Italian residents with property in the UK

This has come up before. You are required to pay tax on property owned abroad. This measure was brought in to make it not attractive for Italians to hide money by buying property in other countries, but it catches the British who retain houses in the Uk. People who claimed residency to avoid paying the higher tax on their purchase may find they have chosen the most expensive option because they must also make a tax return in Italy. Italy has a economic crisis and foreigners will not escape scrutiny.  

I think a lot of British people resident in Italy mistakenly assume that if they file a tax return in the UK for their rental income then that is the end of the story. Sprostoni - it is based on the rateable value of your UK property (as these are bands now I have no idea if you just take the mid-point?) and you cannot deduct the council tax you do, or do not, pay in the UK. The rate is 0.76% and it was due by 20th August 2012 at the latest. The fines are pretty hefty at 40% of the tax amount plus interest and fees. I think the thing that has caught a lot of people out is that it is due for 2011 so has to be paid this year even though the law was created in 2012. That plus the government didn't release details of how to calculate it or the deadlines until the last moment.

The people I know who have been affected were not trying to deceive but either genuinely didn't know about it or their accountant didn't know the deadline was 20th August.

Sprostini I think your sums are wrong! If your rateable value (ie council tax band) is band E £88,000 to £122,000 as mine was and assuming you take the mid-point at £105,000 and multiply this by 0.76% you get £798 so a 40% fine would up this to £1117.20!

Yes, it's an annual charge :-)

From what I read, it isnt based on the rateable value, but on the market value.  The price you paid at purchase if it was not too long ago was the calculation starting point.  Given house prices in the Uk , 0.76% of a house bought even 20 years ago wont be a piddling amount. 

  Latest News

Stop press on IVIE and property values

You may not believe this but.... At less than a week prior to the deadline for paying income tax our friends at the Italian Revenue have completely re-worked the rules on calculating the value of properties overseas. This modification was made yesterday (Circular n.28/E) and published in the specialist papers today. The news is that when calculating the tax on overseas property held by Italian residents, instead of using the purchase price as the taxable value - as they have specified in every publication on the subject to date - for properties in the UK the reference value will be that of the relevant Council Tax band. For properties in other EU countries other reference values are given. Note that the Council Tax itself will not be deductible, but this change of taxable value should make an enormous difference in the vast majority of cases, especially as the values in England were determined way back in April 1991. So this is hugely good news for everyone, save the poor commercialisti who now have to redo their calculations.   Last Updated on Tuesday, 03 July 2012 21:42

It is good that Penny has flagged this up, and there have been a number of clarifications since the subject was first discussed. In fact, we were supposed to hear this week about an extension of the date for making the declaration, but it hasn't come through yet. If the tax is not paid on time the potential fine is not 40%, but 4% for being just a bit late (that's not a change, just a clarification). BUT. Here is a link to a recent IlSole24Ore piece (that's the Italian nearest equivalent to the FT,  in other words it is a very authoratitive newspaper). It is made clear here that the UK Council Tax is NOT deductible from the tax due in Italy. "Caso a parte è il Regno Unito, in quanto la Council Tax non è scomputabile dall'Ivie dovuta, non essendo un'imposta patrimoniale ma un'imposta sui servizi." I can see legal challenges to this, if you study the table associated with the article it does seem ridiculous that properties in different EU countries are treated in such diverse ways. http://www.ilsole24ore.com/art/norme-e-tributi/2012-08-07/casa-estero-so... The most worrying thing about this seems to be the complete lack of understanding by Italian commercialistas. One  non Italian friend was firmly assured by his commercialista that this only applied to Italians with property abroad, and I suggested he asked the commercialista to research further. The commercialista did this, and changed his mind.

Hi Fillide, I will try to find the article again. There was 4% interest charged if you paid after the July deadline but before 20/08/2012 after which you had to pay the original 0.76% plus an extra 0.4% (but I will find the article to confirm the extra %age). Basically you only get away with 4% if you pay by 20/8/2012 is what it says here - http://www.investireoggi.it/fisco/ivie-pagamento-entro-il-20-agosto-con-maggiorazione/

... you put your uk property into a ltd company and thus derive your interest in the property from the share holding?

In a world where people have not enough to eat, to have two houses is riches. . there are many British who are resident in Italy and keep a house in the UK but there are also many who claim residency to avoid the higher purchase tax but who do not here live. If the rich don't pay their taxes the poor must pay more. I pay.

Sorry, but that tax money is not going to feed the poor people of the world, but to pay for all the mistakes of and feed the fatcats... To have two houses does not make the owner a millionaire. Their income and the value of any assets is what gives an idea of the money they have. Someone having a second home is already paying taxes on the value of the home plus any income it may generate. I thought that the whole idea was to avoid double taxation and this was why bilateral agreements were in place. On the other hand , Berlusconi made a big mistake when he decided not to charge IBI for Prima Casa. Everyone should pay for that as local government gets its revenue through taxes. To take up residency in another country to save a percentage on taxes at purchase time is another silly mistake.  And we all pay for the mistakes that someone else makes...

Your argument is flawed, all riches are relative.  "to have two houses does not make the owner a millionaire" tell this to an Italian with no job, no house and no food for his children it is arrogant to expect not to pay you tax

Where about in the council tax band would the value be taken, the median value or  what?

Rickardo - why do you think that people don't want to pay their taxes??? I don't believe anyone has said that. I don't think I've ever met an Italian who only owns 1 house. All the ones I know own at least a pert of a another one due to the inheritance laws....... even if they themselves live in rented accommodation. Many people are stuck with 2 homes because they can't sell one (or both) of them due to the recession so it really isn't an indicator of wealth any more than owning 2 cars because you need them to separately get to work etc. Poetica, if you own a UK Ltd company then you must pay tax on your shareholding (no idea how this is valued) and it is called IVAFE. It was brought in alongside IVIE.

Interesting...today we had a visit from Italian neighbours who live in a flat above the local supermarket. They have 4 houses to sell, two in the village and two in the countryside.....inherited from family, they are by no means wealthy, I would guess the opposite.

I agree with your comments, Penny, Sprostoni and Angie. Many Italians own several houses and small parcels, not worth much and in bad need of repairs and maintenance and I would never say that they are rich, quite the contrary, those properties are a liability. British people who reside in Italy may own a small house in Italy and a similar one in the UK that they keep justbin case their Italian dream becomes a nightmare. They pay taxes on both their Italian and their UK properties to the respective governments. I do not think it is fair to them to be taxed twice on the same property by different governments. This was the true spirit of the law behind the double taxation agreements signed by different countries.

Do not bother to argue with me, save your argument for the Guardia di Finanza

If you are resident in Italy then you pay your tax in ITaly.  If you have a house in the UK where you spend time, then you cannot expect to be exempt from ITlaian tax- you did after all elect to become resident. Nobody forced you to do it.   I cannot agree with Gaia on this one.  If you are non resident then you are not taxed twice.  If you are resident then you pay - but that is an informed choice.  Becoming a resident to save a few bob here and there, is and has not been a good idea for years, but people insist on doing it thinking they are beating the system.  

In France and Spain probably in other EU countries too they take the view that as there is free movement throughout the EU then the old rule of 183 days does not apply. You can live much of the year in France and still be a UK resident for tax and social security purposes. You cannot, of course, then claim benefits or enter the French medical scheme and your house is considered as a second home and does not have exemption from Capital Gains Tax. Any income in France would need to be declared to UK tax authorities.

This all makes me laugh. Everyone has an 'opinion' on the law, as if they really know how it all works, and in fact most of these posts are relating to what people have either 'heard' or 'read' about. The bottom line as Rikardo says is down to the Guardia di Finanza and you can think what you like but if they say you owe € xxx to them for property in another country, my advice is pay up. You can feel as indignant as you like over how right or wrong this may seem, but if you have the luxury of owning 2 or 3 homes either in this Country or another then as far as I'm concerned you can afford this payment. If you can't then sell up; times are hard but someone will buy it at the right price. If you've chosen to become a Resident here for what ever reason you can't harp on about the inequalities of the Tax System. Tough! pay up or Ship out..

It might be 'fair' to bear in mind that for many people who have spent their hard-working lives being 'self-employed', owning property  (and being mortgaged up the neck - so infact only 'partly' owning property with the bank as the other owner!) is a way of trying to create a small pension in the future where there might be absolutely no possibility of saving and 'paying into' a pension scheme. It is quite an exhausting and risky way of creating a pension but I think a very common one now. So owning more than one property cannot only be seen as the realm of the 'rich' - it is also a way for the 'struggling' middle class who are trying to take responsibility for themselves and their family. I do think it is 'unrealistic' and quite frankly 'simplistic' to  imagine everyone with multiple properties are swanning around with spare cash and accruing swimming-pool-laden homes around the world (which the tone of this thread seems to be suggesting is the 'imagined' case from certain quarters). For some of us it's a bit of an unknown 'shot in the dark' to create some stability in an unstable world. Why is it OK for a PAYE worker to pay into a pension scheme contributing to the wages of fat cat bankers but it isn't Ok for another self-employed person to nominate a property as their sole means of pension and not be worrried when that becomes threatened by things like IVIE that they hadn't budgeted for? I totally agree - let's get the fat cats who simply accrue and have nothing to worry about - they should be paying far more - but let's make sure we don't wipe out the hard working ones who aren't at this financial level but have got caught up in the frenzy of bashing the really rich who are not paying their way proportionally....

Brava, Rachel! Well said.

Rachel, far be it for me me to Judge others financial situations, and I steered well clear of Labeling anyone with more than one house and know for a fact that many can barely afford fuel never mind throw a Croissant at the Pool Maintenance man. It still does not get away from the fact that this measure, whether you agree with it or not, has been placed to catch funding from a source of revenue that is generally targeted at ones who should be able to afford it. You cite property being used as a Pension, fine if you have the means or good fortune to acquire more than one property in the first place; but you should remember many who have contributed through PAYE (who paid there tax at source) into pension schemes and now have bugger all to show for it now and in the future due to mismanaged funds. It's fine to pin the blame on these Mythical Fat Cats who seem to be the source of all financial Evil in the World today, but that doesn't escape the fact that an Asset whether held in property or cash is the fairest method of raising funds for a Government. Putting money into Bricks and Mortar used to be the accepted way of planning for the future, but with the down turn in Property values everywhere this is now a risky strategy. Sorry I can't sympathise with those of you who have to good fortune to own several properties, but I can sympathise with those who have no Jobs, Pensions or assets. I know this is not very Middle Class of me but hey I never was.

It does seem that details are now being exchanged automatically between EU countries more than before. As far as UK is concerned this seems to be limited for the time being to National Savings accounts including premium bonds so that those accounts which would have gains tax free in UK become liable for tax in Italy etc. Property ownership in UK as known by the taxman is not so simple and details may come from an individual giving information to the Italian taxman.

Rachel, I think you miss the point that the property in the UK is not part owned by you and the Banks via a Mortgage, the deal is that the Bank has lent you money to buy said property (they used to loan money to buy lots of things, Cars, Boats Holidays etc but always secured against some realisable asset), and IF you cannot pay it back, in simple terms, it will force a Sale taking what you owe from that and leaving you with the equity. Simple. If you have overstretched or edged your bets and purchased another property in another Country, then that is your look out. A mortgage is just a loan of money that the Banks or Fat Cats give out secured against an asset, whether a building or other means; you then pay it back with interest and they relinquish their hold on your Asset, at no stage do they part own your House; the only obligation you have is to pay them back over the agreed terms of that loan.

The only reason some of those at the top of the earning pile appear to pay less tax Rachel is that they can afford very good Accountants and Lawyers, and to some extent (and I'm not saying that in my opinion they do or don't) those at the top do pay Hundreds of thousands in Tax, probably more in a year than the average person earns in ten. I know it's all a question of scale and I'm not the one to Judge those who pay taxes at whatever level. If you actually know how much a Merchant Banker actually pays a year in Tax I think you may be surprise. All this is on an Individual Level as the biggest culprits in all this are Businesses who avoid Paying tax. If the likes of Vodafone, Amazon and a few others actually coughed up rather than try and 'offset' some of their due taxes, Governments would not have to chase so hard the smaller fish.

I think the 'unfairness' of IVIE if you want to call it that, is the way the Italian tax man has decided that people with houses in some countries can offset the cost of the community charge and others can't. In some countries the tax is based on the rateable value (or equivalent - at least this attempts to match the cadastral value) and other are based on the purchase price/current value. It should be the same rule applicable to all wherever the house is and it should at least have some attempt to replicate what you would pay if you owned a second home in Italy. That to my mind seems much fairer. In fact the UK basis for the tax does attempt to do this as it is base don the ratebale value and you cannot offset the community charge. This is identical to what the basis for IMU would be if had a second Italian home. There was a lot of talk when it was introduced that if taken to the European Court it waould not hold up as it is very much against the whole ethos of double taxation treaties etc....

I agree with you, Penny. It sounds as if this decision was a quick way for the Italian government to raise a quick extra revenue; however, I have the feeling that they may soon discover that it can have some nasty consequences. It does not affect me as I am not a resident and my feeling has always been that the old ICI and the new IMU are necessary. On the other hand, this type of taxes will make people twice before taking up residence in Italy and that the government will loose money in the process. 

I find it covenient to remain a UK resident as I know the system. I have done and do reside much of the time outside UK. Throwing yourself into the bureaucracy of a country like Italy (or Portugal etc) where rules and reality often do not meet is  a recipe for disaster.

We have been living in Italy as residents for just over three years now and with the advent of the IVIE tax we are seriously considering giving up residency. Apart from a small discount on the electricty bill I can't see any other advantage. We can easily spend the required number of days outside of Italy and just visit in the spring and summer. We can leave the house locked up and spend the rest of the time in other parts of the world. Am I the only person considering this option?

.. Am I the only person considering this option?   No we will pack up and leave also if we don't like the game ....

It seems we are all being squeezed too hard,but what happens when the jug is empty? It does seem the only option is to opt out but how will you opt out of residency?  

Leave the country, it's a free EU market, as Dire Straits would say it's the "Walk of life"