Donna Noble

Hi everyone,

I was wondering if someone could explain the following?

What has changed this year regarding the taxes for owners of houses in Italy?

What is now the difference between IMU and IVIE?

Why do citizens with a "secondary" property overseas have to pay more than if that second property was located in Italy?

Why is the IVIE rate for "luxury" properties levied at 0.4%- half the amount charged on "normal" properties (0.76%)?

What are the characteristics that define a "luxury" property?

Did I read correctly that you can get up to 25% reduction on your IMU on a second property if you rent that property out to tenants using the property as a main home? Why isn't this applied to second homes in other parts of the EU?

modicasa

Property taxes on houses in ITaly are IMU (And TASI). IVIE is a tax levied on property held outside Italy - and is declared on your yearly tax return.

This year for IMU the differences are: agricultural land is not longer payable. Prima casa owners will not pay IMU or TASI (technically) so expect a whammy for second home owners who will see their rates rise.

The olfd definitiions of luxury properties have gone - now if it is registered as an A1,A8 or A9 its luxury and there is no exemption on Imu (prima casa).

IVIE is not calculated on whether the property is luxury or not - it is payable because you have it.
There is no IMU reduction on a second house. YOu can rent it out using cedolare secca and therefore pay a flat rate of 19% on the incomes instead of your usual tax bracket, which could be a significant saving.

modicasa

37100 has pointed out that the flat rate of cedolare secca is now 21% and not 19%.

Donna Noble

You probably saw this question coming:

Regarding renting out a "seconda casa" not located on Italian territory, will that income also be taxed at a fixed 21%?

modicasa

That comes under the double tax treaty as the income is earned where the house is located, so you should be paying the tax in that country in which case you will be paying at the UK rate if the house is in the UK. TheIVIE though is only payable in ITaly.

Donna Noble

Tax on rental income:

But if one does a tax return in the UK, the earning must STILL be declared here Italy. If the earnings are under £10,000, that means no tax is due in the UK. But that same amount is still taxable in Italy. If the earnings are over 10k then yes, any income tax paid IN THE UK is off-setable against the amount of tax due in Italy.

Last year the rental income from the UK was bundled in with the Italian job earnings and tax paid at the band I was in.

This year, seeing as second property (located in Italy) rental income is being charged at the basic rate, 21%, does that also apply to a second property that happens to be located outside Italy?

Property Tax:

I also read that there is a 25% rebate on IMU for a second property located in Italy if it is rented out to someone using that property as their FIRST home.

My point is that basically IVIE and IMU are now the same thing: property taxes on second homes. The only difference is the LOCATION of the property. However, there seems to be an advantage if the property is located in Italy which is clearly a possible discrimination against non Italians, because it is more likely that a non Italian will have a house back "home".

This also goes for the tax treatment of the rental income for those properties. I don't see why they should be treated differently.

Capo Boi

'Tax on rental income:

But if one does a tax return in the UK, the earning must STILL be declared here Italy. If the earnings are under £10,000, that means no tax is due in the UK. But that same amount is still taxable in Italy. If the earnings are over 10k then yes, any income tax paid IN THE UK is off-setable against the amount of tax due in Italy'

Donna, we have been here before. As I said previously, this is a grey area but experience suggests that the Italian tax authorities will accept the net number. Nothing guaranteed but it seems that the UK regime is respected. So nil up to the allowance and the net number after that. That this has been accepted in the past presents a precedence.

As far as IVIE is concerned, referring to your previous posts, I thought that you considered it illegal despite only applying to residents in Italy. Good luck in your argument and efforts with the Fiscale. Or have you changed your position? And maybe, after all it's legal? George has put stamp duty up to 15% for non UK residents. No one is really questioning that or calling it illegal. Initial moves I believe were to take IVIE up to 2% in a series of stages. I can understand the reasoning.

modicasa

There is a rebate on IMU if the property is let at an affitto concordato - but that is only applicable to 4x4 leases, and in comunes that apply the legislation. It is up to each comune to decide on IMU and who pays what.
I disagree however with your funadmantal point - IMu and IVIE are not the same thing. One is a comunal levy for services - you pay as a consequence of owning: , and one is a tax on luxury/exportation of money - you pay because you own.. IVIE can only exist if the property exists outside Italy. For Italian citizens this creates few problems, the problem is for 'incomers' who are caught in the system - and it seems unfair. But as they cannot vote and have no voice, its an easy call for government.

Donna Noble

Are we still disagreeing about declaring the flipping rental income from UK properties ?

I'm just a dumb wit I know but it is actually the law to declare rental income in the UK AND in Italy. So, I pay zero tax in the UK because it's under 10k .... But you don't just leave it at that ... You HAVE to also declare it (the net income that is, after taking off all your expenses and what not) in this flippin country, where it is taxed at the percentage of "whatever tax bracket you're in".. I am I the only person doing that?

So my question was should it actually be being taxed at a fixed rate of 21% or the percentage of "whatever tax bracket I'm in", which of course is a higher rate than 21% otherwise I wouldn't be asking would I?

Modicasa, in your first post you say IMU is a property tax and the last one that it is a communal levy for services. Which is it?

Of course IVIE is illegal under EU legislation. It was designed with one aim in mind: to force residents into bringing their wealth currently abroad to Italy. That is fundamentally against the european philosophy of free movement of money. It also discriminates against foreign nationals residents who, let's face it, make up the majority of the cases yet who never actually MOVED their money out of Italy in the first place. Added to that is the peculiar case of the UK that is the only country that Italy doesn't allow the local property tax to be off-set. Now that is against the double taxation agreement. Please nobody now comment that the council tax is only a charge for services ... Instead go and look it up on the HMRC site where it says quite clearly that the Council Tax is a tax on property.

Stamp duty in Italy is 2% for residents and 9% for non residents (when i last looked). About bloody time George put a non resident tax in place. Apparently before, non residents were exempt from UK stamp duty. Mad.

modicasa

Whether it is a fixed rate depends on whether you were opt for cedolare secca and if it is applicable on patrimony held outside Italy. Talk to your commercialista - I would think it is an endless variable.
To be exact inmy reply - IMU is a communal levy on serviced charged to those who own property. Make of it what you will.
IVIE was not designed to bring wealth already abroad back to Italy - it was enacted to stop people exporting wealth created in Italy.
Stamp duty is Italy is not 2 and9 % for residents/nonresidents, but on whether it your prima or seconda casa - they are two very different things.

Donna Noble

Yes, modicasa of course you are right about the stamp duty. I just seem to associate the seconda casa bit with non residents!