Property Q&A: Where will I pay capital gains tax on an Italian property?

Your questions answered
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The Independent Online


Q: We would like to buy a second property in Italy that needs renovation. I will probably sell this after a few years to buy something smaller when my children have grown up. Will I have to pay capital gains tax in Italy and the UK? D Streeter, by e-mail

A: Provided a foreigner has owned a property in Italy for at least five years you will not have to pay CGT in Italy. However, as a UK resident you are liable for CGT on all your overseas assets, so you would have to pay it in the UK. An accountant or the tax office would be able to give you more specific advice.

Q: We were hoping to buy a house privately through friends of friends and had agreed a good price four months ago. We have been unable to sell our house, however, and the vendor has had the house revalued and thinks it is worth a lot more. Is there anything we can do to secure the sale at the old price? Donna Brisco, by e-mail

A: It seems unlikely, as the property may well have increased in value if it is a good location and you had agreed a price below the market value. Ask your estate agent what the realistic chances are of selling your property in, say, the next four weeks and negotiate a deadline with your vendor. You may have to increase your offer to make it worth their while.

Q: An aunt has died and left my sister and me her cottage in a popular part of south London. It is in a terrible state and needs complete modernising. I'm keen to borrow money to do it up and then sell it, but my sister wants to sell it now. Any suggestions? G Akini, by e-mail

A: First, ask three local estate agents to give you pre- and post-renovation valuations. Then get quotes from builders on how much you will need to spend on it. If you choose to do the renovations you will have to take into account the cost of borrowing the money against the time the work will take. When the renovations are finished, the property may have benefited from a further price increase. The second option (to sell now) is much easier but perhaps worth less. Developers are likely to be interested in this type of property but they do not usually pay high prices. Consider selling at auction if you want to achieve the best price.

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