1743 regulations for renting

Patrick

Rental income earned will be subject to IVA (VAT) and rental income from land and buildings is subject to income taxes and needs to be declared in the annual tax return. The rules are complex, as you can imagine, but there are options.

You should already have declared income from the property in your tax return; just by owning a property, whether resident or not, you are deemed to produce taxable income and must by law file a return. There are fines and penalties if you do not do this.

If I can help drop me a line a [email]michael@mjmurphyaccounts.com[/email]

Regards,

Michael J Murphy ACA

Michael, thanks for your comments.
Does Italy have a no IVA structure for businesses with a limited turnover?
Thanks Patrick

[QUOTE=patricio]Michael, thanks for your comments.
Does Italy have a no IVA structure for businesses with a limited turnover?
Thanks Patrick[/QUOTE]

Patricio, you are involved with IVA (VAT) only if you rent houses professionally, as an entrepreuner.
If you rent just an house (or even one or two rooms occasionally) you're not considered entrepreuner, so there's no IVA.
The income you get from the fees, increases your general income and you must declare it, so it's only a matter of "dichiarazione dei redditi".

[QUOTE=patricio]Michael, thanks for your comments.
Does Italy have a no IVA structure for businesses with a limited turnover?
Thanks Patrick[/QUOTE]

Patrick

There is no registration limit in Italy; once you start to make taxable supplies as an entrepeneur, then you are liable to register for IVA.

Sec. 4 of the VAT Law defines “enterprise”. From this definition, the definition of “entrepreneur” can be derived. An entrepreneur is a person who is independently and habitually, but not necessarily exclusively, engaged in taxable (including exempt) transactions undertaken in the course of a business enterprise.

Therfore an habitual renting of a property would render the lessor an entrepeneur.

Each entrepreneur must, within 30 days of establishing a business enterprise or permanent establishment in Italy, register with the tax office of the district in which the entrepreneur commences operations (Sec. 35 VAT Law). The entrepreneur is then issued a VAT registration number. The registration
number should appear on all documents relating to VAT.

Foreign entrepreneurs without a permanent establishment in Italy may register only through a fiscal representative.

Hope this helps: drop me a line a [email]michael@mjmurphyaccounts.com[/email] if I can help any further.

Regards

Michael

[QUOTE=Michael J Murphy ACA]Therfore an habitual renting of a property would render the lessor an entrepeneur.
[/QUOTE]

What would be considered habitual renting? We have bought two properties in Italy, one to live in and one to use a holiday rental.

[QUOTE=Technically Blonde]What would be considered habitual renting? We have bought two properties in Italy, one to live in and one to use a holiday rental.[/QUOTE]

The definition of habitual is "ordinary course of behavior" therefore where the second property is "customary" then yes it would appear to meet the requirement. But do not forget that your clients pay the IVA you charge and you can reclaim the IVA you need to pay out.

If I can help drop me a line an [email]michael@mjmurphyaccounts.com[/email]

Rregards

Michael

Thanks for that Michael, I was hoping we would not have to charge IVA to clients as obviously it increase the rent we have to charge to them.

I know how the nuts and bolts of VAT accounting work in the UK, but of course here we are protected by the turnover limits before VAT registration becomes compulsorary.

that as a first sounding seems to take care of what to do with all the rental euros!

Now quaint electrics and open fires......is any authority likely to care about the inner bits of a non-professional rental house?

Any help much appreciated.

Grazie - patricio

[QUOTE=patricio]
......is any authority likely to care about the inner bits of a non-professional rental house?

[/QUOTE]

No.
If you rent an house non professionally, but as a ordinary citizen who just onwns a house and rent it, all you have to do is "registrare" the contract, that is to give a copy of the contract to the local ufficio del registro and pay tassa di registro (2% of annual income): no IVA.
Moreover you add the income on your annual fiscal income.
Short term rental isn't usually "highlighted"....

What you seem to be saying is its a matter of how professional the set up appears?
We intend renting our house for a few months and at Christmas if we can but dealing with payments and bookings in the UK and declaring that income to the Inland Revenue on my tax return. I can't see it coming to more than £1,000 after we've paid for someone to do change-overs.I will design a website and perhaps print some leaflets but as I say the venture is really just to make some money to cover house insurance and taxes.The rest of the year we will use the house ourselves.

Oh and we will live in the Uk not Italy while we do this.

any advice?

[QUOTE=manopello]What you seem to be saying is its a matter of how professional the set up appears?
We intend renting our house for a few months and at Christmas if we can but dealing with payments and bookings in the UK and declaring that income to the Inland Revenue on my tax return. I can't see it coming to more than £1,000 after we've paid for someone to do change-overs.I will design a website and perhaps print some leaflets but as I say the venture is really just to make some money to cover house insurance and taxes.The rest of the year we will use the house ourselves.

Oh and we will live in the Uk not Italy while we do this.

any advice?[/QUOTE]

sounds to me that as the money is actually "arising" in the UK you will be taxed in the UK on it (via your tax return). One reasonably inexpensive way to get a professional reply is to pose the question to [url]www.taxcafe.co.uk[/url]. They used to charge £75.00. The replies are comprehensive, understandable and backed up with relevant tax legislation.

Notaio - thanks for your help. I'm encouraged.
Another thread started getting into window sizes and the like for tourist accomodation, and my heart started sinking.....
One final query, non-professional rental income goes into annual personal income tax declaration. Any provision to deduct repairs, improvements, costs etc, or is that reserved for the professionals?
Grazie - Patricio

the inland revenue are fab with answering these sorts of questions so I will phone them and post their reply if anyone else is interested.They are free too yipee!!

thanks for the other details..may try them too.

Becky

[QUOTE=patricio]
One final query, non-professional rental income goes into annual personal income tax declaration. Any provision to deduct repairs, improvements, costs etc, or is that reserved for the professionals?
[/QUOTE]

Sorry, professionals only.
But you can deduct from your italian income 36% of all the costs made for repairs, improvements etc. on your italian real estate, with a procedure that a commercialista might explain.
Of course you've to consider if you have enough incomes to declare.
In Italy there's a "no tax area" under €. 19.000,00 (... about, I'm not sure of the amount, I've to check if it's going to change this year).

[QUOTE=notaio]
In Italy there's a "no tax area" under €. 19.000,00 (... about, I'm not sure of the amount, I've to check if it's going to change this year).[/QUOTE]

Sorry, big mistake: no tax area, is €. 3.000 if you have only houses and no other incomes (i.e. jobs).

[QUOTE=notaio]Sorry, big mistake: no tax area, is €. 3.000 if you have only houses and no other incomes (i.e. jobs).[/QUOTE]

Does this mean that if your income is below €. 3.000 you don't have to fill in any forms?

[QUOTE=alan haynes]Does this mean that if your income is below €. 3.000 you don't have to fill in any forms?[/QUOTE]

Yes you don't have to fill anything.
Of course we're talking about italian incomes.
If you rent the house in England to a UK citizen and you're payed there, it is no more an italian problem, because, for the italian tax authorities it is a foreign income.
It might be taxed by English authorities (but are they able to do that ? how can they notice?).

notaio

I am confused do you mean that if I only recieve payment in UK in sterling for rent for my house in Italy I do not need to involve the Italian Tax Authourities?

Would this apply to my partner who is an artist and sells his work only in UK and is paid in Sterling.If he lived in Italy can he also carry on dealing only with the Inland Revenue as I was told he could but only for 2 years!!

The tax limited in Italy is very low at 3,000 is that a personal tax allowance so a couple get 6,000?

Its the tax situation in Italy that will prevent us making it a permanent home as we would be so much worse off both being self-employed.

Becky

Becky darling, it's Rob,
Yes, yes & yes. I've been down this road. All that any country in europe require, is that you pay tax in A EUROPEAN COUNTRY. For example, if you maintain a UK bank account, the profits you accrue have to be deducted & paid in the UK. When you tell HM government that you are now a tax payer in Italy, they will require you to declare what income, if any, you still have in the UK, never mind what tax you are declaring you and paying in Italy In other words, whichever country you want to declare the 'tax liability' of an income, you can.
Hope this helps.
Salute
Rob

[QUOTE=manopello]the inland revenue are fab with answering these sorts of questions so I will phone them and post their reply if anyone else is interested.They are free too yipee!!

thanks for the other details..may try them too.

Becky[/QUOTE]

Hi Becky,

I'd be very interested to know... if you've already got around to calling them! :)

Cheers,
Stephanie

[QUOTE=notaio]Yes you don't have to fill anything.
Of course we're talking about italian incomes.
If you rent the house in England to a UK citizen and you're payed there, it is no more an italian problem, because, for the italian tax authorities it is a foreign income.
It might be taxed by English authorities (but are they able to do that ? how can they notice?).[/QUOTE]

Income derived in Italy is taxable in Italy; the fact the money is handled outside of Italy is irrelevant. Rental income from an Italian house is taxable in Italy.

If you are UK resident and ordinarily resident then the UK will tax you on overseas income of this type with an ordinary tax credit to offset the taxes paid in Italy. Only non UK domiclied individuals resident in the UK may shelter the income from UK tax so long as conditions are satisfied.

This advice from notaio is unambiguously incorrect.

It is an offence not to make full disclosure to the UK authoities where income of this type is earned overseas.

[QUOTE=Technically Blonde]sounds to me that as the money is actually "arising" in the UK you will be taxed in the UK on it (via your tax return). One reasonably inexpensive way to get a professional reply is to pose the question to [url]www.taxcafe.co.uk[/url]. They used to charge £75.00. The replies are comprehensive, understandable and backed up with relevant tax legislation.[/QUOTE]

Earnings from a property situated in Italy arise in Italy and not the UK so will need to be declared in the UK and Italy.

This is goverened by article 11 of the treaty, and Italian tax law.

[QUOTE=alan haynes]Does this mean that if your income is below €. 3.000 you don't have to fill in any forms?[/QUOTE]

You will need to fill in forms but just not pay any taxes.

Declarations are even needed if you just own a property in Italy because the house is deemed to generate income but there is a tax credit to offset the deemed income where it is your prima casa. So the end result will mean no taxes to pay.

I am phoning the Inland Revenue today but this concures with all I've read about Italy.Thanks

Becky

[QUOTE=Michael J Murphy ACA]You will need to fill in forms but just not pay any taxes.

Declarations are even needed if you just own a property in Italy because the house is deemed to generate income but there is a tax credit to offset the deemed income where it is your prima casa. So the end result will mean no taxes to pay.[/QUOTE]

Bearing in mind that I [like many others with holiday homes] don't have any income from my house - so don't want to spend out on fees on Commercialistas etc - how can I get these forms in the UK - when are they to be filled in by, and where are they sent when completed?

[Why is it that I dread the answers to these questions]

[QUOTE=alan haynes]Bearing in mind that I [like many others with holiday homes] don't have any income from my house - so don't want to spend out on fees on Commercialistas etc - how can I get these forms in the UK - when are they to be filled in by, and where are they sent when completed?

[Why is it that I dread the answers to these questions][/QUOTE]

Like [I]ICI[/I] the price of having a holiday home is this compliance. As far as I am aware there is no way of getting the forms in the UK hence a UK Chartered Accountant with an allaince with a commercialista is one way. The forms are only in Italian.

The Italian tax year runs on a calendar year basis.

The due date depends on whether you file on line or in paper; 31st October and 31st July respectively.

If I can help you can contact me at

[email]michael@mjmurphyaccounts.com[/email]

[url]www.mjmurphyaccounts.com[/url]