Penny Your example may be simplistic but it is basically correct. The Italian calculation of how the overseas taxable income is calculated should be checked with a commercialista as there may be some differences to how it is calculated for Italian properties. If it is the same a Italian properties then from what I have gleaned the expenses for rented property are limited and restricted to 15% of the rent, although I have seen comment that expenses up to 30% may apply. As with other areas of taxation in Italy it is complex and I would strongly recommend using a suitably experienced commercialista to sort out the Italian Tax side. The Italian authorities are I believe cracking down hard on tax evasion and the penalties etc, even for simple errors, can be large. Rachel68 Taxation is frequently illogical and at times unfair. The double tax relief rules and treaties aim to prevent a double tax charge on the same income source but the actual amount of tax in each country is calculated by reference to the rules in each country's tax code. What this effectively means is that between the 2 countries involved you end up paying tax equal to the tax in whichever country has the highest effective rate after deducting whatever reliefs/allowances are available in that country. This is then paid to both countries with the first slice going, in the case of let property, to the country where the property is, the amount being based on the tax due under that country's rules. The balance (if any) is then paid to the other country.
Examples include Civil Service pensions and Armed forces pensions HMRC manuals contain the following comments: A pension of an individual who is, or was, directly employed in central, regional or local government service is paid to him by the other state for services rendered to that state. Members of armed forces or teachers employed by a local authority (or by the board of governors of a public sector school) are also regarded as paid by the state for services rendered to that state. A pension paid by a government etc to the widow or dependants of an individual who rendered services to that government etc is similarly regarded as being paid to the pensioner by the other state for services rendered to that state. Employment with a statutory body set up by a state etc. is not usually regarded as involving payment by, or the rendering of services to, that state etc., even if the body is set up and funded by the state etc. Employees in nationalised industries are also not regarded as coming within the government services Article, nor are employees of privatised industries With regard to the UK/Italian Double Tax Treaty, pensions from the following are apparently also accepted as paid by the UK state the Commonwealth War Graves Commission the British Council the British School of Rome the British Institute of Florence If anyone is unsure they should check with HMRC for a ruling. Hope that helps
I looked at this a while back when someone else was questioning the tax on pensions. You cannot be resident for tax purposes in both the UK and Italy - the Double Tax Agreement includes a tie- breaker which means that for tax purposes you can only be resident in one of the countries. If you are Italian Tax Resident then any UK source income remains liable to UK tax (subject to some exemptions) and relief is given by setting the UK tax against any Italian Tax on the same income. Rental income from UK property remains taxable by the UK even if you are non UK resident for tax purposes and would also be liable to Italian tax as an Italian tax resident - with relief for the UK tax. Nil Italian tax if, and only if, the UK tax on the rental income equals or exceeds the Italian tax otherwise payable. This will not necessarily be the case as there are expenses that are allowed for UK tax purposes that may not be allowable for Italian Tax purposes. So far as pensions are concerned, pensions from the state, which means from employment by the state and does NOT include the usual old age retirement pension that everyone gets, are exempt from Italian tax unless received by an Italian National. The UK old age pension paid by the UK government is therefore taxable in Italy if Italian tax resident. Whilst I have knowledge of the UK tax rules I have very limited knowledge of the Italian Tax rules (merely what I have picked up from the published information and dealing with the Italian tax on my Italian rental income) and as others have advised - get a commercialista to advise on the Italian Tax position as it can get confusing and complex.
Unfortunately it is not as simple as whether you have paid UK tax or not. It is a question of whether you are liable to pay UK tax. To consider whether the UK source pension is taxable in Italy in any particular year it is first necessary to determine whether the individual is tax resident in Italy or whether they are, in fact, tax resident in the UK for that year. The year for UK tax is the year to 5 April of the year for Italian tax is the calendar year to 31 December. It should be noted that “tax residence” is not the same as “residence” and it is possible for a person to be living in Italy for sufficient time to require them to be registered as resident with the local commune but nevertheless, for tax purposes, for them still to be UK tax resident and not Italian tax resident. Conversely, just because someone has not registered as resident in Italy does not mean that they are not tax resident in Italy. The question of residence for tax purposes in the UK is complex and is currently in a state of flux following various decisions in the UK courts. It is anticipated that a new statutory definition of residence in the UK for tax purposes will be introduced in the near future. The UK-Italy Double Tax Agreement (“DTA”) has a tie breaker if someone is tax resident in both countries under their domestic rules. Whilst it is dependent on the facts of each case, and each case must be considered individually, for many people who have retired to Italy and spend most of their time there they are likely to be Italian resident for tax purposes and therefore not UK tax resident. However, where someone has a home (which has a wider meaning than simply owning a house) in both countries and spends time in both countries then it can get very complex. For the UK domiciled individual (usually someone born in the UK and/or having British parents), having a home available to live in in the UK can mean that under the DTA they remain UK tax resident and only pay Italian tax on their Italian source income. In most circumstances that Italian source income would then need to be returned on their UK tax return but would have the benefit of double tax relief and UK income tax would only be payable on that income if the UK tax liability exceeded the Italian tax paid on it. If there is any doubt about your tax residence status then it is essential to get proper advice as the consequences of getting it wrong can be very expensive. So far as pensions are concerned, the general rule under the DTA is that pensions are taxable in the country of tax residence and not the country of source with the exception of Government and Local Authority type pensions (ie pensions paid by the State to someone who has been employed in government service or by a local authority or similar), which are taxable in the country of payment unless paid to someone who is both a national of and tax resident in the other country. To further complicate it, pensions in respect of services rendered in connection with any trade or business carried on by the State or a political or an administrative subdivision or a local authority thereof is taxable in the country of tax residence. It should be noted that the state retirement pension which everyone usually receives is not treated as a Government pension for DTA purposes and is taxable in the country of tax residence. Non-government service pensions (including the UK state retirement pension) received by a tax resident of Italy would, therefore, normally be taxable in Italy and not the UK. If in any doubt advice should be obtained in both the UK and Italy from a tax advisor/commercialista or from someone specialising in the interaction of taxes between the 2 countries. It should also be noted that in the UK, if you have paid overseas tax on income then relief is given for that tax. But this only applies if the overseas tax is actually due. If the tax has been paid and no tax is actually due then no relief would be given as the individual would be expected to recover the overpaid foreign tax from that country’s tax authorities. I do not know if it is the same in Italy but I suspect it is. Apologies for the length of this post but the position is not as simple as some people think and hopefully the above will at least give people a starting point to considering their position. Whilst I can comment on the UK tax position, including the DTA, I do not have sufficient detailed knowledge of the Italian tax system to give other than very general comments on it. The above is only a brief and general outline of the position and does not constitute the provision of advice on any particular circumstances. Advice on a person's individual circumstances should, if required, be obtained from a suitably qualified person. I hope the above is of assistance J
Yes. I went for an "Escape" card after researching. £10 set up fee, no payment charge, no monthly fee and a good exchange rate if paying in euros. Have saved over £100 so far using it as opposed to all the charges I would have paid using a normal credit card. FX card was my second choice - all depends on personal circumstances and useage as to which card is best. Also worth looking to book each way seperately as some of the charges are currently the same in Euros as they are in Sterling, but watch the exchange rates offered by Ryanair. Got caught out once by their automatic use. If you use one of the "good" exchange rate cards (no fixed/minimum fee) then additional savings can be made. eg 2 bags from Italy to UK - £26 instead of £30 on last trip. Main drawback is having to go through the purchase procedure/entering details and online check in twice instead of once.
Domicile is actually relevant for Income Tax and Capital Gains Tax purposes as well as Inheritance Tax. Until recently a non UK Domiciled individual resident in the UK for tax purposes was only taxable on non UK source income and income and gains remitted to the UK. Now, if a person has been UK resident for more than a few years they are taxable on their worldwide income and gains, or they can pay £30,000 and ignore unremitted income and gains for that year. The case of Gains Cooper, whilst relevant, is likely to have limited application to anyone who has established residence in Italy as the UK/Italy Double Tax Agreement (“DTA”) has a tie breaker if someone is tax resident in both countries under the domestic rules. Whilst it is dependent on the facts of each case, and each case must be considered individually, for most people who have retired to Italy and spend most of their time there they are likely to be Italian resident for tax purposes and therefore not UK tax resident. Where someone has retained homes in both countries and spends time in both countries then it can get very complex. If in doubt get proper advice as the consequences of getting it wrong can be very expensive. So far as pensions are concerned, the general rule under the DTA is that pensions are taxable in the country of residence and not the country of source with the exception of Government and Local Authority type pensions (ie pensions paid by the State to someone who has been employed in government service or by a local authority or similar), which are taxable in the country of payment unless paid to someone who is both a national of and resident in the other country. To further complicate it pensions in respect of services rendered in connection with any trade or business carried on by the State or a political or an administrative subdivision or a local authority thereof is taxable in the country of residence. Non government service pensions received by a resident of Italy would, therefore, normally be taxable in Italy and not the UK. If in any doubt advice should be obtained in both the UK and Italy from a tax advisor/commercialista or from someone specialising in the interaction of taxes between the 2 countries. It should also be noted that n the UK, if you have paid overseas tax on income then relief is given for that tax. But this only applies if the overseas tax is actually due. If the tax has been paid and no tax is actually due then no relief would be given as the individual would be expected to recover the overpaid foreign tax from that country’s tax authorities. I do not know if it is the same in Italy but I suspect it is. Hope that helps.
Comments posted
Penny Your example may be simplistic but it is basically correct. The Italian calculation of how the overseas taxable income is calculated should be checked with a commercialista as there may be some differences to how it is calculated for Italian properties. If it is the same a Italian properties then from what I have gleaned the expenses for rented property are limited and restricted to 15% of the rent, although I have seen comment that expenses up to 30% may apply. As with other areas of taxation in Italy it is complex and I would strongly recommend using a suitably experienced commercialista to sort out the Italian Tax side. The Italian authorities are I believe cracking down hard on tax evasion and the penalties etc, even for simple errors, can be large. Rachel68 Taxation is frequently illogical and at times unfair. The double tax relief rules and treaties aim to prevent a double tax charge on the same income source but the actual amount of tax in each country is calculated by reference to the rules in each country's tax code. What this effectively means is that between the 2 countries involved you end up paying tax equal to the tax in whichever country has the highest effective rate after deducting whatever reliefs/allowances are available in that country. This is then paid to both countries with the first slice going, in the case of let property, to the country where the property is, the amount being based on the tax due under that country's rules. The balance (if any) is then paid to the other country.
Examples include Civil Service pensions and Armed forces pensions HMRC manuals contain the following comments: A pension of an individual who is, or was, directly employed in central, regional or local government service is paid to him by the other state for services rendered to that state. Members of armed forces or teachers employed by a local authority (or by the board of governors of a public sector school) are also regarded as paid by the state for services rendered to that state. A pension paid by a government etc to the widow or dependants of an individual who rendered services to that government etc is similarly regarded as being paid to the pensioner by the other state for services rendered to that state. Employment with a statutory body set up by a state etc. is not usually regarded as involving payment by, or the rendering of services to, that state etc., even if the body is set up and funded by the state etc. Employees in nationalised industries are also not regarded as coming within the government services Article, nor are employees of privatised industries With regard to the UK/Italian Double Tax Treaty, pensions from the following are apparently also accepted as paid by the UK state the Commonwealth War Graves Commission the British Council the British School of Rome the British Institute of Florence If anyone is unsure they should check with HMRC for a ruling. Hope that helps
I looked at this a while back when someone else was questioning the tax on pensions. You cannot be resident for tax purposes in both the UK and Italy - the Double Tax Agreement includes a tie- breaker which means that for tax purposes you can only be resident in one of the countries. If you are Italian Tax Resident then any UK source income remains liable to UK tax (subject to some exemptions) and relief is given by setting the UK tax against any Italian Tax on the same income. Rental income from UK property remains taxable by the UK even if you are non UK resident for tax purposes and would also be liable to Italian tax as an Italian tax resident - with relief for the UK tax. Nil Italian tax if, and only if, the UK tax on the rental income equals or exceeds the Italian tax otherwise payable. This will not necessarily be the case as there are expenses that are allowed for UK tax purposes that may not be allowable for Italian Tax purposes. So far as pensions are concerned, pensions from the state, which means from employment by the state and does NOT include the usual old age retirement pension that everyone gets, are exempt from Italian tax unless received by an Italian National. The UK old age pension paid by the UK government is therefore taxable in Italy if Italian tax resident. Whilst I have knowledge of the UK tax rules I have very limited knowledge of the Italian Tax rules (merely what I have picked up from the published information and dealing with the Italian tax on my Italian rental income) and as others have advised - get a commercialista to advise on the Italian Tax position as it can get confusing and complex.
Unfortunately it is not as simple as whether you have paid UK tax or not. It is a question of whether you are liable to pay UK tax. To consider whether the UK source pension is taxable in Italy in any particular year it is first necessary to determine whether the individual is tax resident in Italy or whether they are, in fact, tax resident in the UK for that year. The year for UK tax is the year to 5 April of the year for Italian tax is the calendar year to 31 December. It should be noted that “tax residence” is not the same as “residence” and it is possible for a person to be living in Italy for sufficient time to require them to be registered as resident with the local commune but nevertheless, for tax purposes, for them still to be UK tax resident and not Italian tax resident. Conversely, just because someone has not registered as resident in Italy does not mean that they are not tax resident in Italy. The question of residence for tax purposes in the UK is complex and is currently in a state of flux following various decisions in the UK courts. It is anticipated that a new statutory definition of residence in the UK for tax purposes will be introduced in the near future. The UK-Italy Double Tax Agreement (“DTA”) has a tie breaker if someone is tax resident in both countries under their domestic rules. Whilst it is dependent on the facts of each case, and each case must be considered individually, for many people who have retired to Italy and spend most of their time there they are likely to be Italian resident for tax purposes and therefore not UK tax resident. However, where someone has a home (which has a wider meaning than simply owning a house) in both countries and spends time in both countries then it can get very complex. For the UK domiciled individual (usually someone born in the UK and/or having British parents), having a home available to live in in the UK can mean that under the DTA they remain UK tax resident and only pay Italian tax on their Italian source income. In most circumstances that Italian source income would then need to be returned on their UK tax return but would have the benefit of double tax relief and UK income tax would only be payable on that income if the UK tax liability exceeded the Italian tax paid on it. If there is any doubt about your tax residence status then it is essential to get proper advice as the consequences of getting it wrong can be very expensive. So far as pensions are concerned, the general rule under the DTA is that pensions are taxable in the country of tax residence and not the country of source with the exception of Government and Local Authority type pensions (ie pensions paid by the State to someone who has been employed in government service or by a local authority or similar), which are taxable in the country of payment unless paid to someone who is both a national of and tax resident in the other country. To further complicate it, pensions in respect of services rendered in connection with any trade or business carried on by the State or a political or an administrative subdivision or a local authority thereof is taxable in the country of tax residence. It should be noted that the state retirement pension which everyone usually receives is not treated as a Government pension for DTA purposes and is taxable in the country of tax residence. Non-government service pensions (including the UK state retirement pension) received by a tax resident of Italy would, therefore, normally be taxable in Italy and not the UK. If in any doubt advice should be obtained in both the UK and Italy from a tax advisor/commercialista or from someone specialising in the interaction of taxes between the 2 countries. It should also be noted that in the UK, if you have paid overseas tax on income then relief is given for that tax. But this only applies if the overseas tax is actually due. If the tax has been paid and no tax is actually due then no relief would be given as the individual would be expected to recover the overpaid foreign tax from that country’s tax authorities. I do not know if it is the same in Italy but I suspect it is. Apologies for the length of this post but the position is not as simple as some people think and hopefully the above will at least give people a starting point to considering their position. Whilst I can comment on the UK tax position, including the DTA, I do not have sufficient detailed knowledge of the Italian tax system to give other than very general comments on it. The above is only a brief and general outline of the position and does not constitute the provision of advice on any particular circumstances. Advice on a person's individual circumstances should, if required, be obtained from a suitably qualified person. I hope the above is of assistance J
Yes. I went for an "Escape" card after researching. £10 set up fee, no payment charge, no monthly fee and a good exchange rate if paying in euros. Have saved over £100 so far using it as opposed to all the charges I would have paid using a normal credit card. FX card was my second choice - all depends on personal circumstances and useage as to which card is best. Also worth looking to book each way seperately as some of the charges are currently the same in Euros as they are in Sterling, but watch the exchange rates offered by Ryanair. Got caught out once by their automatic use. If you use one of the "good" exchange rate cards (no fixed/minimum fee) then additional savings can be made. eg 2 bags from Italy to UK - £26 instead of £30 on last trip. Main drawback is having to go through the purchase procedure/entering details and online check in twice instead of once.
Domicile is actually relevant for Income Tax and Capital Gains Tax purposes as well as Inheritance Tax. Until recently a non UK Domiciled individual resident in the UK for tax purposes was only taxable on non UK source income and income and gains remitted to the UK. Now, if a person has been UK resident for more than a few years they are taxable on their worldwide income and gains, or they can pay £30,000 and ignore unremitted income and gains for that year. The case of Gains Cooper, whilst relevant, is likely to have limited application to anyone who has established residence in Italy as the UK/Italy Double Tax Agreement (“DTA”) has a tie breaker if someone is tax resident in both countries under the domestic rules. Whilst it is dependent on the facts of each case, and each case must be considered individually, for most people who have retired to Italy and spend most of their time there they are likely to be Italian resident for tax purposes and therefore not UK tax resident. Where someone has retained homes in both countries and spends time in both countries then it can get very complex. If in doubt get proper advice as the consequences of getting it wrong can be very expensive. So far as pensions are concerned, the general rule under the DTA is that pensions are taxable in the country of residence and not the country of source with the exception of Government and Local Authority type pensions (ie pensions paid by the State to someone who has been employed in government service or by a local authority or similar), which are taxable in the country of payment unless paid to someone who is both a national of and resident in the other country. To further complicate it pensions in respect of services rendered in connection with any trade or business carried on by the State or a political or an administrative subdivision or a local authority thereof is taxable in the country of residence. Non government service pensions received by a resident of Italy would, therefore, normally be taxable in Italy and not the UK. If in any doubt advice should be obtained in both the UK and Italy from a tax advisor/commercialista or from someone specialising in the interaction of taxes between the 2 countries. It should also be noted that n the UK, if you have paid overseas tax on income then relief is given for that tax. But this only applies if the overseas tax is actually due. If the tax has been paid and no tax is actually due then no relief would be given as the individual would be expected to recover the overpaid foreign tax from that country’s tax authorities. I do not know if it is the same in Italy but I suspect it is. Hope that helps.