How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4189
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Italian Uk resident with income only in Italy, taxed in Italy

Customer Question

Italian Uk resident with income only in Italy, taxed in Italy as follows (-already properly converted in £ from €)
€ 198,579. = £ 158,909 income tx paid in Italy €73.642.( £ 59,512)
Propery tax ". " €15,572. ( £ 12,583)
Income in Italy made of Property rents £136.080. Pension with10%deduction £22.829

How is the UK tax situation I. E. is there anything to be paid (as in zitaly taxese are higher) ?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question. As a UK resident you are taxed in the UK on all income received world wide. However under the double taxation treaty between the UK and italy any tax paid in Italy will be allowed as a credit against UK tax liabilities.

Before I can proceed further please advise; is the property tax a tax charged against rent and the 12583 the amount of tax payable. Also pension 10% deduction, is this the Italian tax being deducted?
Customer: replied 3 years ago.
The property tax is related to the value of the property not rent
The Italian pension of 31.ooo € is transferred free of Itax in the UK to be taxed here. A 10 % deduction wascapplied giving you net amount.
Expert:  bigduckontax replied 3 years ago.
I am sorry, but I am still confused. For what purpose is the 10% deduction made?
Customer: replied 3 years ago.
No the property tax has nothing to do with rents paid. Is on capital and that amount is the tax already paid on Itsly converted in £
No, the 10% is British usual deduction not Italian. I repeat the pension is transferred gross to the UK and not taxed in Italy at all
Expert:  bigduckontax replied 3 years ago.
Thank you for that. In general terms I compute your total income to be of the order of 326K. Your UK tax liability would be say 135K [32K @ 20%, 150 @ 40% and 154 @ 45%]. Offsetting the Italian tax credit and the UK tax deducted from your pension leaves some 56K outstanding.

You have no personal allowance in the UK as your income level is too high, you start to loose it at the 100K point. Contributions to personal pension schemes would top slice your income and is about the only way to reduce UK income tax. These may be up to 100% of your salary with a maximum of 50K this tax year, 40K next.
Customer: replied 3 years ago.

No Your totalsare wrong as you added £ to €
I repeat only in £. 136.080 from rents taxed in Italy
Plus. £ 25.366 from pension not taxed in Italy
Txes in Italy income on rents plus propery on value of property not on rent
Total taxed paid in Italy £ 72.095
The pension should be added on the taxable amount in the UK
Expert:  bigduckontax replied 3 years ago.
I may have misread your post. Forgetting the pence your Italian property income is only GBP 136, correct? Your pension is a mere 25 quid and the Italian tax deducted GBP 72? Please confirm and I will recalculate.
Expert:  bigduckontax replied 3 years ago.
Sorry, last post delete '72' insert '60K!'
Customer: replied 3 years ago.
I trust you got my last info re Income £ 136k taxed in Italy £ 59k
Plus property tax not to related to rents £ 12.5k total taxes paid £72k
To above taxable income add Italian pension £25k to be taxed in the UK
( transferred from Italy free of any tax).
Therefore total income £136k plus £25k on which already paid tax 72k Italy

Waiting kind reply
Expert:  bigduckontax replied 3 years ago.
Right income 136K + 25K = 161K. UK tax (no personal allowance, income over 100K) is 32K @ 20% = 6K + 129K @ 40% = 52K, total tax due is 58K. This is covered by the Italian tax paid leaving 3K deducted by the UK authorities from the pension on transfer which you can get back. You could not recover any Italian tax overpaid should this have occurred.

That's a little better, isn't it!
Customer: replied 3 years ago.
Yes, thank you, XXXXX XXXXX was told that the pension has to be taxed separately. Which would cause me to pay without getting anything back from the overpaid Italian taxes. Are you sure of what you are telling me ? Apparently there are some pages 263 on the Internet about taxation available but I can not understand it. Grateful for a final effort from you!
Thanks regards
Expert:  bigduckontax replied 3 years ago.
The trouble with the Italian tax viz a viz UK tax is that it is merely a tax credit against UK taxation. Thus if there is an over deduction the UK could't care less, they only need allow as much of the credit as is needed.

Help Sheet 263 says in the first sentence that 'If you have paid foreign tax on an item of income, that tax cannot be refunded by HMRC.' It's telling you that you are stuffed to use a colloquialism. The foreign tax deducted is only available as a credit against UK tax as far as it goes, or in this case, is needed. It also tells you that you should try to claim exemption from the Italian tax authorities under the double taxation treaty. With my cynics hat on, I wish you the best of luck! Of course if you did gain exemption you could face a whopping great UK tax bill all in one go!
Customer: replied 3 years ago.
Thank you anyhow for your help. I will be back if in the future I will need any help. Regards
Expert:  bigduckontax replied 3 years ago.
Pleased to be of assistance.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.