Should we become tax residents in Italy rather than the UK?

My husband and I would like to buy a house in Tuscany, while retaining our London flat. We are both retired but have significant income from various property investments as well as our pensions. 

Does it make financial sense to spend more than half the year in Italy and qualify as tax residents there, rather than in the UK? We also hope to leave a substantial estate to our children when we die.

Stefano Simontacchi, partner and head of the tax department of law firm BonelliErede, says that in addition to good weather and great food, some convincing arguments can be made for moving your tax residence to Italy.

Several years ago, Italy introduced special tax incentives for new residents with the aim of attracting investment. One is a special tax regime (STR) for wealthy individuals with relevant assets and income from foreign sources.

A key aspect is to work out whether you will still be considered tax resident in the UK or any other countries where you might spend time in the coming years or have strong personal or economic ties. This will require a combined analysis from Italian and foreign lawyers and will also have to take into account the interplay between domestic laws and tax treaties.

Depending on the outcome you might be able to opt for the special tax regime. The STR is a flat tax of €100,000 a year on all foreign-sourced income, with the sole exception of qualified capital gains realised in the first five years of opting for this regime. These capital gains are subject to ordinary Italian taxation at 26 per cent. Just a note about that qualified capital gains exception: it also applies if certain shareholding thresholds are crossed.

You can opt for the special tax regime for 15 consecutive years from the first year of tax residence, and the same benefit can be extended to family members, whose foreign sourced income is subject to an annual flat tax of €25,000.

Remember, however, that Italian-sourced income will remain subject to ordinary taxation.

The special tax regime also offers other benefits. There is no obligation to disclose foreign assets to the Italian tax authority (apart from qualifying shareholdings); no Italian property taxes on real estate and financial assets held abroad; and crucially if you are hoping to leave a large inheritance behind, no Italian inheritance and gift tax in relation to assets held abroad transferred by the new Italian residents. 

The special tax regime is applicable, upon request, to most people who move their tax residence to Italy, and have not been tax resident in Italy for at least nine out of the 10 years prior to applying.

In any case, given the complexity of Italy’s tax rules and the need for other relocation-related advice, such as on visas, I recommend you seek advice from tax and legal specialists, especially concerning estate planning and the Italian legal framework, as well as getting an assessment of the tax burden you face — as well as the consequences once the 15 years of the special tax regime ends.

Can I sue council over damp issue?

I own an ex-council flat affected by a long-standing unresolved leak. The leak has been continuous since at least November, and although the freeholder, a local council, has sent its building contractor, it has not been repaired. The leak is from the external wall and is causing my tenants to suffer health problems due to humidity and mould problems and they are threatening to withhold rent. If they do, I will be unable to pay the mortgage. Can I sue the council for loss of rent and the damage caused to my flat?

Philip Hind, head of property litigation in the London office of law firm JMW Solicitors, says being a landlord is a lot of work and this is only made harder when issues caused by a third party affect your ability to comply with your obligations to your tenants. Unfortunately, this is not uncommon. 

The starting point will be carefully to review the written documents you have with the relevant parties. In your case this will be your lease with the council — the freeholder — and also your tenancy agreement with your renters. (Leasehold laws typically apply in England and Wales. In Scotland leasehold is far less common.)

As a landlord you are expected to keep the flat in a good condition and make sure the water and utility services run smoothly. However, there may be some qualification to your responsibility where such things are outside your control, such as in this case, where the issues are caused by the freeholder. You may therefore be obliged to act reasonably, and this will be in pursuing the freeholder in a reasonable and timely manner. 

It may also be advisable to consider agreeing a rent reduction with your tenant now and to be as transparent as possible with them about your dealings with the freeholder to resolve the issue to reduce any ill-feeling and to try to limit your liability. 

It is unlikely you will have a direct contractual relationship with other leaseholders. This will be with the council, and you should identify its obligations and breaches. You need to check what obligations they owe in relation to keeping the building and services in repair. It is likely that the pipework in or on the building will be the council’s responsibility. 

If the council will not accept responsibility for the leak, then you may need to instruct your own expert to undertake a survey and identify the likely cause and its location. However, this can be notoriously difficult. You would be best off to seek an expert who specialises in water leak cases but this will be an upfront cost that you will have to bear.

Your claim against the council could be for something called “specific performance”, which is where the court can order a party to comply with its obligations. It could also be for damages relating to any financial loss you have suffered because of the breaches. 

Before taking any action, you should carefully check your insurance to see whether you are covered for these problems. You should also put your insurer on notice as soon as possible in accordance with any policy conditions. You should seek their consent to any steps that you do take to ensure that you do not inadvertently invalidate any such policy. The policy may well also cover some or all your legal costs and other financial losses. 

Additional information was provided by Kishen Bhimsingh at JMW Solicitors.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.