SELLING UK PROPERTY AS AN ITALIAN RESIDENT

Selling UK property as an Italian resident.  It’s always good to review certain subjects again and I was recently talking to someone about selling rental / second home property in the UK and the potential tax consequences of doing so. If you have held the property for more than 5 years, from acquisition or inheritance (and excluding any emotional or sentimental attachment to the property for the purposes of this discussion) then the sale of a property could be a tax planning opportunity rather than a consequence.

Selling a UK Property

Selling a UK Property

I was asked recently about a little  known UK property tax break which I revealed some time ago and thought I would repeat it again here:

UK PUBLIC SECTOR PENSIONS, BREXIT AND ITALIAN CITIZENSHIP

I was watching a nature documentary with my son the other day and we were watching the foraging activities of grizzly bears in North America.  

Property: rising prices in Italy?

Property is always a favourite topic in my Blogs and whilst I profess to know very little about the property market itself, other than that which I can see with my own eyes and hear about other people's experiences, it does appear that the Italian property market is seeing a 'Rialzo'. 

Tax Cuts......?

Before you have to steady yourself at the mere thought of tax cuts in Italy, I have to warn you, (sorry, I am so used to warning people about tax increases that it comes naturally to use the word, 'warn'), or I am pleased to inform you that if you can hang in there a little longer they may be on their way. 

 

And 'I am' talking about 'Income tax Cuts' (IRPEF)!

Have you made a will for your Italian property?

Have you made a will for your Italian property?

 

Whilst there seems to be a general lull in financial markets, in the lead up to the British vote to leave Europe, I thought I would interrupt with a notice on my next event which may interest you. 

For some time I have been noticing that many of my clients, possibly you included, have not made sufficient plans for the succession of their properties in Italy in the event of their deaths. This may be as simple as making a Last Will and Testament to establish to who, and how, the asset is distributed on your death. 

However, as we all know, in Italy, things are not that straight forward and the rule of 'forced succession' (i.e. a proportion of the asset MUST BE distributed to children, spouse etc) may or may not be applied to your property in Italy. 

For this reason it may make sense to have a written Last Will and Testament in Italy to either reflect your last wishes as written in your country of origin, OR merely to have a written statement of how you wish your property to be distributed on your death.

Without written evidence of your wishes various interpretations can be made and tax authorities can hold up the passing of assets, in a timely manner, to your beneficiaries. In addition, your beneficiaries may not speak Italian and may need to take expensive legal advice to administer your estate.  Small actions now can minimize all these problems later. 

For this reason, The Spectrum IFA Group (Italy) have partnered again with Studio Legale Internazionale Gaglione  (Rome)  to provide you with a morning of questions and answers on this very topic.  

Wednesday May 23rd 2016 at Michele's Pastisserie in Castiglione del Lago starting at 11:00am. 

Should I make a Last Will and Testament in Italy, or not? 

Do the new Inheritance Tax proposals in Italy affect me? 

If my beneficiaries don't live in Italy do the forced succession rules apply to them? And what if they do live in Italy? 

Can I opt for my preferred jurisdiction to be taxed on death? 

What process will my beneficiaries have to through if I do not leave a Last Will and Testament in Italy? 

These are a few of the questions which can be answered on the day. 

The event will open at 10:30am for coffee, tea and pastries, followed by a prompt 11:00am start to the talk.

All attendees are encouraged to ask questions of the speakers, ROBERTA MORETTI AND GIUSEPPE GAGLIONE of Studio Legale Internazionale Gaglione, or you can just come along and listen. 

Due to the outstanding success of the previous event, when held in Bagni di Lucca, numbers will be limited to a maximum of 30 people to ensure that everyone gets an opportunity to ask questions, so book early to reserve your place.   

Due to the importance of the subject matter, I would also ask you to kindly share the information of this event with people you may know who are not on my E-zine mailing list so that they may also attend if they wish.

To book a place you can contact me on gareth.horsfall@spectrum-ifa.com or call me on +39 333 6492356

UK buy to let property is a bad investment...and here's why!

You may find this blog a little provocative.  

Does my foreign will cover my Italian property on my death?

On May 19th 2015 I held a joint event nr Lucca, with a firm of Anglo/Italian lawyers called Studio Legale Internazionale Gaglione.  They are a firm I met whilst in London presenting at The Place in the Sun event.  I was impressed by their knowledge but more importantly their long term view of the Italian legal profession and their moves to proactively model their business accordingly.

A Place in the Sun - Birmingham NEC 2014

For those of you who are familiar with the UK TV programme, A Place in the Sun, you may be interested to know that they also hold a twice yearly exhibition in the UK to promote home ownership abroad (and flog a few houses in the process). 

The next one is in Birmingham from 3rd - 5th October 2014. I will be on a stand in the Italian forum doing a presentation on each of the 3 days to the attendees. The idea being, to try and advise expats before they move to Italy and help them to avoid the traps that many people fall into. 

Our French team will be presenting in the France forum.  

If you or anyone you know is in or near the Birmingham NEC on those dates and would like to attend I have some free tickets (Worth £10 each) and would be happy to send them on, if you just let me know by email on gareth.horsfall@spectrum-ifa.com

Rental Income from properties overseas and how to declare it in Italy.

One of the questions I am asked regularly is how income from property held overseas is taxed in Italy.  Is it exempt from Italian tax because tax has been paid on it overseas first and is it subject to the same taxes as Italian rental income?

I would like to dispel any myth and confirm that you do have to pay Italian tax on the profit from any rental income on properties held overseas as a resident in Italy.  (if it was really ever in doubt.  Out of interest the arrangement is reciprocal, and any if you were resident in another country with rental property in Italy then it need to be declared as well).

The best way to organise your rental income

The law for Italian tax residents states clearly that the net profit (after expenses) from property overseas, must be declared in the Italian end of year tax return.  The net profit is then assessed as income, added to the rest of your income for the year and tax paid at your highest rate of income tax (that could be as high as 43%).

Let's not forget the IVIE tax as well which is 0.76% of the property council/cadastrale/rateable income (whatever you choose to call it) value of the property.

If tax has been applied in the country of origin, it is the law in Italy to declare the funds here as well and so annual declarations need to be made.

As an aside, it is relevant to note that in 2012 I received a deluge of enquiries from people who had been contacted by the Guardia di Finanza who had obtained information from HMRC (UK tax authorities) about people who have/had rental properties in the UK, were legitimately declaring tax in the UK, but who had failed to then declare that income in Italy. In some cases they were fined substantial amounts for merely this simple mistake.

However, all is not lost because there is a way to limit your Italian tax liabilties.  If the property income is declared in the country of origin and all the costs are deducted from the income, still within the country of origin, then ONLY the net profit needs to be declared in Italy.  In some cases it might also be necessary to declare the rental income in the country of origin even when that country no longer requires you to, for example the UK. If you have rental income under the basic allowance of approx the first GBP 10500 of income and therefore the UK no longer requires a declaration, it may still be wise to insist on making a declaration because the UK allow for multiple expense offsets for tax purposes.  By following this process you are showing the Italian authorities your expense declarations and therefore it is acceptable for Italian tax purposes. 

You may in some cases be able to reduce your net profit to zero. 

To clarify, any rental income from properties held overseas must be declared in Italy, for Italian tax residents.  This is the NET income (after expenses).  And this net figure is added to your other income to determine at which rate of income tax it is assessed in Italy.

Depending on why you are investing in property overseas the advantages/disadvantages can work in 2 ways: . 

1. If you have high expenses for the property then it can work in your favour as a capital appreciation investment. (assuming the value of the property goes up).  Less income means less tax.

2. The downside of this arrangement is that someone with low expenses and high net income (maybe living from the income in retirement) will be assesed at their income tax rates in Italy (IRPEF) which could go as high as 43%

If you are concerned about your tax situation in Italy and would like an initial meeting to assess your liability then we are here to help.  In addition, there might be other more tax efficient and less costly ways to produce income and grow your money.  If you are interested in exploring these then you can contact me on gareth.horsfall@spectrum-ifa.com or on cell 333 6492356

Super Mario (Draghi's) game of risk

Mario Draghi's speech:  He is finally talking about quantitative easing (QE) in Europe? How might it affect Italy?

Breaking news for NON Resident UK Home Owners

Non UK residents will have to pay capital gains tax (CGT) on residential property sales in the UK from April 2015, reversing the current rule, George Osbourne announced in his Autumn Statement yesterday.

The Abitabilità and tax on the sale of Italian properties.

I have been asked a question a  few times in the last year or 2 about the abitabilità and thought I should get an answer.  Here is the question followed by the answer:

Italian succession tax: Did you know?

Did you know that the Capital Gains tax on the sale of inherited property for an Italian tax resident is ZERO.

Taxation of UK rental income in Italy

Since the recent exchange of information between HMRC and the Italian tax authorities on UK rental property owners, I have been asked the question whether rental income (when taxed principally in the UK) will be taxed again in Italy as an Italian resident. 

Warning to UK Rental property owners!

It appears evident from the number of people contacting me recently that HMRC in the UK have shared information with the Italian tax authorities regarding anyone who has a UK rental property and is declaring it in the UK for income tax purposes, but failing to declare it in Italy

Foreign Owned Asset Tax for Italian Residents

My meetings with expats around Italy are becoming increasingly alarming due to the general confusion in the expat community in relation to the taxes specifically on overseas property and assets.  (IMU is already well publicised so I will not recover that ground).  

Who is expected to pay the new taxes?

Anyone who is tax resident in Italy and who has a house and/or financial assets overseas. You are included if in any tax year you were either signed up as resident with your Comune OR living in Italy for more than 180 days, OR the centre of your business and domestic activities was Italy (in other words, you earned income in Italy and/or your family lived here).

Blackrock calls for longer Term Investment

Asset management giant BlackRock today unveiled a high-profile campaign designed to engender a longer-term global investment culture.

“Investing for a New World”, which was launched with a four-page insert in global newspapers including the Financial Times, seeks to encourage investors to build “more dynamic and diverse” portfolios, with the aim of overcoming low yields and volatile markets.

The Spanish tax man

You might be thinking, what on earth could the Spanish tax man have to do with the Italian tax man and the relevance to you.

Well, very simply it is a fact that 300,000 letters were recently sent by the Spanish tax authorities ( The Hacienda), to expats living in Spain.  Each expat was listed with the land registry as having a permanent residence in Spain.  The only issue is that the Hacienda could not find any record of a tax declaration of income.

Penalties for Landlords in Italy

It would appear that the Italian authorities are starting to understand the nature of the tax evasion that goes on in the rental of residential property in Italy. 

Where the landlord/lady does not report the tenancy to the authorities and does not pay registration / income tax on the rent, the tenant is now given an opportunity to register the tenancy and effectively to report the tenancy to the authorities.