If you plan on earning a rental income from a property in Italy, you could risk paying tax both at home and away unless you contact the tax office where you live. Read on to find out more.
If you are planning a 'buy to rent' property in Italy, you will have to pay taxes on any rental income that you earn. Italian income tax is called called IRPEF (Imposta sul Reddito delle Persone Fisiche).
If you are a resident in the UK you are still liable to pay IRPEF even if you are not a resident within Italy. Each treaty is called either a 'Double Taxation Agreement' or a 'Double Taxation Convention', depending on the wording of the treaty.
If you have income from a source in one country and are resident in another, you may be liable to pay tax in both countries under their tax laws. To avoid 'double taxation' in this situation, the United Kingdom has double taxation (DT) treaties with more than 100 other countries.
If you are a resident of a country with which the UK has a double taxation treaty, you may be able to claim exemption or partial relief from UK tax on certain types of income from UK sources.
Relief from UK tax is not automatic and you will need to register for relief where your application will be dealt with by HMRC Residency. The relief available depends upon the terms of each DT treaty and HMRC Residency decides whether an application is allowable.
If it is, relief at source is normally allowed on future payments of the income.
If your application is approved you will either be liable to zero tax on the income or tax on a reduced rate as laid out in the DT treaty.
For specific details and downloadable forms, go to: www.hmrc.gov.uk
The views represented in this article are those of the author and not of Channel 4. The purpose of the article is to provide general information only and does not constitute financial, investment, legal or other advice. You should not rely on any information provided in this article and you should always seek out independent professional advice relevant to your own particular circumstances.
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