Rental Income Italy.

[Fray]

Hi, I am a UK resident and taxpayer. I have invested in a flat in Italy which I have now rented out. The rental income is paid in Italy. Can anyone let me know whether I have a choice as to where I pay taxes on the rental income - in Italy or the UK. I know there is a double taxation treaty - but what does this mean in practical terms. If I was to pay the tax in the UK, which I would prefer, am I issued with some form of confirmation which I can show the Italian tax authorities. Does one country have a first right of taxation over the other.
Would really appreciate any advice.
Many thanks.
P. Gallagher.

[pawncob]

If you're UK resident, you'll pay tax here on your worldwide income. You can't choose where you pay your tax.
If you also have to decalre and pay tax in Italy (not likely as you're EU resident) the double taxation agreement means you'll get credit for any foreign tax paid.

http://www.hmrc.gov.uk/taxon/foreign.htm

[Fray]

Thanks pawncob for the reply. I understand the regulations/double taxation theories. It was the actual practicalities I was wondering about. If I pay the tax in the UK, is some form of credit/confirmation automatically raised or forwarded to the Italian authorities? I ask because in Italy if tax and income is not declared and paid on time there are very substantial and harsh penalties, which I would prefer not to fall foul of. I was actually going to approach the Italian tax authorities with the question but wanted to be absolutely sure I was entitled to pay the tax in the UK beforehand - the Uk tax system permits for more allowances and lower tax rates - so I would much prefer to pay here.

[King_Maker]

Immoveable property is normally taxable in the country where the property is situated. You will need to check the UK-Italy DTA to see if this is so.

If it is, you can claim a tax credit for any Italian Income Tax - but not to create a UK tax repayment, although you may have some UK Income Tax to pay, depending on your tax position here.

I assume rental accounts have been produced by an accountant in Italy?

[maths]

Any rental income is primary liable to tax in Italy based on a tax computation prepared under Italian tax rules.

Any such tax paid is then off-settable (ie creditable) against the UK tax liability which is based on a computation based on UK tax rules.