# Sellin house - tax implication



## Ligman

We bought a house in Italy 12 months ago. Because it is our Prima Casa, our first and only house we got a tax concession on the purchase tax. It is normally 10% and we paid 4%. BUT no-one explained to us that if we sell the house within 5 years we have to pay the 6% difference. (No-one = estate agent, builder or Notario).
So, we only found out about the 6% when we asked (another) estate agent to sell it for us as we want to go back to UK (6% = €15,000 pprox)
So we have a few options
1. Don't sell, stay here another 4 years
2. Sell and buy another house within 12 months at a much lower value and rent it out for 4 years
3. sell and leave the country without paying the tax!

No-one can recommend or condone option 3, but does anyone know what would happen next, if we did?
Other suggestions would be most welcome.


----------



## BBCWatcher

Aren't you forgetting one option?

4. Pay the tax.


----------



## Ligman

Thanks BBC Watcher - Pay the tax? Well there is that option, and I don't think I can avoid it. If the pound falls some more this will help me as I bought the house with a favourable rate of 1.24!


----------



## accbgb

Perhaps someone can satisfy my curiosity: does option #2 really work? Can the OP get away with treating a rental property as his prima casa and thus avoid the tax?

Or, would he end up paying the deferred tax on his first home AND ALSO paying the full tax hit on the second, rental, property as well?


----------



## Ligman

accbgb said:


> Perhaps someone can satisfy my curiosity: does option #2 really work? Can the OP get away with treating a rental property as his prima casa and thus avoid the tax?
> 
> Or, would he end up paying the deferred tax on his first home AND ALSO paying the full tax hit on the second, rental, property as well?


I am reliably informed that I only have to pay the tax if I sell the1st house and do not buy another in the locality within 12 months from the sale date.

If I buy another house, in the 12 months after the sale I can rent it out if I so choose. As long as I own a house for the 5 years I would not have to pay the tax difference. This house must be habitable, that is not a ruin or a garage or shed.
Hope this helps


----------



## accbgb

Ligman said:


> I am reliably informed that I only have to pay the tax if I sell the1st house and do not buy another in the locality within 12 months from the sale date.
> 
> If I buy another house, in the 12 months after the sale I can rent it out if I so choose. As long as I own a house for the 5 years I would not have to pay the tax difference. This house must be habitable, that is not a ruin or a garage or shed.
> Hope this helps


Well, sure, but I suspect that the assumption made by the person/people telling you this is that the "new" house would now be your prima casa. But, in my opinion, that is not the case as I don't believe a home which you own solely for the purpose of renting it out can ever be your prima casa; your prima casa is the home in which you physically reside. 

Anyone who tells you otherwise is, I am fairly confident, wrong.


----------



## Ligman

accbgb said:


> Well, sure, but I suspect that the assumption made by the person/people telling you this is that the "new" house would now be your prima casa. But, in my opinion, that is not the case as I don't believe a home which you own solely for the purpose of renting it out can ever be your prima casa; your prima casa is the home in which you physically reside.
> 
> Anyone who tells you otherwise is, I am fairly confident, wrong.


accbgb

I have read your advice and it makes sense. You could well be right and I don't think I will take the renting out option. I would still have the buy a cheaper house, pay more tax on it, Notario, fees, taxes, bollo and goodness knows what both when I buy it and when I sell it again say in 4 years. I would have to pay someone to handle the rental, probably pay tax on the rent and maintenance....

I think I will opt to pay the tax on demand at the end of the 12 months and just hope they don't know where to send the demand! I also believe that if the authorities ask for the money and I don't pay they can add 30% as a penalty.

However, nothing will happen until my current house is sold, that may take another 4 years!!! I am on my way back to Italy from the UK where there has been all the terrible gales and bad weather, who know we may just decide to stay after all!


----------



## accbgb

Ligman said:


> accbgb
> 
> I have read your advice and it makes sense. You could well be right and I don't think I will take the renting out option. I would still have the buy a cheaper house, pay more tax on it, Notario, fees, taxes, bollo and goodness knows what both when I buy it and when I sell it again say in 4 years. I would have to pay someone to handle the rental, probably pay tax on the rent and maintenance....
> 
> _I think I will opt to pay the tax on demand at the end of the 12 months and just hope they don't know where to send the demand!_ I also believe that if the authorities ask for the money and I don't pay they can add 30% as a penalty.
> 
> However, nothing will happen until my current house is sold, that may take another 4 years!!! I am on my way back to Italy from the UK where there has been all the terrible gales and bad weather, who know we may just decide to stay after all!


As both an Italian citizen and a citizen of the universe, I cannot condone your attempt to avoid paying a legal and proper tax to the detriment of all other Italian citizens who will ultimately be forced to make up the loss.


----------



## Ligman

accbgb said:


> As both an Italian citizen and a citizen of the universe, I cannot condone your attempt to avoid paying a legal and proper tax to the detriment of all other Italian citizens who will ultimately be forced to make up the loss.


You and your fellow Italian citizens can sleep soundly in your beds in the knowledge that I have been paying thousands of €'s in tax to the Italian government for all my income and house purchase, not to mention iva on cars etc-
I would sleep better in mine if I had been pre-warned about the requirement to pay the balance if I sold within 5 years.This did not appear on any documentation and nor was there any legal duty of care to advise me of this. 
I think it is inevitable that I will be paying the tax, but not willingly under the circumstances


----------



## BBCWatcher

Perhaps, but I think a "reasonable person" would have anticipated a minimum residence period in order to qualify for retaining the tax break, and 5 years would be within the realm of reasonable expectation. It'd be much more surprising if Italy granted the full tax break even if you buy a home, live in it for, say, 6 months, and leave Italy. I assume you were aware you were getting a tax break when you purchased. In other words, is it really surprising that a tax break comes with a couple conditions, caveats, and understandings? Yes, you've paid many Italian taxes -- IVA (VAT) at least -- but that's _precisely the point_. The property tax break is intended to give some relief for those paying other Italian taxes for at least 5 years. (If you're only paying Italian taxes for, say, 2 years then you haven't paid as many Italian taxes as someone similarly situated and living in Italy for 5+ years. And this particular tax relief is directed at the latter class of persons.

Please note that you will still receive the time value of the tax money you didn't pay for the duration of your residence and ownership in Italy, so actually you still receive an effective tax break even if you leave Italy early. As far as I know they don't charge interest or penalties on that property tax gap if you have to make it up, assuming timely payment after you sell, so that's quite nice. This is probably why your advisers didn't bother to mention it because either way you pay the tax owed, and you come out ahead when you take the tax break on offer, even if you have to leave Italy before the 5 year qualifying period. You either pay the standard rate but on a highly deferred basis -- that's a win -- or you pay the lower rate, also a win. It doesn't alter the decision whether to take the tax break. You would have been foolish not to take the prima casa break when you qualify for it, so you made the right decision.

As you mentioned, the tax break is not particularly tied to your home but rather to you and your residence time in Italy. So this is yet another reason why it's not critical to discuss with any particular home purchase in Italy. You're still free to move within Italy and continue enjoying the tax break (with very few caveats).


----------



## Ligman

BBCWatcher said:


> Perhaps, but I think a "reasonable person" would have anticipated a minimum residence period in order to qualify for retaining the tax break, and 5 years would be within the realm of reasonable expectation. It'd be much more surprising if Italy granted the full tax break even if you buy a home, live in it for, say, 6 months, and leave Italy. I assume you were aware you were getting a tax break when you purchased. In other words, is it really surprising that a tax break comes with a couple conditions, caveats, and understandings? Yes, you've paid many Italian taxes -- IVA (VAT) at least -- but that's _precisely the point_. The property tax break is intended to give some relief for those paying other Italian taxes for at least 5 years.


I can update this situation, but first I can voice my opinion on your reply.
When I bought the house, I was told that if it was my only house and I owned no other, I would pay IVA at 4%, as opposed to already owning more than one house or a holiday home when the IVA would be 10%. As a "reasonable person" why should I even suspect I would have to pay the 6% if I sold within 5 years, where was the clue that should have triggered this thought process. So I condemn your attitude to this question, also the high handed rubbish about being a citizen of the world who should expect to have to pay my taxes.

Well, having visited an Avvocato to discuss this problem I was informed that there is a reciprocal agreement in place between Regno Unito and Italy, which allows me to sell my house in Italy within 5 years and buy a house in the UK. If the house in the UK is my only house in the EU, then the tax is waived. Accordingly I have the official documents from Agenzia della Entrate with the title "Interpello 907-244/2014-Art.11,legge 27 luglio 2000, n212." which affirms that the matter is closed.
If any forum reader wishes to benefit from my experience they can send a PM to me and I will try to give them more information if I can


----------



## BBCWatcher

I'm glad you were able to find a solution to preserve your tax break. You're entitled to your opinion, and I'm entitled to mine. I'm sorry to hear you were evidently not informed of the minimum residence requirement to preserve the tax break when you purchased the home. You should have been.

As it happens, the United Kingdom demands a minimum 3 years of EU/EEA residence as of the date of university matriculation for EU/EEA students to enjoy lower (state-supported) tuition rates. If you think that's not fair then you might also think a 5 year minimum residence is not fair in order to enjoy Italy's residential tax breaks, and vice versa.

I happen to think both provisions are at least reasonable in the circumstances. As it also happens, in contrast to Spain, Italy has been well served by its real estate tax provisions. Italy has not experienced the type of property crash that Spain has experienced, for example -- and a large part of the credit for that is due to tax provisions such as the one you describe that work together to discourage overbuilding and "flipping." In other words, it has recently proven to be good public policy.


----------



## Crabtree

Having lived in Italy for 8 years I have to ask did you do no preparation when you moved to Italy?Every book on taxation in Italy clearly states that if you sell your "prima casa" within 5 years you pay Capital Gains Tax on a slding scale depending on how long you lived there.You should note that the term "prima casa" is not translated as "first house" but is a term for your main residence so if you sell it and rent out the next house you buy you will still have to pay the tax and pay tax in Italy on the rental income.Also the notaire will require you to provide a cheque for the amount of the tax which will be cashed in the event of you not buying a prima casa but returned to you when you buy another prima casa.In addition part of the duties of the Polizia Municipale is to check on the residency status of people in their area and there are legal requirements to show you are resident by registering at your local commune.So either sticjk it out or pay up


----------



## Arturo.c

Ligman said:


> 3. sell and leave the country without paying the tax!
> 
> No-one can recommend or condone option 3, but does anyone know what would happen next, if we did?
> Other suggestions would be most welcome.


When you sell the home, the Notary who will legalise the deed is bound by law to send a copy of it to the "Agenzia delle Entrate", which is the Italian equivalent of the HMRC.

They will then send you (either by registered mail or through the Italian consular network), a document called "Avviso di Liquidazione", with which they will give you notice that you are due to pay the tax difference, plus a fine for the amount of roughly 40% of the unpaid tax. If you don't pay within 60 days from the date of receipt, another overdue fee is added for every extra day past the sixtieth. Once the debt reaches a relevant amount, the Agenzia will file a civil lawsuit to recover the amount due, plus interest and legal fees.

And if you think that, as long as you live outside Italy, they'll never going to get you, think again...


----------

