(Because of the Telegraph’s paywall, I’m pasting the whole article about this side effect of Brexit.)
British expats in Italy face massive wealth tax bills
Close to 30,000 Britons are resident in Italy and face tenfold increases in overseas property duties
ByHarry Brennan25 March 2021 • 5:00am
British expats living in Italy will be hit with vastly increased wealth tax bills on their properties back home, under post-Brexit rule changes.
They face paying thousands or even tens of thousands in extra duties every year on their UK properties, because of fresh changes to Italian tax laws which were first introduced in 2012.
These changes have now taken effect and in some cases will cause annual bills to increase by as much as ten times.
Italian tax law states that all Italian residents must pay a 0.76pc annual levy on the value of overseas properties.
For years a quirk in the continental rule book meant the Italian tax authority calculated these bills using Britain’s outdated council tax system, which uses property valuations dating back to the early 1990s.
But the annual wealth tax will now be based on the properties’ true, modern-day market value, now that Britain is no longer part of the EU.
In areas of Britain where property prices have increased the most over the past three decades, the added tax will be enormous.
There are currently properties on sale in Kensington and Chelsea of more than £3m that fall within council tax band G, which means they were worth £240,000 on average back in 1991.
The change will mean an annual wealth tax bill of more than £20,000, compared to less than £2,000 today.
Alessia Paoletto of advice firm Withers said: “These rules have been in place for a number of years but they are changing because Britain is no longer part of the EU. We hope there may be some reliefs against it as this is going to affect a lot of people, but right now it is happening so people will have to watch this space.”
Simon Goldring of McDermott Will and Emery, another adviser, said British expats who retain properties back home would be caught out.
There were almost 30,000 Britons living as residents in Italy in 2017, according to the latest data from the Office for National Statistics.
Since then Italy has introduced a number of favourable measures to entice foreigners to settle and bring fresh investment to struggling parts of its economy.
This has included a number of schemes offering the chance to buy up properties in need of renovation from as little as €1 (86p), as settlers spend a certain amount of time and money in the country.
This has mainly taken place in the more impoverished regions in the south of the country such as Calabria, a place still plagued by the Italian organised crime groups.
Italy has also become an increasingly popular destination for incredibly wealthy “non-doms”, who move from country to country for tax purposes.
Relatively new laws allow non-doms to avoid taxation on their worldwide wealth in Italy by instead opting to pay an annual €100,000 flat-rate tax for a period of up to 15 years.
“This could provide a ‘get out’ to the change in the way the property wealth tax is calculated, but will only be a viable option for the truly rich,” Mr Goldring said.
