Originally blogged on July 11, 2012
“Tax laws are like sexual positions. You can bend them in all kinds of directions but you still end up getting screwed in the end.” – Nicola (Nick) Cacciato
As we prepare for our adventure in Sicilian house-hunting, Nick and I have been reading and researching and talking to anyone who may be able to add to our growing understanding (or lack thereof) of the tangled labyrinth that is Italian tax law. After Silvio Berlusconi (the previous prime minister) drove Italy into the ground economically, the EU offered a bail-out package however one of the strings was the resignation of Berlusconi. Considering he was a mafia connected crook who changed the laws whenever he was close to being charged with anything, this was a good thing. The replacement, Mario Monti, has built a government of technocrats. I think that, considering the state in which Berlusconi left the country, a government of technocrats might just be the answer. After decades of corrupt rule, Monti seems to be trying to reign in those who are trying to bend the rules to their own advantage and not in support of the country. Many wealthy Italians have centred their wealth off shore in bank accounts and property, etc.. The new Decreto Salva Italia (Save Italy Decree) now taxes any residents with off shore accounts and property. There is a tax on each account and each piece of property, based on the value of the property at .76%. Since we live in one of the most expensive areas of Canada, the tax on our Canadian home would be significant – in fact, more than we currently pay in property tax to our local municipality.
“The IVIE (Imposta sul valore degli immobili situati all’estero) is a tax on any real property owned in another country. Designed to catch out the big fish who hide large assets overseas, this tax is sadly also netting all us little minnows. It is not a particularly small tax either, as it is equal to 0.76% of the value of your property.” (from An Expatriate in Rapallo: Musings on a Life in a New Culture)
On top of the almost $2500 the “IVIE” tax would put on our Canadian home, there is also tax on all bank accounts (they will probably fall over laughing if they see our bank accounts) – and Nick and I haven’t even yet discovered how this tax is calculated!
The Decreto Salva Italia has also changed the property tax on homes owned in Italy although we are less concerned about this particular property tax. Prior to the Salva Italia law, there was no property tax on first homes – only if you purchased a second or third home would the tax kick in. With the homes that we are interested in looking at, property tax would only be about $300 compared with the $2000+CAD that we just paid for our Canadian home. So, the dilemma that we thought we were facing once we retire: resident or non-resident, seems to have become a big non-issue. Non-resident it is! The only thing that will have to be figured out at that point is medical insurance. But we have seven years before that particular bugaboo has to be faced.