Residence in Italy whilst still having house in UK

05/12/2012 - 10:34

I am wondering if anyone can help with this property tax minefield! Last September my partner and I bought a casale in Lazio to renovate and which will be our main home in the years ahead. It is a long term home for us. We bought it in my name solely. I also have a house in London which has gone up in value substantially over the last eight years. We currently rent out this home in London and rent in Scotland as my partner's job involves frequent postings abroad. He will retire in approx 6 years and then the plan is that we will all live in Lazio. Our plan was for me to obtain residence within the 18 months stipulated on the rogito and to start my residence earlier. However, our house in London is also solely in my name but with my partner owning half by deed of trust. He doesn't have any other property in his name. My questions are, if the house in Italy is my 'prima' casa' will I have to pay tax on profit from selling the London house should we decide to do this and also as I am a low earner and my tax level from rental income on the house is at 20% will I pay this through the Italian tax system which will mean it is more like 40% tax, or does the tax go to the country where the rented property is, and if so what happens if there's discrepancy in tax threshold levels between the two countries? There is this further business of the yearly tax on overseas properties which has recently come up but I think this has not even been found to comply with EU rules at the moment so I guess we'll worry about that one when we come to it! The house in the Uk is our only savings etc so it is obvious crucial we get this right as we can't afford to be flippant about it. If we decide to change our minds about me being resident is there any way of doing this without the awful fines I've read change of circumstances through employment etc?Thanks. Any advice very much appreciated!



Most of this depends on how honest you feel and what you's up to you as the chances of the Tax man catching up with you on what you have described are pretty slim I think. Decide where you want to pay tax and adjust accordingly is my motto..

I think my concern would be on what basis would you appply for residency?  If you don't have a job here (in Italy) then your local comune would most likely ask to see proof of means of support here ie income / savings / pension etc.  It's not a given that it would be granted and then where would you be? I think many people bought (and were encouraged to buy) prima casa when actually it was only a rough plan to live here at some stage in the future. If this is seen as a tax dodge, rather than you simply keeping your options open as you move forward, then you may be in hot water here.  I would take advice from a commercialista immediately as the clock is already ticking.

Hi rachel68, It is a VERY interesting situation that you have, I sadly am not in a position to advise directly...........BUT, my general thinking is to play with a 'straight bat'. I think it would be VERY likely that you would be granted residency here as there is a bit of a 'self-declaration' ethic here at times. I tend to think that you are likely to be paying more tax in Italy by playing the straight bat, but you will feel better for it than risking the wrath of the tax people here. Think positive...........where do you want to be? do you want to do things correctly? Do you want the risk of worries ? Good luck and enjoy this wonderful country............. S

If you are within the eighteen month period, I'd think very hard about whether it would not be more economical for you to pay the higher tax rate on the house purchase, and not to become resident. This is an option available to you, and does not incur any fines. Only when you have become resident (by registering yourself on the anagrafe of the comune) do you become liable for IMU on your British property by default, and enter the Italian tax system for worldwide income. If you are genuinely not resident (ie spend more than 183 days outside Italy) then you simply do not enter into the Italian tax system. You will have to pay IMU on your Ligurian property (and at a higher rate than if you were resident). When you are genuinely resident here then your house will become de-facto your prima casa. You won't get the purchase tax back, but everything else will be the same as if it were bought as prima casa.

Thanks so much for the help! This is all really helpful. Perhaps I should explain a little more; I am a freelance classical musician and am really hoping to audition for work in Italy alongside being 'on site' with the house renovations (musicians often survive with this hybrid job combination!). We were also planning for our 3 1/2 year old to go to the village scuola infanzia so really I would be living in Italy. The fly in the ointment is that my partner's work means I'll be travelling between where he is based and Italy. This will become clearer over the next few months when we know where his next posting will be. We are told the casale renovation costs will be in the realm of €170k so not being resident at this point will also mean hugely expensive building taxes at a non-resident rate plus no access to the tax reduction (€48k over ten years?) you can claim for renovating an old derelict building in Italy. I suppose the big issue is what happens if we sell our house in London and decide to downsize to release funds at some point. In the UK it's our sole home so no capital gains but will the Italian tax office be entitled to a chunk of the profit? Seems a little unfair as if I sell in a year I will have only been an Italian resident for a fraction of the time that we've owned the UK house. Any ideas of a good, reasonably priced commercialista? Thanks again!