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.