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Where Taxpayers and Advisers Meet
CGT LIABILITY ON ITALIAN PROPERTY
I am UK resident and have a property in Italy which I am just selling at a €60k profit above purchase price plus renovation costs. I am a non resident in Italy and have not owned the property for 5 years and as such CGT at 20% applies. Do I have to pay the CGT in Italy or can I choose to use the double taxation treaty and declare my profit in the UK, utilising the £11k annual threshold and thereby reducing my tax liability to £1k (assuming a 20% rate) or must I declare in Italy and pay the full £12k
Re: CGT LIABILITY ON ITALIAN PROPERTY
If you are liable to pay CGT in Italy then you will have to pay it there. Essentially, Italy gets first dibs under the DTT as the land is in Italy.
You will also have a liability here but can set off the Italian tax as a credit against the UK tax under Art 24 of the DTT
Bear in mind that if the property is residential, the 18/28% rate applies here, not 20%, and you need to use the original and sale sterling values (calculated at the then exchange rates) rather than calculate the gain in Euros and convert as of now. This latter point could work against you if Euros have increased in value vs GBP during your ownership.
You will also have a liability here but can set off the Italian tax as a credit against the UK tax under Art 24 of the DTT
Bear in mind that if the property is residential, the 18/28% rate applies here, not 20%, and you need to use the original and sale sterling values (calculated at the then exchange rates) rather than calculate the gain in Euros and convert as of now. This latter point could work against you if Euros have increased in value vs GBP during your ownership.
