This
spring, I wrote an article about the new property tax owed by the owners of
real estate property in Italy, called the Imposta Municipale Unica (IMU; see TF
166). Then, just a few days ago, a foreign resident presented me the following
problem: ‘I don’t have real estate property in Italy, but I do have an
apartment in France, that I bought some years ago, when I was still living
there. Now the Italian tax police have asked me to provide itemized information
that I annually pay taxes on the property in France. Before I provide this
evidence, I would like to know, since I do not pay taxes in Italy, whether the
Agenzia delle Entrate has the right ask me this kind of information and why.’
WHO HAS TO PAY IVIE?
The
law considers ‘resident in Italy’ a person who spends the majority of the
fiscal year (184 days per year) in Italy, either because he or she is
registered in the civil records of residents (anagrafe), or because he or she
has ‘the center of their personal or professional interests’ (article 43 of the
civil code) in Italy.
In
other words, if a person has family, owns a property, has children who attend
local schools in Italy, or simply lives in Italy for more than 184 days per
year, it is likely that he or she will be considered a ‘resident’ and therefore
subject to the payment of the IVIE levy on the property that he or she owns
abroad.
If the
property is owned by a group of people, the tax is to be paid by each person in
proportion to the ownership percentage of the property. Special rules are also
set if the property abroad is registered under someone else’s name (for
example, through a trust).
WHAT IF THE OWNER ALREADY PAYS PROPERTY TAX IN HIS
HOME COUNTRY?
If the
owner already pays the equivalent of property tax (for instance, Council Tax in
the United Kingdom; in Argentina the Impuesto Inmobiliario; in the United
States, Real Estate Tax or Property Tax) in the country where the property is
located and if that levy is higher than the IVIE that should be paid in Italy,
then he or she will not have to pay IVIE. Specifically, that person still has
the obligation of declaring the property in his Italian Tax Report, but the law
will grant a tax credit up to the amount of IVIE that he or she would have paid
in Italy. Further reductions may be granted if the property is located in the
European Union.
HOW MUCH TO PAY?
The
rate of IVIE is 0.76 percent of the ‘value of the premise.’ For properties in
the European Union, the value taken into consideration is the rental value as
assessed by the local land registry. Indeed, within the European Union, each
country has adopted a similar system to calculate local property taxes. If that
value is not available, the value stated on the purchase document will be used.
If this value is not available (perhaps because the property was given or
inherited), the ‘property value’ is the amount that the donor or the deceased
person paid for that property. If even this value is not available, the current
market value of the property will be taken in consideration.
If the
amount of the tax is lower than 200 euro (which means that the value of the
property is lower than 26,381 euro), the owner pays nothing.
If the
property owned abroad is the ‘first’ property, where the owner maintains his
formal residency, 200 euro is deducted from the amount of IVIE to be paid.
Another 50 euro can be deducted for each child under 26 who lives in the
property.
WHEN AND HOW TO PAY?
The
levy must be paid once a year, with the annual tax report in June. There is a
specific area of the income declaration (Denuncia dei Redditi) where property
owners must declare the value of any property abroad, and other codes that the
Agenzia delle Entrate uses to identify assets. As noted previously, this
information is required even if the property owner does not have an Italian
income.
WHEN TO START PREPARING FOR JUNE 2013?
Now.
The Latins used to say ‘ignorance of the law excuses no one.’ As always, this
brief article presents only the framework, not the details of this new tax.
Therefore, whether you are a resident or not, if you own property abroad and
you are unsure of your tax liabilities, please ask a professional for advice.
