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 Post subject: Italian Income Tax
PostPosted: November 9th, 2009, 11:03 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
I recently spoken to HMR&C (the Inland Revenue) with regards to any income made on rentals for our apartment in Calabria. I was hoping that I could deal solely with them with regards to this income since I understand the UK system and understand the language on the forms!
The UK have a double taxation agreement with Italy meaning that any tax on income generated in Italy that is taxed there we will be given credit for this tax paid as we still have to declare it on our annual Tax forms in UK.
Has anyone had any contact or experience with the Italian Income Tax Office and can anyone give me any advice on what to do?


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 Post subject: Re: Italian Income Tax
PostPosted: November 10th, 2009, 6:34 pm 
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Location: Near Sheffield
Hi davidnam

I think I'm at about the same stage as you (with regard to finding out about tax). I had a similar conversation with HMRC and they told me that the double taxation treaty between the UK and Italy meant (as you have found out) that the earnings must be declared in the UK and Italy but the tax paid only in Italy. The payment of income tax depends on where the income arises. I tried to argue that I could take the income in the UK (e.g. via Paypal or direct payment to my account) however, they stated that as the property was in Italy, the income in relation to that propoerty would also arise in Italy :cry: .

I haven't scrutinised the relevant form in the self assessment tax return yet (that reminds me, I must get on with it!), but I guess that there must be a box to declare the property, the income generated and the tax already paid/payable in Italy (if that isn't the case...I'm all ears). Even if the tax is paid fully in Italy, it is an offence to fail to declare the income here in the UK.

I think that in order to not fall foul of the Italian tax laws I will employ an Italian accountant (at least until such time I understand their system enough to do it myself).

If anyone else is already paying tax in Italy (and declaring back home)...it would be useful to hear your experiences...

Beekeeper


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 Post subject: Re: Italian Income Tax
PostPosted: November 10th, 2009, 6:57 pm 
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Location: Italy
Beekeeper wrote:
If anyone else is already paying tax in Italy ...
Beekeeper


there are two words in that sentence that do not usually go together ...

Just kidding (a bit), but there is a pdf manual available online at http://www.nuovofiscooggi.it/files/annuario_2009.pdf.

From what I understand you do not pay tax for the first 4800 euros (possibly per person) earned. However, you should still fill in the forms. An accountant would charge around 300 euros. I can recommend Paparatto, above the BCC bank, but not sure of his command of the English language.

To keep things simple, I would try to receive cash or payment into a (UK) Paypal account.

Disclaimer: I am not an accountant and in no way authorized to advise on taxation.


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 Post subject: Re: Italian Income Tax
PostPosted: November 10th, 2009, 7:05 pm 
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Joined: October 6th, 2008, 5:19 pm
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If you do not rent out your property would you still have to fill in forms?


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 Post subject: Re: Italian Income Tax
PostPosted: November 10th, 2009, 7:10 pm 
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Joined: February 19th, 2008, 9:00 pm
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Location: bedfordshire
Hi David have you tried the "Agenzia Delle Entrate" website ?

Paul


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 Post subject: Re: Italian Income Tax
PostPosted: November 10th, 2009, 9:45 pm 
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Joined: June 25th, 2008, 6:39 pm
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
Thank you all for your input.
It seems as if I will have to pay for an Italian accountant to fill my tax return to start with until I get to know the system as beekeeper has suggested.
I have looked at the suggested links and the information not surprisingly is in Italian so doesn't help me as my Italian is almiost nil at present.
Anyone know a English speaking accountant in the Tropea / Capo Vaticano area?
Elise I don't think that you need to fill in any tax forms if you are not generating any income from your property in Italy but you may have to declare to the HMRC that you have bought a property for Capital gains purposes. I am no expert on this.
From what Donstenk has said I suppose the 4800 euros is similar to our personal allowance in UK so could be / person. If this is the case we may not have to pay much tax if any when you take expenses out of the income received.
The downside to this is that as we have to declare our worldwide income to HMRC this income will probably be added to our total income earned in UK and taxed in UK at the appropriate rate.


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 Post subject: Re: Italian Income Tax
PostPosted: August 1st, 2010, 1:11 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
I must get my tax sorted out for the Italian & UK tax authorities.
Dennis, where can I locate Paparatto and the BCC Bank that you mentioned in your reply? Is it in Tropea?
Is there anybody out there who knows of a English speaking Accountant in the Tropea/ Capoi Vaticano areas please advise.
Below are a few paragraphs from Blevin Franks ( Specialist Tax Advisory Service foe Overseas Property Owners) "Guide to Taxes in Italy" which may be of help to others.

"What if you rent out Italian property?

Many people who have bought property in Italy look to rent it out, evn if it is a holiday home. The money brought in from such activities pays for the mortgage, or annual local taxes and some of the upkeep.

This money even if it is just to 'cover the bills' whilst someone is using the property, is income derived from the property, and therefore subject to tax in Italy regardless of your residence position. A flat 15% deduction is allowed in lieu of actual expenses, and the resulting 85% net figure taxed at the progressive scale rates.

If you have an Italian property that is not your main home and you are not renting it out, the Italian deem a notional income to arise, based on the registered value of thge property. This income, even though it is not actual income, is taxable in Italy."

Their website is www.blevinsfranks.com

davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: August 5th, 2010, 12:49 pm 
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Dear Davidnam
Thank you for all the information.
With regard to your last statement ,I am assumming everyone who owns a property in Italy, which is a second home must be required to register for tax as the government view it as making notional income even if it is not being rented -can anyone comment ?
Thanks
Pamela


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 Post subject: Re: Italian Income Tax
PostPosted: August 9th, 2010, 7:39 pm 
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pamela wrote:
Dear Davidnam
Thank you for all the information.
With regard to your last statement ,I am assumming everyone who owns a property in Italy, which is a second home must be required to register for tax as the government view it as making notional income even if it is not being rented -can anyone comment ?
Thanks
Pamela

Can anyone comment on this?


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 Post subject: Re: Italian Income Tax
PostPosted: August 9th, 2010, 8:40 pm 
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Location: Berkshire/Marina di Caulonia
this link gives more information on this matter

http://www.studiolegalemetta.com/en/pdf/IRPEF_%2009.pdf


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 Post subject: Re: Italian Income Tax
PostPosted: August 9th, 2010, 9:20 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
Hi beauyash,
I have looked at the Studio Legale Metta link that gives the information on taxation in Italy.
Many thanks for the information, it is a lot more comprehensive than what I had from Blevin Franks and it will be very useful for everybody who owns a holiday property in Italy. There is a link to the Italian Tax Authorities (Finance Ministry) but it is naturally all in Italian so I will have to get hold of an English speaking accountant to register my tax papers.
It appears that you have to pay 23% tax on income up to 15000 euros earnings, less whatever expenses you can claim against your rental profit.
Does anybody know what the personal allowance is for an individual ?
In the case where your rentals work out below your allowance I assume that no tax is due in Italy but I wonder whether UK tax be liable on this sum.
I know we have to declare overseas earnings on our UK tax forms. I am wondering whether this amount of 'earnings' has to be added to your UK income and is then taxed, or is it disregarded and is not added to your total earnings as it has been considered by the Italian Tax Authorities since there is a 'Double Taxation Agreement' with Italy & UK.
Anybody know the answer to this?
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: August 9th, 2010, 10:50 pm 
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Location: Berkshire/Marina di Caulonia
If you download Google translate it translates the web pages. Couldn't find which documents to fill in on the Italian Tax pages, so will probably have to use an accountant.


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 Post subject: Re: Italian Income Tax
PostPosted: May 2nd, 2011, 8:54 am 
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How much federal income tax will I have to pay for interest earned? I'm cashing in a few EE series savings bonds that will result in $574.46 in interest. This interest is taxable when I submit my income tax, but it's not taxable by the state or local entities.
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 Post subject: Re: Italian Income Tax
PostPosted: January 21st, 2012, 10:07 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
I attended a meeting organised by Calabrian Invest in London today with approximately 25 others. I had requested them to try and obtain information about Italian Income Tax on rental income for this meeting.
They received the following information from a Real Estate Agent who is registered with the FIAIB (An organisation that registers and approves reputable Agencies).
The information and example below is what I have been given.

For 'Long Term Lets' (This example is for a 4 year contract)
No information on what the minimum 'Long Term Let' is.
You have to register your contract with the authorities for all 'Long Term Lets'.
The cost of this is €68 + 2 stamps at €14.62.
This cost is shared by the landlord and the renter.
To register the same contract for another year the fees are lower.
Example given to me.
Rental of €400 / month the annual rent will be €4800.
85% of this figure is subject to tax at 23%
The 15% figure is the landlords allowance for wear & tear etc.
In this example 85% of 4800 = 4080.
4080 at 23% tax rate = €938.40.
This seems pretty high tax to pay to me and is probably due to only 15% allowances being given.

The good news is that if you rent out a property for less than 30 days a year you do not have to inform the Italian Tax authorities at all.
No information given if for example you rented for 8 weeks in a year.
I guess that I will only rent out up to 30 days !!
In this case I will inform HRMC of 30 days rental income and give them the list of expenses that I have incurred.
It will be interesting to see what reaction HMRC will have to the various expenses claims and what would be allowed.
These are some of the expenses I think could be claimed with HMRC:-
mortgage interest, costs for advertising, cleaning, laundry, meet & greet charges, condominium fees, water, gas & electricity, wifi costs and 10% of the rental income for wear & tear. (10% is given on UK rental income so may well be allowed for overseas property).
Some of these charges maybe reduced to a pro-rata rate to 30 days expenses.
I wsonder taht if your annual outgoings are more than the income, will this deficit be set against your other income?

The final sentence in the note given to me on this subject was :-
"The law about rental income in Italy is very confused and depends on the type of contract".

Hope this has helped in some way, I will report back on this subject when I send my 2011/12 Tax Return and get their response.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: January 23rd, 2012, 4:10 pm 
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Hi David, thanks for sharing the info.


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 Post subject: Re: Italian Income Tax
PostPosted: March 1st, 2012, 6:43 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
I copy below what I have just received from the Overseas Guide Company re Renting and Tax implications.

Renting out your property in Italy
Renting out overseas property is of course an excellent way of making it pay for itself, or even of earning the owner some welcome additional income. Here are just some of the things to consider for ensuring the endeavour is successful and legal:

Step 1 - deciding on rental rates and conditions. Check the market for similar properties before deciding how much yours is worth, and what you wish to offer you guests within the rental package.

Step 2 – deciding whether to leave the rentals in the hands of an agency, or deal with them yourself. Have you got somebody trustworthy on the ground to collect rentals, clean, deal with unexpected problems, check for damage? Have YOU got the time needed to deal with enquires and follow up queries?

Step 3 – making your property rentable. Rental properties must be aesthetically pleasing, as well as being well-equipped; holidaymakers should feel they are somewhere special, and not have to spend their vacation chasing down basic items.

Step 4 – making sure your property is insured. Normal household insurance does not normally cover rental usage. Ask your insurer about insuring the physical wellbeing of the property and its contents, as well as third party risks should a guest have a mishap whilst staying there.

Step 5 – making sure you are aware of your tax responsibilities. Non-residents are obliged to pay tax on rental income. Tax must be paid on the full rental income, minus 30% repair and maintenance allowance. The taxable income from rentals cannot be less that 70%. The current rates of income tax applied in Italy are as follows:

Up to 15,000€ - 23%
15,001€ to 28,000€ - 27%
28,001€ to 55,000€ - 38%
55,001€ to 75,000€ - 41%
75,001€ upwards - 43%

There appears to be a typo. error in Step 5, I assume 'that 70%' should read 'than 70%'
and means that the maximum allowances for maintenance etc cannot exceed 30%.
Unfortunately some of this information differs from what I was advised recently and posted on the Forum about 5 weeks ago.
The differences are :-
No mention that 4 weeks or less rentals do not need to be declared.
No mention whether Residents are taxed differently to non-residents.
The different allowances for maintenance etc quoted (15% compared to 30%).
I am afraid that I will have to do more research into this subject and will report back if I find out any more information.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 1st, 2012, 8:09 pm 
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Rental in Calabria one would be very lucky to get 5 to 6 weeks ,so you would not make a lot of profit to pay tax on


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 Post subject: Re: Italian Income Tax
PostPosted: March 2nd, 2012, 9:46 am 
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Ursla, that's very dependent on location, price and amenities. We got 6 weeks for our clients last year with minimal and last minute effort in a place with pool in Capo Vaticano.

The apartment was furnished (tastefully) on the 15th of July when pictures were taken and put online. 23 July the first family arrived and both apartments were full until the end of August and got the odd weeks in September and october.

Note that this was just a little experiment for us.

This year we will provide some marketing to our clients but the condo admin will do check in, cleaning and payments, which is the setup I would recommend to you all.


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 Post subject: Re: Italian Income Tax
PostPosted: March 2nd, 2012, 10:14 am 
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So can I take it for definate and draw a line on this that if i only rent for 4-6 weeks per annum i do not have to declare and do not have to pay tax


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 Post subject: Re: Italian Income Tax
PostPosted: March 4th, 2012, 7:41 pm 
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Hi Iloveialy,
Re my posting on the 23rd January. I was only quoting what I had been told at Calabrian Invest meeting in London.
I have recently read other advice including my Forum posting on the 1st March, that doesn't mention this '4 weeks' or less rental period as being exempt from Italian Tax so I would not at this stage take this as being fact.
It maybe that a personal allowance is given to an individual, if this is so it may negate any tax due for renting 4 weeks or less. I am in the process of trying to find out more on this and will report back when I find out more.
I fear that the way Italy is at the moment economically, the Authorities will need to collect as much Tax as they can.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 19th, 2012, 11:42 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
Hi Forum holiday home renters,
I have finally found an English speaking accountant via the good offices of Nicola M. Metta of Studio Legale Metta from Bari.
The accountant a Mr. Antonio Del Gaizo sent me the following advice that can be seen below. I also copy their office addresses for your information.

"Dear David
Thank you for contacting me.

I think the question is a little different from how you imagine so I'll give you a quick summary of the situation.

On the assumption that you are not tax resident in Italy , you only need to present a tax return in Italy in relation to income produced in Italy .

If the rendita catastale of your property is over € 500 then you need to present a tax return anyway, even if you only use it for yourself. If you do not know your rendita catastale I can let you have the Land Registry certificate which shows it. I would just need your codice fiscale.

If you rent out your property, this income needs to be declared as occasional commercial income and income tax paid on it.

There is no relevant form just for this type of income: you need to file a tax return as a non-resident in Italy (again, assuming that is what you are).

In actual fact the whole question of renting out an Italian property is a bit of a minefield - this is just a quick overview.

In addition to filing the tax return you also need to pay IMU (the new tax replacing ICI) and TARSU (the refuse tax).

If you would like my office to organise your tax return for you we would be happy to do so - for this type of income the cost is around €150 + IVA, which I think is very reasonable.

If you would like a copy of your land certificate I can provide you with one for no charge".

Best regards

Antonio

Antonio Del Gaizo
Professionista Associato
Website: http://www.studiodelgaizopicchioni.it
Email: delgaizo@studiodelgaizopicchioni.it
Phone: 0039 0586 809299 - 800599
Fax: 0039 0586 261363
Skype: antoniodelgaizouk"

Addresses :-

Studio Commercialisti Associat
Del Gaizo - Picchioni
Via G. Marradi 30
57126 LIVORNO
Italy
Tel. 0586/809299 800599
Fax 0586/261363
e-mail: delgaizo@studiodelgaizopicchioni.it

UK Office
Trading as Bel Paese Ltd
11 Town Furlong
Bodicote
BANBURY (UK)
OX15 4DP
phone and fax 0044 1295 709105
e-mail: adgaizo@talktalk.net

I will not be letting the property more than 4 weeks in a year due to the registration and other bureaucratic matters you would have to comply with!
On a rental income of €3500, tax would work out to be €563.50 plus the IMU tax and the accountant fee approx €180 a total of a little over €400 / year.
i Hope that this information clarifies the tax situation for non-residents who rent their holiday homes in Italy.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 21st, 2012, 5:38 pm 
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Location: Carmarthen, south west Wales / Santa Maria di Ricadi, Capo Vaticano
Hi again,
Just to let you know that Antonio Del Gaizo no longer works with Bel Paese Ltd. I have been in contact with him by email and his contact details are below.

UK Office
11 Town Furlong
Bodicote
BANBURY (UK)
OX15 4DP
phone and fax 0044 1295 709105
e-mail: adgaizo@talktalk.net

Antonio sent me my certificato catastale (Land Certificate) and the rendita catastale was well below the €500 valuation. This merant that a tax Return was not required so no "Notional Tax" was due on the property.
The current rendita catastale was for our 2 bedroomed 1st floor apartment above Santa Maria di Ricadi was €225,95. He made comment that as a joint owner with my wife I was even further below the level in which a Tax return must be submitted if you do not rent out your property.
It would appear that the rendita catastale value changes as it was €189,80 in October 2008 when we completed,.The Region and Commune / locality you are in may also play some part in it's valuation..
I still have to find out a bit more about the '30 day rule' that was mentioned to me. I was advised that if you let your prioperty out for more than 30 days you must register the contract with the Authorities pay a fee and stamps and annually after initial registration. You must inform the local Police on the arrival and departure of any renters. This would be a real pain as non-residents.
What I don't know is whether this 30 days is for a single let or a total of multiple lets (less than 30 days for each).
If anyone knows about this I'd be grateful for the information.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 21st, 2012, 6:57 pm 
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A lot of people will not rent their apartment if all this has to be done if you rent out your property


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 Post subject: Re: Italian Income Tax
PostPosted: March 21st, 2012, 10:52 pm 
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davidnam wrote:
I was advised that if you let your prioperty out for more than 30 days you must register the contract with the Authorities pay a fee and stamps and annually after initial registration.


This is for continuous, long term letting to the same tennants, and not applicable to holiday lettings. Please note that for foreign clients, within 48 hours of their arrival the Police still needs to be informed of their identities due to an arcane anti-terrorism ruling from the 1970's.

IANAA (I am not an account) but according to the Italian Consumers Association since 2011, Italian tax residents have to declare any income from rental income and pay a flat-rate 21% tax rate instead of adding it to your income as previously (and pay up to 42%). This is applicable only to private owners who don't have an Italian VAT number (Partita IVA).

I would expect that by declaring any occasional rental income from a second home in the country where you are tax resident you would also be complying if there is double taxation treaty - which is the case between UK and Italy, see http://www.hmrc.gov.uk/taxtreaties/in-force/italy-dtc.pdf. Italian income tax (IRPEF) is covered, and the flatrate is an optional substitution to IRPEF.

Here is the link to the Italian Consumers Association: http://www.aduc.it/comunicato/affittare+casa+vacanze+regole+consigli+dell+aduc_19028.php

I hope this goes some way to helping all of you on the way to threading the right way in the minefield of international taxation.

Dennis.


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 Post subject: Re: Italian Income Tax
PostPosted: March 22nd, 2012, 12:33 am 
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Hi Dennis,
Thanks for information re 30 days or more for a single letting.
Where can you find the actual legal / administrative ruling on this subject?
I assume that you are confirming that we can let to multiple renters (less than 30 days for each let) for more than 30 days and not go through the bureaucratic machinations of registering and reporting the renters arrival and departures to the Police.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 22nd, 2012, 8:46 pm 
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David,

I have edited the text above to include the link: http://www.aduc.it/comunicato/affittare ... _19028.php

Dennis.


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 Post subject: Re: Italian Income Tax
PostPosted: March 23rd, 2012, 1:49 am 
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Hi Dennis,
Thank you for the links and information, it has clarified a few things in my mind.
This reporting to the Police the names of all "foreign" renters will be a nuisance to many holiday home renters. I only heard about this in the last couple of months from Calabrian Invest when they organised a meeting in Lndon. I thought that it only applied for lets more than 30 days but it is not the case.
I think that in my case I have had this done by Demetrio as he registers all his renters and I have always informed him the dates, names and nationalities of all the persons who use and rent our apartment.
I can't imagine how the Police would be able to check that every foreign visitor is registered with them for all the rental properties in a given area.
I will be using the accountant Antonio Del Gaizo to submit my 20102 / 13 tax return and I will report back to the Forum my experience with HMRC when I submit my Self Assessment form to them towards the end of this year.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: March 23rd, 2012, 9:52 am 
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Do Management companys not take passports from clients the same as hotels do in Italy when you arrive..


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 Post subject: Re: Italian Income Tax
PostPosted: March 23rd, 2012, 7:22 pm 
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Hi Ursla,
The hotels I have stayed in Italy only took our passports to photocopy them. They gave them back to us and as a Brit you can use your passport to get into museums and some archeological sites free of charge or discounted. This is a reciprocal arrangement with various EU countries because in UK our museums are free of charge.
For holiday home owners who use management companies I haven't heard that they take the renters passports but they possibly should inform the Police of the visitors.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: April 2nd, 2012, 11:37 am 
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Thought that I'd better add this since there are two threads regarding Italian Income Tax.
I visited the "A Place in the Sun" Exhibition at Earls Court, London this weekend since it advertised that "Legal and Tax advice" would be available.
No financial accountants were at the Italian Pavilion but an Italian lawyer who gave a seminar on purchasing in Italy.

The Lawyer was quite clear that if income is derived in Italy, tax is to be paid in Italy.
I met someone else on one of the Italian property stands who said that he knew a number of UK citizens who had declared their Italian rental income in UK only. There is no doubt that by filling in your HMRC Tax form in UK you will benefit from higher expenses that you can claim against your income. Apparently if you do this the Tax that is raised is put into a 'European Pot' and doled out to the corresponding countries. The owners rationale was to present the proof that Tax had been paid to the HMRC if they were to be confronted by the Italian Tax Authorities. He hadn't met any owners who up to the present time that had been contacted by the Italian Tax Authorities.
The problem about doing it this way, according to the Lawyer, was that as you will be paying less tax in UK as compared to Italy, the Italian authorities are likely to demand the difference of what tax they have paid in UK and what should have been paid in Italy. A fine may also be imposed but the main difficulty will be if and when someone wants to sell their property. All this is likely to come out and delay the sale until the paperwork and all taxes have been paid.
Worryingly he did mention that the Communes are looking at new ways to raise taxes and there is likely to be a Tourist Tax of some kind to be introduced in the future. In thoery the reporting of foreign nationals renting properties to non-Italians is a means of them knowing who stays at what property and for what length of time!

I am now convinced that the only way is to employ an Italian Accountant and get them to file your Tax Return to the Italian Authorities.
As I now understand it you are allowed up to a maximum of 15% allowance for expenses and the balance is taxed at 21%. A rental income of €3000 would generate a tax bill of €535,50.
The Tax is paid in retrospect by June of each year so come November after the rental season there will be plenty of time to gather the necessary paperwork and submit the return.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: January 10th, 2013, 1:48 pm 
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I have been in contact with an accountant based in UK who works for an Italian firm regarding my Italian rental income. The fees quoted toady by them for filing my Italian tax return is €160 plus 21% IVA Plus 4% obligatory providential fund contribution (whatever this is) for myself and the same cost for my wife since the apartment is in both names! This comes to €400 for filing the return and there is the income tax (23%) to pay as well. This makes it quite a large percentage of the realtively small renjtal income that we receive.
I have been researching whether I could file the return myself and have read somewhere that you can obtain the Unico tax return from (Modello Unico) from your Comune office, purchase it at a tobacconist or download it from the Italian Finance Ministry website. I wasn't been able to access this website today.
Has anyone managed to file their Italian tax form or has been able to obtain thie appropriate Modella Unico for non-residents?
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: January 11th, 2013, 4:38 pm 
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I have now found out what I believe is the 4% obligatory provident fund contribution (pf). It is the equivalent to our National Insurance contributiions in the UK for Social, health and pensions.
Why we as UK citizens and non - residents in Italy have to pay this on top of income tax seems ludicrous. We will not be able to claim any of the social benefits etc. whilst in Italy.
I will be checking this out with the accountant who is filing my tax return. I have negotiated a reduction in their fee down from €160 to €100 pp with 21% IVA (going up to 22% in June). It will still cost me about €250 for their services with the income tax to pay as well. I presume that the 4% is on top of the 23% rate of tax.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: July 5th, 2013, 7:02 pm 
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Our Tax Returns have been submitted to the Italian Authorities and we do not have to pay any income tax on out rental income.
The rental income we declared was relatively low (€2600) and our rental income is classed as "casual income" ("altri redditi") so it receives a generous tax credit hence nothing to pay. I haven't found out how much this tax credit is but I have asked the accountant to let me know how much it is.
As the apartment is in joint names two forms had to be submitted and that meant two bills.
Each bill was €100 for the accountants' fee ( negotiated their price down) plus 4% for the Provident Fund (Imposta Cassa Mutua) and 21% IVA. This came to €125.84 each (a total of €251,68).
It will be interesting what happens when I declare this income to HMRC and state that the Italian Authorities did not tax me on it.
I fear that they will tax it into consideration with all my other income but hopefully the expenses I can claim eg, Mortgage interest, Condominium fees, utiliity bills, advertising fees etc wiill be taken into account. No doubt some of these will only be allowed at a pro-rata rate as we use the apartment ourselves.
I will keep you all updated when I get more information.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: July 5th, 2013, 9:57 pm 
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Thanks David for this information, I haven't done anything about this yet.


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 Post subject: Re: Italian Income Tax
PostPosted: August 22nd, 2013, 9:49 pm 
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I have recently spoken to a specialist tax technician of the HMRC regarding the rental income I have earned in 2012 -2013 from out holiday home. This is what I understand from the conversation I had with him.

You must declare any overseas income to HMRC as well as to the Italian Tax Authorities in the first instance. Any tax paid in Italy is taken into account when they calculate your possible UK tax on this income.

Since the apartment is in joint names my wife and I have to submit separate SA! Self Assessment Forms to include the 'Land & Property' supplementary page(s).
All income and expenses claimed are divided by two and then entered on 'Land & Property' page(s) of the SAI form.
This form can requested from the HMRC webpage at http://www.hmrc.gov.uk and can take several weeks before it arrives. You then have 3 months to submit your completed SA1 form. You can also submit your return on-line but I have chosen for now to send in paper form and it is preferable to submit your return by the end of October.
You can also request 'Help Sheet 253' which I believe gives information on 'Furnished Holiday Lettings'.
To convert Euros to GBP a 'Spot Rate' for a particular year and currency can be found on the HMRC Website Home Page by going to 'Quick Links' - 'Rates & Allowances' - select country and tax year.
For 2012 - 2013 the rate for GBP is 1.223473 and for euro 0.8107.

In most cases if you rent your holiday home you use it for part of the year. In these cases you can only claim expenses against your income on a pro-rata basis.
Our apartment is available for 7 months of the year from 6th April to the 5th November (to fit it in the tax year). We have used it ourselves for one month during this period so the pro-rata rate for working out our expenses is 6/7ths.
Say that my total expenses was £1400, I could only set £1200 against my rental income.

The expenses that I believe you can claim for include :-
mortgage interest, Condominium fees, utilities, IMU tax, Tarsu tax, utility charges, building, contents & landlord insurance, internet costs, advertising costs, accountant fees, property agents fees and laundry costs.

Any allowable expenses claimed more than the rental income received can be carried forward to the next tax year.
The 10% allowance of the rental income you are given for UK rental for wear and tear is not applicable for overseas rental properties.

You can put a claim in for Capital costs and I assume replacement items (eg water boiler) as well but I am not sure if this is added to the general expenses.

It is always best to keep all paperwork regarding expenses and capital purchases in case they ask to see it. In my experience having let out furnished properties in UK they don't ask for anything unless they think you are trying to pull the wool over their eyes.

I hope to submit my SA1 Tax Return by the end of October and will keep you posted on the outcome after I hear back from HMRC of the acceptance of my return.
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: November 8th, 2013, 12:21 am 
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davidnam, did you have to pay any additional tax in the UK? I will face that in Jan when I complete my UK tax return. I have just contacted Antonio to begin the process of paying the non-resident tax. I've been told that we can only claim for expenditure directly related to renting the property therefore can't deduct mortgage interest, condominium fees etc. More surprisingly is that marketing/rental websites can't be deducted either without registering as a business. I bought a lot of extra things including washing machine, TV/DVD for the purpose of renting and I've asked if I can include these.


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 Post subject: Re: Italian Income Tax
PostPosted: November 8th, 2013, 6:19 pm 
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Hi eviegardner,
I am still waiting to hear back from the HMRC after submitting my return last month for 2012/13.
As soon as I hear from them I will let you know how I got on via this Forum.
Just to amend what I mentioned in my last post about apportioning personal use against expenses.
I have amended all my adverts for my apartment making them 'available' for the whole year!
Since I used the apartment personally for one month I was allowed to claim 11/12 of all my expenses (instead of 6/7 as I mentioned in my last post) which is slightly more favourable.
As far as Italian Tax is concerned you are correct about the expenses you cannot claim. as I assume that you are renting out to receive 'casual income' as I have done. However if you are renting as a business a total new set of rules apply eg registering as a business, IVA may apply etc. but a lot more of your expenses you incur can then apply aas legitimate expenses.
I believe that in UK you are able to claim capital costs for furnishing your property but check it out with HMRC, again it may depend on individual circumstances.
You have mentioned paying non-resident tax, is this the former ICI / IMU (property taxes) that you are referring to? The IMU tax as far as I am aware has been abolished as it was a manifesto pledge from the incumbent PM and I am waiting to hear from my contacts to what is to replace it.
Is it Antonio Del Gaizo the same person that I used through Judith who lives in Banbury, Oxfordshire?
davidnam


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 Post subject: Re: Italian Income Tax
PostPosted: November 9th, 2013, 12:58 am 
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David, yes same Antonio and Judith. thanks for the contact. I think it's expensive especially if there's no rental income but I'll just be glad to get it sorted. I'm waiting to hear back about what I can claim as expenditure against the rental income but I think UK would be more generous regarding what can be deducted. I'll report here what I find out but I get the insertion that most owners haven't done anything about their income tax. By non resident tax I mean the tax this thread is about. I paid my IMU tax in June so not aware of it being replaced yet.


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PostPosted: November 9th, 2013, 10:19 am 
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Evie,
Their charges are expensive especially as I had to pay two fees for my wife and myself. I did manage to negotiate a discount and paid €100 each and of course IVA and 4% social insurance type payment as well. You don't need to submit a tax return if there is no rental income.
I am surprised that you paid your IMU in June, I was told I couldn't as it was in the process of being changed! We shall see when I go to the Ricadi Comune in May.
david


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PostPosted: November 11th, 2013, 7:18 pm 
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I've just asked Judith what the threshold is i.e. how much am I allowed to earn (income minus allowed expenditure) before I have to pay tax so will report back. Although you probably know this already, David?


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PostPosted: November 11th, 2013, 8:42 pm 
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Evie,
I do not know what the threshold is for 'casual income'.
I have asked Judith on a number of occasions but have not had a reply from her on this! I would like to know if you get a figure from her.
I've just received my Self Assessment Tax calculation but there is no mention about my rental income on the calculation. It maybe because I made a paper loss but will contact them tomorrow to find out why it's not mentioned.
david


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 Post subject: Re: Italian Income Tax
PostPosted: November 12th, 2013, 5:29 pm 
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Hi Evie and everyone else interested in declaring their rental income to the Italian Tax and UK HMRC

I spoke to HMRC today re my Self Assessment (SA) form and their calculation.
They had noted that I had submitted my Italian holiday home income so they appear to have accepted the figures for the expenses and outgoings that I submitted.
I can only assume that it wasn't included on my tax calculation as I had a 'paper loss' of £519 which I can carry forward to next year against my income.

The Expenses / outgoings come under three headings. I just gave my total annual figures with no details of the individual expenses / outgoings which they have accepted.
I advise that you keep all the invoices and receipts (for 7 years) of everything in the unlikely event they may want to check your paperwork and figures.
These are the details of the expenses / outgoings that I claimed for:-.
1. Expenses (box 6 on SA form)
I included the Condominium fee, IMU, rubbish, water tax, Enel bills, Wical (internet), laundry costs, cost for replacement boiler, replacement wash hand basin and bidet taps.
2. Loan Interest and other financial costs (box 7 on SA form)
Mortgage interest and their monthly charge fee (which is a small sum)
3. Legal, management and other professional fees (box 8 on SA form)
I included the accountants fee, the cost of my property manager, all my advertising costs.

Other allowable expenses (Box 9 on the SA form)
You can claim other expenses such as stationary, phone, business travel and other miscellaneous costs and any foreign tax paid.
Since I am classed as a 'casual renter' and paid no Italian tax I didn't claim for anything under this heading.
I suppose if you are renting out as a business you can probably claim air fares, car hire etc.

Private Use Adjustment - if expenses include any amounts for non-business purposes (box 10 SA Form)
I used the apartment for one month during the year (apartment is advertised to be available for renting all year!) so I divided the total of all my outgoings / expenses by 12 and added this figure as the figure for my Private use adjustment.

As the property is co-owned with my wife I had to fill in two SA forms and divided all the figures for income and expenses / outgoings by two for the individual SA forms.
This is the same for the Italian Tax Authorities so I had to pay two fees for the Italian accountant!
I am now almost legal, only the new Property, Tarsu and water taxes that are unpaid to sort out!
davidnam


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PostPosted: November 12th, 2013, 11:42 pm 
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Thanks david, that will be very useful when I complete my SA form. When I asked Judith how much I could earn (income minus deductions) before paying Italian tax she said:
"It's not a very exact science (depends on the availability of what they call a "tapering" tax credit) but up to around € 4800.00 profit should result in a zero tax liability. You need to be a bit careful about expenses too - these have to be properly documented and anything that is not strictly connected to the actual rental will not be allowable - it's much stricter than the UK. For example, the costs of marketing will only be allowable if you are registered as a business".
So this is good news as I doubt if anyone would have so many rentals that they'd make a profit of 4800 euros even taking into account the fact that some expenses e.g. marketing, condominium fees are not deductible.


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 Post subject: Re: Italian Income Tax
PostPosted: November 13th, 2013, 1:25 am 
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Evie,
Thank you for the information regarding the tapering Tax credit (or threshold) of about €4800.
They are somewhat mean on their expenses allowances.The Condominium fee and my advertising costs are the main expenses that I pay out. I am not sure whether mortgage interest, the Enel, Wical and Comune taxes are allowable. I would have thought that the Agents fees and laundry fees would be allowable as they are directly connected to the rental.
I don't agree with Judith that €4800 rental profit is not achievable as this year I had 16 weeks of rentals!

I must clarify a few points so matters are clear to all who are interested in this topic.

1. The SA Form and the 'UK Property Pages' should be filled in.
In my last posting I was referring to the box numbers on the UK Property pages, and despite it's title this is the form as on the 'UK Property Notes' ('SA105 notes' which is very helpful to help you fill the form) it does state that the pages are for "income from letting furnished holiday accommodation in the UK or European Economic Area".

2. Anyone who receives income from renting in Italy are legally obliged to declare this income to the Italian and UK HMRC.

3. If any tax is paid in Italy, you will be given credit by HMRC for this amount against any tax due (if any because of the more generous expenses allowed)) when your UK tax is calculated.

4. Different rules apply if you set up a rental business for your holiday accommodation compared to 'casual rentals' as I am considered by the authorities.
In reality despite the fact that my property is available all year I only rent out mainly from the beginning of May to the end of October.

If anyone is unclear or needs any other information please contact me on this Forum
davidnam.


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 Post subject: Re: Italian Income Tax
PostPosted: November 14th, 2013, 3:15 pm 
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David, I replied yesterday but no sign of it so here goes again! Judith's comments are in quotes so it was me you said that we would be unlikely to make a profit of 4800 euros although I was thinking of a 1-bedroomed like mine. I did ask about what I could claim for as expenses but, as I have not reached the threhold, they may not tell me. If I hear I'll report back. If I don't meet the threshold next year then there's probably no point in registering as a business (in order to claim for marketing costs etc). I need to complete my online SA form earlier this year rather than waiting until Jan 30th like I usually do!


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PostPosted: November 14th, 2013, 6:16 pm 
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Evie,
Thanks for the clarification, at least we do know that the threshold could be around the €4800 level.
I don't think I mentioned that this tax return was for the 2012-2013 tax year .
When you apply for the SA forms you have at least 3 months to submit your return.
I believe that if you submit your paper return by the 31st October they will perform the tax calculation for you. I think that the 30th January is the last date for submission.
Next year I may submit my return on-line now that I think I understand the system a little better.
david


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PostPosted: December 14th, 2013, 1:00 pm 
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I now have my Italian income tax affairs sorted. Like you, David, I had no tax to pay and indeed don't think I am likely to ever exceed the €4800 profit threshold. I think the company used is rather expensive for a straightforwad tax return although I was relieved to get it done so thanks for the contact David. Now that I understand how to complete the forms, I would be keen on doing it myself next year. Just need to find out where to download the forms from and where to submit them to. Has anyone attempted to do this themselves?


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PostPosted: December 14th, 2013, 1:56 pm 
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Hi eviegardner,
Glad that you have now sorted your Italian Tax out. Just the HMRC to sort out now!
I woud ike to do it myself but getting the forms, filling in the form (which will be in Italian), send it to the appropriate agency etc. wil be a nightmare.
I did negotiate the price with the accountants to €100 + IVA + 4% social tax about €254. The saving grace is i suppoose that all earnings are halfed because of the Joint ownership which reduces the possibilty of paying any tax in Italy and UK.
If you do find out how to do it yourself please do let me know.
davidnam


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PostPosted: December 14th, 2013, 3:44 pm 
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Completing the forms even in Italian would be relatively straightforward as we could copy from what was completed this time (although if the 4800 euros changed we wouldn't know about it). In contrast for my Spanish property it was cheap to get someone to complete/file the tax return but there was 200 euros approx tax to pay even if no rental income. Easy to download form and DIY next year so will try to do so in Italy also. Anyway it's a problem for next year! Need to do something about UK Inland Revenue soon. David, are we the only 2 on this forum interested in this topic?? It would be great to hear about other's experiences also. Thanks for all your help.


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 Post subject: Re: Italian Income Tax
PostPosted: January 20th, 2014, 12:26 am 
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Just completed my UK Inland Revenue form - whether I've done it correctly or not is another matter! I didn't claim for the same expenses in UK and Italy (as rental websites, mortgage interest, condominium couldn't be claimed for in Italy).


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