Capital Gains Tax

dan rooney Image
06/03/2010 - 10:08

Hi - I am sure this topic has been covered many time before. I am selling my house in Sardinia, where we have lived and have been residents for nearly 4yrs. I understand that there has been some changes in the capital gains tax system but do not know what they are. Can anyone tell me if I will have to pay capital gains tax when I sell the property? Many Thanks,   Dan  


If you have been actually living in the house, (at least for much of the time), and resident, then you are absolutely in the clear as regards Italian 'plusvalenza'. It is not applicable. The test is where you have been living, (and really does not involve being resident on the anagrafe, though that would help to avoid any questions being raised). Assuming you are UK, you may have a liability to UK CGT.

Its not as simple as that. The whole crux revolves around where your proceeds will be deposited. For example, even with double taxation treaties (UK- Ialy) any potentiial liability will ultimately rest on the tax regime of the country that you are moving the funds to.

Taxation treaties only cover so much, and in this case (Uk/Italy) the laws relating to CGT are different. As I understand it, where you are domiciled is key not where the funds eventually end up. If this was your PPR (principle private residence) then no CGT is liable to UK inland revenue. If it wasnt your PPR even though you had Italian residency, you will still be liable for any profits on sale to UK revenue minus deductions etc. If this is the case get a wriggle on...CGT soon going to be increased in Blighty. good luck.

Think that was what I was trying to say pianopiano. If you are "resident" in the UK, you fall within the UK tax regime for all worldwide earnings, gains etc. Similarly, if you are "resident" in Italy then Italian laws apply on all worldwide earnings, gains. Double taxation treaties mean that tax paid in one country can be offset against tax due in the other.

Yes no CGT in Italy after 5 yrs........ however that doesnt mean anything to UK revenue......because the 5 yr law does note exist.  If you have a profit after allowances and the property is NOT your principle will still despite the Italian law have to declare this to UK IR. This is a very common and often costly mistake people make. This issue was exacerbated a few years ago when lower cadastral values were deliberately declared on purchase to lessen tax burden but only served eventually to increase the CGT liability on sale.

Many thanks for confirming that Pianopiano.  In our case, although we are still UK residents (domicile and tax), this is our only property, and so I would hope that we wouldn't have any problems with UK CGT.