cannot be sold, transferred, or used as collateral. For a villa worth €15 million, held in a structure that may also include other assets, that practical consequence is immediate and severe — independent of how the criminal proceeding ultimately resolves.
What Buyers Need to Know Before They Move
Building irregularities in Costa Smeralda are frequently invisible at the time of purchase — not because sellers conceal them deliberately, but because Italian due diligence, as commonly practised, does not systematically compare the physical state of a property with its cadastral registration, its historic building permits, and the applicable landscape restrictions for the specific zone in which it sits.
Govoni Law’s guide on building abuses and planning irregularities in Sardinia addresses this in detail — the starting point for any buyer who wants to understand what a proper pre-purchase legal review looks like in this context.
For owners who already hold a property in Costa Smeralda — whether through a corporate vehicle or in their own name — the relevant question is different: does the property’s current physical state match its cadastral and urbanistic documentation? If the answer is uncertain, the risk is not only legal. It is fiscal, and it operates on a timeline that is largely invisible until an investigation or a transaction brings it to the surface.
The Intersection with Corporate Structures
For owners who hold Costa Smeralda villas through a company — the scenario addressed in the first article in this series — a building irregularity on the underlying property adds a layer of complexity that most company-focused analyses do not capture.
The company’s declared assets, and therefore the values used in the operatività test under Italy’s non-operative company rules, are based on the property’s official cadastral value. If the actual property is materially larger, more valuable, or more commercially active than its cadastral record reflects, the discrepancy affects the company’s fiscal position in ways that flow through to the non-operative company analysis. A tax review that looks only at the company, without examining the underlying asset’s conformity, produces an incomplete picture — and potentially an unreliable one.
Contact
Govoni Law works with international owners and their advisors on property law, building compliance, and the legal aspects of owning real estate in Sardinia.
FAQ Section
Q: What are the consequences of unauthorised building work on a luxury villa in Costa Smeralda?
A: Building irregularities on Costa Smeralda properties can generate three distinct levels of exposure: criminal liability under Italy’s Testo Unico Edilizia, an administrative demolition order or pecuniary sanction (fiscalizzazione), and fiscal consequences flowing from the mismatch between the property’s declared and actual state. All three can operate simultaneously and on different timelines.
Q: Can a demolition order be replaced by a financial penalty in Costa Smeralda?
A: In principle, Italian law allows fiscalizzazione — substituting a demolition order with a financial penalty — where demolition of the unauthorised part would compromise the approved part. However, this alternative is not available for works on landscape-protected land, which covers most of the high-value zones of Costa Smeralda and the Arzachena coastline. Courts have interpreted the conditions strictly.
Q: How does an unauthorised extension affect the tax position of a luxury villa?
A: When a property’s physical state diverges from its cadastral registration, the tax authority can reassess the property’s value for all past transactions — purchases, sales, contributions to companies. The gap between the declared and actual value becomes the basis for a potential fiscal claim, compounding the administrative and criminal exposure.
Q: What is the connection between the Vacchi case and typical building issues in Costa Smeralda?
A: The Vacchi proceedings — involving a villa valued at approximately €15 million near Porto Cervo, under sequestro since 2023 — illustrate the system’s features: permits issued by the Comune can be subsequently reviewed by the Corpo Forestale and the Procura, works in landscape zones face stricter standards, and once a property is seized, it cannot be sold or transferred until the proceeding concludes.
Q: Can a buyer discover building irregularities before purchasing a luxury villa in Sardinia?
A: Yes, with the right due diligence. A proper pre-purchase legal review compares the property’s physical state with its cadastral registration, its building permits, and the applicable landscape and urbanistic restrictions for its specific zone. Standard real estate due diligence in Italy often does not cover all of these dimensions systematically.
Q: Does a building irregularity affect the fiscal position of a company that owns a Costa Smeralda villa?
A: Yes. Companies holding Costa Smeralda properties are assessed under Italy’s non-operative company rules using declared cadastral values. If the property is materially larger or more valuable than its official records reflect, the discrepancy affects the company’s fiscal position and the reliability of any non-operative company analysis conducted on the basis of declared values alone.
Internal Linking Suggestions
- → Building Abuses and Planning Irregularities in Sardinia — the foundational Govoni Law guide on this topic: link early in the article body
- → Shell Company, Luxury Villa in Costa Smeralda & Italian Tax Audit — the corporate structure layer that compounds building risk
- → Foreign Flag Yacht in Costa Smeralda — for owners whose exposure spans both property and vessels