Italian real estate tax affects expat Romanians who own properties in native country

Romanians resident in Italy have received notifications from the Italian authorities asking them to pay the tax difference on properties owned in their native country. The real estate commission fee charged by Rome’s fiscal authorities is higher than the amount requested in Romania.

This notification has been sent to Romanians living in Italy based on a decree issued in 2011 by the Italian government that applies to all Italian residents who own real estate outside the country. The tax is charged at a rate of 0.76 percent calculated on the purchase price of the property as shown by documents or alternatively on a fair market valuation of the property. A tax credit is granted, reducing the Italian tax due for any real estate taxes paid to the country in which the real estate is located. However, Romanians owe more money to the Italian government, as the real estate commission fee paid in their native country is determined by the quality of construction materials used together with the utilities and the area where the property is situated, at 0.1 percent of rateable value. According to Mediafax, the Romanian Government also had a say in this matter and asked the European Commission to analyze the situation and decide whether the fiscal decree enacted by Italy meets European regulations. In addition, the Italian authorities said that the decree does not contravene the Double Taxation Avoidance Agreement. In principle, the agreement contains stipulations on the taxation of capital gain, independent professions or pensions. Romania has so far concluded 82 conventions for the avoidance of double taxation. These agreements are based on the Organisation for Economic Co-operation and Development law provisions, even though the country is not a member of the OECD. Italy and Romania signed the Double Taxation Avoidance Agreement in 1977 and according to Article 3 of the document, the existing taxes to which the Convention will apply also comprise : ‘the tax on income from the leasing of buildings and land’. On the other hand, Italian authorities said that taxpayers are thus encouraged to actively manage their properties through a foreign managing entity in order to avoid the application of the tax. The Romanian Government is currently waiting for an explanation from the Italian authorities as well as from the European Commission concerning this matter. Iulia Marin photo source: sxc.hu